ZAGREB, 17 Jan 2022 - Croatian National Bank (HNB) Governor Boris Vujčić said on Sunday he was not thinking of resigning and called on the financial regulator HANFA to look into the veracity of media reports of financial wrongdoing at the central bank.

"We certainly didn't do anything wrong," Vujčić told RTL television in a comment on the article by the Index news website saying that 40 HNB staff had been involved in insider trading in securities.

Vujčić urged HANFA to look into the allegations, stressing that the HNB wanted the matter clarified as soon as possible. He said that the regulator had access to all the data, both at the HNB and the Central Depositary Agency.

He said it was not the HNB staff that had caused damage to the central bank but the media fuss that was made without any evidence.

Vujčić said that he always adhered to the law in his work. In 2001, when he joined the HNB leadership, he had sold his shares in two banks to avoid a potential conflict of interest, he added.

He said that the HNB had adopted a code of ethics in 2016, which requires all staff to report to their superiors if they trade in banks' securities.

"If anyone is found to have traded in insider information from the HNB, they will immediately lose their job and that will not be the end of problems for that person. At this point we do not have any indications that something like that happened," the central bank governor said.

Vujčić said he was not thinking of resigning. He noted that in his opinion this whole affair was aimed at undermining the process of adopting the euro, adding that this attempt would not succeed.

"These unsubstantiated accusations in the public sphere and partly in the political sphere are certainly undermining the credibility of the institution," he said.

Vujčić said he would not be attending the presentation of the Euro Act on Monday.  Asked how was it that he was not invited, he said the question should be addressed to the prime minister.

For more, check out our dedicated politics section.

December the 16th, 2021 - Croatian National Bank Governor Boris Vujcic has revealed more about when Croatia will begin displaying prices in shops and other sales outlets in both kuna and euros.

As Poslovni Dnevnik/Ana Blaskovic writes, the latest forecast regarding the domestic economy has been revised once again with Boris Vujcic pointing out that the CNB is "cumulatively quite optimistic". The basic contribution to domestic GDP remains the same as before - foreign demand is primarily made up of the exports of services due to the surprisingly good tourist season this past summer, as well as the growth of the exports of goods and personal consumption.

The burning issue for people, however is the inflation rate, which will accelerate to 2.4 percent this year, and should remain at that level throughout 2022. Boris Vujcic pointed out that Croatia could meet the criteria for joining the Eurozone on time, too.

“The main logistical activity is cash withdrawals and coin minting. We'll have to borrow banknotes and ensure that from the 1st of January 2023 they end up in peoples' hands,'' said Boris Vujcic.

"Everyone is already working on it because we can't wait for next summer to start with that. IT adjustments in companies are already underway, and if we enter from January the 1st, 2023, then we will have to show prices in both kuna and euros as early as the summer months,'' explained Vujcic.

The CNB Council: Croatian GDP growth of 4.1 percent is expected in 2022

At a recent session, the Council of the Croatian National Bank discussed current economic and financial developments and adopted the Monetary Policy Projection and Macroeconomic Developments and Forecasts, as well as several other decisions within its competence. Taking into account the achievements in the first nine months of 2021 and the movement of indicators of monthly economic activity available for the fourth quarter, real GDP could grow by 10.8 percent on the level of the the whole of 2021, and thus already exceed the pre-crisis level this year.

In 2022, growth of 4.1 percent is expected, predominantly supported by foreign demand, with a positive contribution from various other components. The expected slowdown in growth is mostly the result of the base effect, ie the cessation of the effect of the low level of GDP in 2020 on the annual growth rate. The projection of Croatian GDP in 2022 is still exposed to numerous risks, with the negative ones predominating, and they're mainly related to the potential unfavourable development of the ongoing epidemiological situation and the increase in uncertainty that continues to bring with it.

The growth of Croatian tourism revenue during the main part of the summer season this year almost completely brought the current and capital account surplus closer to the record realisation from the third quarter of pre-pandemic 2019, so its level this year could exceed 4 percent of GDP, and additionally increase to 5 percent GDP in 2022. The growth of the current and capital account surplus, along with tourism, is strongly supported by net inflows of EU funds.

