Prices and exchange rate stable, foreign debt on increase

Published: 23/4/2003

At its meeting held on Wednesday, the Council of the Croatian National Bank, chaired by Governor Željko Rohatinski, PhD, reviewed recent economic and monetary developments and adopted monetary projection for the second quarter. The report on the main characteristics of the banking system over the last quarter of the previous year was also on the agenda, and several approvals were given within the authority of the central bank's highest decision-making body.

The main macroeconomic indicators remain favorable. The annual inflation rate stood at 1.7 percent in March. Following a somewhat more pronounced depreciation pressures in the first quarter, as a result of which the central bank intervened three times in the foreign exchange market in March by selling a total of EUR 150.1m, the kuna appreciated in early April and then stabilized at the level of about 7.52 kuna for the euro. According to the present estimates, prices and exchange rate will remain within the expected band.

Placement growth of banks to non-financial sector slowed down in comparison with the last months of the previous year, but it nevertheless stood at a very high level of 5 percent in the first quarter. Placements to households grew considerably faster (8.4 percent) than placements to companies (2.5 percent), whereas lending interest rates for companies increased and for households decreased. A downward trend of banks' deposit interest rates continued, and interest rate spread on total loans and total deposits increased by 8 percentage points in February. According to the data submitted by commercial banks, loans declined in March, but there are indications that this can be explained by a transfer of receivables from domestic to parent banks or to connected companies, rather than by an actual decline in credit activity.

The CNB Council expressed its concern over foreign debt growth of both banks and government, which continued this year as well. The matter of utmost concern for the members of this highest decision-making body is the fact that it stimulates domestic demand for imported products to a great extent, due to which foreign trade and current account balance deteriorate.

The CNB Council approved the proposal for amalgamation of HVB Bank Croatia d.d. Zagreb with Splitska banka d.d. Split, and for the appointment of Wolfgang Peter as chairman of the management board of Splitska banka, and Ivo Bilić, Goran Gazivoda and Christoph Schöfböck as members of the management board. The proposal of the supervisory board of Požeška banka d.d. Požega was also approved to appoint Krešo Toromanović chairman and Đurđa Babić member of the management board of that bank.