October 16, 2022 - After two and a half years of exceptional challenges due to the pandemic, the world is facing new crises. The road ahead will probably be just as difficult, if not more, Fund Director Kristalina Georgieva said at the end of the annual meeting of the IMF and the World Bank. The IMF's strategic committee called on Russia to stop its invasion of Ukraine. The Governor of the Croatian National Bank, Boris Vujcic, commented on the forecast for the Croatian economy.
As HRT reports, the war worsened the economic crisis, slowed growth, and created inflation and energy and food insecurity. The fight against inflation and protecting the most vulnerable categories of citizens remains the main priority. This was the conclusion of financial experts.
CNB Governor Boris Vujcic commented on the forecasts for the global and Croatian economy for HTV in Washington.
"It is obvious that the economy, both globally and European, and now according to the latest high-frequency data, the Croatian economy has started to slow down. At the global level, this slowdown has been visible for some time in Europe as well; in Croatia, it is very recent, and we have practically started seeing it from September onwards. Croatia will still have a very good year. We expect growth from 5.5 percent to 5.8 percent, which is very good after 10.2 percent last year. However, next year we expect that this slowdown that we are seeing now will be fully reflected in a much lower growth rate where the economy could grow by only one percent", he said.
IMF estimates
IMF estimates are that the economy of the Eurozone could only grow by half a percent and that some countries, primarily our main foreign trade partners such as Germany and Italy, would be in recession, which would mean having negative growth rates. As for Croatia, the primary projection is that we will have a low growth rate and not a recession. However, when the practical prospects are continuously deteriorating in this situation, he said it would not be surprising if we also entered at least a technical recession, meaning two consecutive quarters of negative growth.
"Of course, inflation is the biggest problem everywhere; central banks have to tighten their monetary policies, which means raising interest rates, but also to reduce their balance sheets, which have grown a lot since the great financial crisis and represent another, I usually call it fertile ground for the growth of the inflation. Central banks will continue to do so. As of next year, we will be a member of the eurozone, so this is primarily a concern of the European Central Bank, where I will co-create that policy. And as for the governments, this winter, they are mainly limiting the prices of electricity, thermal energy, and natural gas. Next year, we will see how things will develop, he said.
Entry into the eurozone
"Everyone congratulates us; they think it is very good for Croatia and will help Croatia significantly in this crisis. And we can already see that. We see that Croatia is doing better in this crisis than other EU countries that are not on the way to become members of the eurozone or existing members. Our rating is growing; we don't have to spend reserves on intervention in the foreign exchange market, which we had to do in the spring of 2020." He concluded that our interest rates are significantly lower.
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