Consumer price inflation accelerated, which was influenced by rising food prices, and based on the achievements so far this year, it can be estimated that consumer price inflation at the level of the whole of 2021 could amount to 2.4 percent, with the growth of energy prices accounting for half of this growth. In 2022, the average rate of consumer price inflation is expected to remain at the same level, with inflationary pressures potentially becoming more pronounced in the first half and more subdued in the second half of the year.

For more, check out our dedicated politics section.

ZAGREB, 28 Oct 2021 - A two-day conference on economic trends in central, eastern, and southeastern Europe, the consequences of the corona crisis, climate change, and inflation, which was organized by the European Bank Coordination "Vienna" Initiative and the Croatian National Bank (HNB), started in Split on Thursday.

The European Bank Coordination “Vienna” Initiative is a framework for safeguarding the financial stability of emerging Europe. The Initiative was launched at the height of the first wave of the global financial crisis in January 2009.

Opening this annual conference, the HNB Governor and Chairman of the Vienna Initiative Steering Committee, Boris Vujčić, said that the availability of bank lending was currently much better than in 2019, before the start of the COVID-19 pandemic.

Of course, during the lockdown of economies there was no need for taking funds, as economic activity was suspended, but the price of the money today is more favorable, the governor said in his opening speech.

Asked whether he feared inflation, Vujčić said that he could now, perhaps, be more afraid of inflation than other citizens, however, inflation was not currently an important issue.

He elaborated that this year's 2.3% inflation rate should not be a rate that caused concern.

It will grow into a bigger problem if such a rate remains present for a long period, he explained.

The governor also admitted that a part of bankruptcy proceedings that had not happened during the pandemic could ensue later and that state grants for job-keeping measures helped to achieve employment even higher than before the corona crisis.

He said that Croatia would get an exact date for the euro changeover next summer.

HNB survey shows that 61% of Croats are for switching to the euro

As for a referendum initiative by a few right-wing parliamentary and non-parliamentary parties against the adoption of the euro in Croatia, Vujčić said that not one country that introduced the euro had experienced a decline in living standards.

He went on to say that opinion polls conducted by the central bank show that 61% of Croatians support the euro, 19% are against it, and the remaining respondents are also in favor of the euro on certain conditions. 

The HNB reports on its website that the participants in the Split conference include Vice-President of the European Bank for Reconstruction and Development, Mark Bowman, the European Investment Bank Vice-President, Lyiana Pavlova, World Bank Vice-President for Europe and Central Asia, Anna Bjerde, who will join virtually, as well as central bank Governors of Estonia, North Macedonia, Montenegro, Slovenia, and Ukraine.

Representatives of the International Monetary Fund, the European Central Bank, the European Commission, and the European Investment Fund will also be participating in the conference together with commercial banks and other financial sector stakeholders.

As the region recovered, the Initiative’s focus shifted to addressing the remaining and new challenges in the financial industry, including the resolution of non-performing loans, the development of local capital markets in emerging Europe, funding innovation, and green transition.

For more, check out our politics section.

ZAGREB, 27 Oct 2021 - Croatian National Bank (HNB) Governor Boris Vujčić said on Wednesday that next year Croatia would know the exact date for its changeover to the euro, adding that a strong campaign will be conducted in 2022 to inform the public of all the details.

Addressing a conference on what switching to the euro would mean for SMEs, which was organized by the 24 Sata daily, Vujčić underscored that Croatia has set a date for the introduction of the euro currency, but next year only will we know the exact date of the euro changeover.

If that is to be 1 January 2023, we have only 14 months for preparations, he said.

A law will be passed precisely regulating the changeover from the kuna to the euro, and the main principle will be to protect consumers so they are not brought into a worse position than they were prior to the conversion.

