At the meeting held on Wednesday, the Council of the Croatian National Bank, chaired by Governor Dr. Marko Škreb, examined recent economic and monetary developments, and reached several decisions related to further implementation of monetary policy and stabilisation of the Croatian banking system.
Basic indicators of macroeconomic stability for the last year, marked by a slowdown in economic activities in the second half of the year (it is estimated that the growth of GDP in 1998 was around 3 percent) are entirely satisfying. Consumer prices rose by 5.4 percent but if one time effects of the introduction of the value added tax are excluded, the annual rate of inflation amounts to satisfactory 3 - 4 percent, as in the previous several years. In the last year the exchange rate of kuna against the German mark depreciated by 6.4 percent while it appreciated by 0.9 percent against the U.S. dollar. The last quarter was characterised by somewhat greater interventions of the central bank in the foreign currency market. However, at the end of the year the CNB had in its accounts 2.8 billion dollars of foreign currency reserves, which is an increase of 277.6 million compared to the previous year.
An encouraging indicator is that, following the November stagnation, a significant increase in foreign currency household deposits with domestic banks can be seen, showing that the widely-known problems in some banks have not compromised public trust in the overall banking system. Lending of commercial banks grew on an annual level by 28 percent, which is in agreement with the forecasts. The average interest rate on bank credits has been stagnating for quite some time now, the basic obstruction to its further decrease being the problem of collection of payments which should be resolved by a more efficient functioning of the legal system.
Current account deficit for the first nine months of the last year amounted to 878.2 million dollars, which is a decrease of 19.1 percent compared to the same period of the previous year. Based on the available data for the eleven-month international merchandise trade (in dollar terms, exports grew by 8.9 percent while imports fell by 2.3 percent compared to the same period of the preceding year) it is estimated that the last year's current account deficit will total 7-8 percent of the GDP, which is a significant improvement compared to 12.6 percent of the GDP in 1997. At this meeting, the Council of the CNB also gave its approval for the appointment of Mr. Drago Jakovčević as member of the Management Board of the Convest Banka d.d., Zagreb.