Main indicators of macroeconomic stability are satisfactory

Published: 19/1/2000

At the meeting held on Wednesday (January 19, 1999) the Council of the Croatian National Bank, chaired by Governor dr. Marko Škreb, reviewed recent economic and monetary developments, adopted the Financial Plan of the Croatian National Bank for this year, and made a number of decisions acting in accordance with its authorities.

Statistical data for the third quarter of 1999 show that the real GDP fell by 0.8 percent. In the first nine months of 1999 the real GDP fell by 1 percent year on year. It can be expected that the decrease of GDP for 1999 will be lower than 1 percent. Main indicators of macroeconomic stability are still satisfactory and do not call for changes in the monetary policy stance or for the implementation of additional monetary measures. Retail price inflation for 1999 is 4.4 percent, thus being lower than inflation observed last year after the introduction of the value added tax. However, it is higher than the inflation in the few years preceding 1998. Cost of living increased by 3.6 percent and producer prices by 5.9 percent last year. This increase was largely propelled by the rise in prices of oil products. The increased demand for kuna and foreign exchange cash observed at the end of December 1999, stirred also by psychological factors, had no major impact on exchange rate developments. This is evidenced also by the fact that the exchange rates in exchange offices which in December significantly exceeded exchange rates offered by commercial banks, returned to levels observed in banks. In 1999 the kuna depreciated against the German mark by 5 percent. However, as the dollar appreciated against the kuna by 22.4 percent, nominal effective depreciation was 11.2 percent. On the whole, in the first eleven months the real effective exchange rate deflated by retail prices depreciated by 6.11 percent, and deflated by producers' prices by 5.13 percent.

Interest rates on the Money Market and on bank lending did not change significantly, while bank lending moderately increased. Monetary indicators show that the expected recovery of the economy at the end of 1999 failed to occur. Balance of payments developments in the first nine months of 1999 were largely marked by a decrease in merchandise trade. Imports decreased by 5 percent (falling to USD 3.23 billion) and exports by 14.5 percent (falling to USD 5.56 billion). On the basis of such developments the current account deficit was by one third lower than in the same period last year (falling to USD 603,8 million). It is estimated that the current account deficit for 1999 will not exceed 7 percent of the GDP. At the Wednesday meeting, the CNB Council approved the nomination of Mr. Goran Rameša for member of the management board of Kvarner banka d.d. Rijeka. The CNB Council was also informed that the competent commercial court decided on initiating bankruptcy proceedings against Promdei banka d.d. Zagreb.