"The experience in all the countries that have entered the euro area indicate that wages increased more than prices while the standard of living increased and that is why the support for the euro in those countries is very high," he underscored. In other transition countries where the euro was introduced, the support is about 80% which Vujčić believes is proof that the fear of declining living standards is unreasonable.

Dual display of prices

The governor said that in the countries that adopted the euro the practice of dual display of prices was useful.

The dual display will also cover wages and not only prices, he also explained.

The logistics of exchanging the currencies have been worked on for a year and a half already, he said.

Payments will continue in both currencies for the next two weeks after the euro is introduced, explained Vujčić.

Finance Minister Zdrako Marić also underscored that based on current forecasts, the earliest the euro could be introduced is 1 January 2023.

He explained that prices in both currencies will be shown on articles five months prior to introducing the euro and for 1 year after its introduction. Marić believes that legislation related to the euro should be adopted in the spring of next year.

The president of the Croatian Chamber of Crafts and Trades (HOK), Dragutin Ranogajec, expects problems to occur during the 14 day period of payments in both currencies with regard to accounting and fiscalisation.

For more, check out our politics section.

ZAGREB, 18 Oct 2021 – Croatian National Bank (HNB) Governor Boris Vujčić said on Sunday that Croatian citizens should not fear a sudden rise in loan installments as a result of the rise in the inflation rate.

Speaking in an interview with the HRT public broadcaster on Sunday evening, Vujčić said there was no room for panic that interest rates would rise abruptly, and with the loan payments, for citizens who have long-term loans with variable interest rates.

He noted that the interest rates had been at record low levels since 2015 and that throughout that time the HNB was warning that at one point they would get back to normal and start increasing.

He said that this approach and the HNB's recommendation to the banks to offer fixed interest rates to citizens had led to the share of the variable interest rate in loans decreasing from 90 to the present 38 percent. He added that the majority of citizens have a fixed interest rate for the first five to ten years of loan repayment, after which the interest rate becomes variable.

"This means that in normal scenarios no one will feel any significant rise in interest rates in the short term," Vujčić said.

Should the inflation rate remain high for a longer period of time, interest rates might grow at a greater speed, he said, illustrating this with an example: "If your loan matures in 20 years or more, then a one percentage point rise in the interest rate might increase your loan installment by approximately 9.5 percent, provided you have no protection such as a fixed interest rate."

Vujčić said it was not possible to make a general recommendation to citizens with long-term loans and variable interest rates to apply for a switch to loans with fixed interest rates. He, however, recalled that in 2017 the HNB had recommended to the banks to make this possible for those who make such a request.

The HNB governor said he did not expect the rise in energy prices to have the same inflationary impact it had this year.

"Energy contributed to half of the total rise in prices, which is absolutely the greatest contribution to inflation. Looking at the markets, next year energy prices are expected to stabilize or even start falling slightly," he said.

He, however, warned there was still considerable uncertainty because if prices continued to rise, that would definitely put additional pressure on inflation.

"However, we cannot expect, in any reasonable scenario, the rise that we had this year when prices rebounded from the very low levels in the pandemic year 2020 to normal levels. I do not expect anything similar to the inflationary pressure we saw this year, but energy prices are definitely important for the overall inflation trend," Vujčić said.

The HNB expects inflation to pick up to 2.3 percent this year before slowing to 2.1 percent in 2022.

For more about politics in Croatia, follow TCN's dedicated page.

ZAGREB, 17 Oct, 2021 - Prime Minister and HDZ party leader Andrej Plenković said on Sunday that intraparty elections at which the leaders of the HDZ's city and county branches will be elected, were democratic and transparent.

"Anyone who wanted to run as a candidate could do so, and the process has been transparent and democratic. I do not see any relevant objections or anything that is not in line with democratic standards," said Plenković, who cast his vote in regular intraparty elections.

He expressed hope that local HDZ branches, which are to elect their presidents and vice-presidents today, would contribute to their local communities as well as the HDZ's national policy.

