CNB Council: Accelerated economic recovery in first quarter of 2021

Published: 9/6/2021

The CNB Council analysed the information on the latest economic and monetary developments and adopted several decisions within its field of competence.

Economic recovery accelerated in the first quarter of 2021, which may both be attributed to the improved epidemiological situation from the peaks of the second and third waves of the COVID-19 pandemic in Croatia and to a seasonal decrease in the level of activity of some segments of the services sector. The first GDP estimate, based on a small number of available data, suggests a deceleration in real growth in April from the first quarter average. This largely reflects the effects of the pandemic's third wave, the return of part of the economy to the pre-pandemic level and the seasonal strengthening of the importance of some service activities that are vulnerable to physical distancing measures. The deterioration of the epidemiological situation early in the second quarter and the weakened growth of seasonal activities arrested the favourable trends of employment growth and decrease in the unemployment rate. Inflation accelerated from 1.2% in March to 2.1% in April, primarily due to an increase in the annual growth rate of energy prices, brought about by a positive base effect. Banks' free reserves continued to peak in May, mostly because of a decrease in government kuna deposits with the CNB. The course of economic recovery and a rise in optimism have given a boost to lending, with the result that the annual growth of bank placements accelerated from 2.3% in March to 2.6% in April. Household lending showed stronger growth, rising to 3.1% in April from 2.2% in March. Housing loans accelerated, while general-purpose cash loans decreased at a decelerated rate. Corporate placements edged up annually, up from 1.0% to 1.1%, reflecting a pronounced drop in corporate lending in April last year. The favourable economic developments also led to a sharp increase in budget revenues in the first four months of 2021, which exceeded expenditure growth.

The CNB Council approved the proposal of Croatia banka d.d., Zagreb to extend the mandate of Danijel Luković as Chairman and Tadija Vrdoljak as Member of the Bank's Management Board.

The Council also issued a Decision on the issue and sale of numismatic sets of commemorative gold and silver coins in denominations of 5, 2 and 1 kuna and 50, 20, 10, 5, 2 and 1 lipa with the motifs of the nine denominations of the circulation coins of the Republic of Croatia and mint year 2021, marking the Independence Day of the Republic of Croatia, 25 June 2021.