HNB governor should explain his statement about loan installment increase

Plenković was also asked to comment on Croatian National Bank (HNB) Governor Boris Vujčić's warning in an interview with the Novi List daily that loan installments of debtors with long-term loans approved with a variable interest rate could increase from 10% to as much as 20%. Vujčić did, however, note that that scenario was not very likely.

"I have not read the interview, he should explain what he meant. As far as I understand, that is not a very likely scenario. If he has an opinion on the matter, he should make a statement," Plenković said.

In a comment on the International Day to Eradicate Poverty, which is observed today, Plenković said that the government's national development strategy stated that maximum effort should be invested to reduce the number of Croatians who were at risk of poverty or were poor.

"The 20% rate is still very high, as an EU country we must reduce it, not only through social policy but through a policy that enables wage growth and a general atmosphere of equal opportunities," he said, adding that his government would continue working towards that goal in the next three years.

Plenković believes that the progress made in the past five years in the fight against poverty is visible, albeit not as great as one would want it to be.

He wondered what the percentage of people at risk of poverty would be if the government had not intervened with job-keeping measures during the coronavirus crisis.

Asked about the investigation into police violence against migrants on the border with Bosnia and Herzegovina, Plenković reiterated that the case was contrary to the government and Ministry of the Interior's policy, that it was an isolated incident and that the government would do its best to prevent any similar incidents.

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October the 11th, 2021 - CNB Governor Boris Vujcic has stated that the Croatian inflation rate could be higher, adding that while forecasts of domestic economic growth are positive, there are many negative risk projections to take into proper consideration, too.

As Poslovni Dnevnik writes, CNB Governor Boris Vujcic spoke in Croatian Parliament on Thursday and explained that, unlike the forecasts for Croatian economic growth, which are generally very good, the projections of inflation are dominated by negative risks, ie those that could lead to higher inflation rates.

In Parliament, where he presented the Croatian National Bank's semi-annual piece of information on the nation's overall financial situation, price stability and the implementation of monetary policy in the second half of last year, Vujcic reminded those present of the CNB's projections for economic growth of 8.5 percent this year, and of 4.1 percent in 2022, which, he estimated, will have a positive impact on both the situation with employment and the situation with average wages.

"Due to the sheer amount of uncertainties which still remain in place, it's possible that these projections will not end up actuallybeing realised, but unlike the previous ones, the positive and negative risks are balanced," said Vujcic. He explained that the negative risks to the domestic economy relate to the possibility that the epidemiological situation in the Eurozone will worsen in the fourth quarter and that any remaining restrictive measures will be tightened once again, which would result in weaker foreign demand and as such, negatively affect Croatian exports.

When it comes to the situation with inflation, it will accelerate to 2.3 percent this year, and slow slightly to 2.1 percent in 2022. In the previous part of the year, the acceleration of inflation occurred mainly under the influence of rising energy and food prices, said CNB Governor Boris Vujcic, emphasising the fact that the current projections of inflation are dominated by negative risks, ie those that could lead to higher rates eventually.

For more on Croatian monetary policy, follow our politics section.

October 9, 2021 - When it comes to the inflation rate in Croatia, it will accelerate to 2.3 percent this year, and slow slightly to 2.1 percent in 2022, according to the Governor of the Croatian National Bank (CNB), Boris Vujčić.

The Governor of the Croatian National Bank (CNB), Boris Vujčić, said in the Croatian Parliament on Thursday that, unlike the forecasts of economic growth, the projections of inflation are dominated by negative risks, such as those that could lead to higher rates, reports Poslovni Dnevnik. In Parliament, where he presented the CNB's semi-annual information on the financial situation, price stability, and implementation of monetary policy in the second half of last year, Vujčić reminded of the CNB's projections for economic growth of 8.5 percent this year, and 1 percent in 2022, which he estimated, will have a positive impact on employment and wages.

"Due to the still great uncertainties, it is possible that these projections will not be realized, but unlike the previous ones, the positive and negative risks are balanced," said Vujčić. He explained that the negative risks to the economy relate to the possibility that the epidemiological situation in the euro area will worsen in the fourth quarter and the restrictive measures will be tightened, which would result in weaker foreign demand and negatively affect Croatian exports.

When it comes to inflation, it will accelerate to 2.3 percent this year, and slow slightly to 2.1 percent in 2022. In the previous part of the year, the acceleration of inflation occurred mainly under the influence of rising energy and food prices, said Vujčić, emphasizing that the projections of inflation are dominated by negative risks, ie those that could lead to higher rates.

Previously, in mid-September, Vujčić himself commented on the expectations about the inflation rate in Croatia regarding the next insertion of the euro as the official currency in the country, commenting about the situation in the United States, that ''it has a higher inflation rate, but the economy is overheated there, they also have strong fiscal stimuli that are stronger than European ones and I do not see that at this time such an inflation rate could happen in Croatia, we expect that year-round inflation rate to be 2.2 percent. This is, in principle, the goal of the European Central Bank, so we should not be concerned about that. The problem is if there is a change in expectations, wage growth, but we do not see that at the moment''.

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September the 23rd, 2021 - Croatian Eurozone accession might still seem like a far away event on the domestic political stage, but it is edging ever closer and things are set to start being quite significantly different as of next summer.

As Poslovni Dnevnik writes, preparations for Croatian Eurozone accession have already started, and one of the measures is to ensure that prices don't increase significantly, which is something most people fear when asked what their worries surrounding the process of phasing out the Croatian kuna is.

Tihomir Mavricek pointed out that this will be among the very first things that will be tackled, and that the fixed exchange rate will be determined just before the decision of the EU Council on the introduction of the euro as Croatia's official currency.

"It will be around 7.53, but it will finally be determined in May or June next year and will become valid from January the 1st, 2023. Until December the 31st, 2022, the commercial exchange rate will be valid, it'll be as we have it now," he explained for HRT.

"There's no need to be afraid of price increases"

Many people are afraid of price increases as a result of Croatian Eurozone accession, but Mavricek has assured that the practice of countries that have already adopted the euro has shown that the replacement of the national currency has had very little effect on price growth, ie inflation.

"The countries that first adopted the euro had a small so-called harmonised growth of the consumer price index, which ranged between 0.09 and 0.28 percentage points. Countries that later adopted the euro had one which stood at around 0.3 - so we don't expect any significant impact on prices, maybe of some 0.37 percentage points, with the biggest impact coming from services and a slightly smaller number of commonly used products, such as pastries and newspapers,'' said Mavricek.

After the introduction of the euro in neighbouring Slovenia, prices in transport, restaurants and hairdressing/beauty salons increased, while in Slovakia the prices of food and construction works increased.

"Research has shown that these increases mostly regard products that don't affect people with lower incomes when compared to those with higher incomes, such as sectors like accommodation services, restaurants, and sports services - these are usually services used by people with higher incomes," explained Mavricek.

For more on Croatian Eurozone accession, check out our dedicated politics section.

ZAGREB, 2 Sept 2021 - Croatian National Bank (HNB) governor Boris Vujčić has said that the HNB's legal proposal is aimed at regulating tacit overdrafts the same way authorized overdrafts are regulated, which would result in greater consumer protection but also cause a drop in bank revenue of more than HRK 100 million annually.

Addressing a news conference on Thursday, Vujčić recalled the HNB's proposal for amendment of the Consumer Credit Act in the segment concerning authorized and tacit overdrafts. The HNB will agree to those changes with the government and it will also meet with bank representatives, Vujčić said, noting that the final form of the bill had still not been defined.

Vujčić said that the HNB completed a market analysis in Q1 2021 and that its findings, together with legal proposals, were presented to the Finance Ministry in April.

The analysis of the overdraft market was launched in 2020, showing that a large portion of overdrafts had changed from authorized to tacit overdrafts.

Vujčić stressed that the Consumer Credit Act, adopted much earlier, was designed to make tacit overdrafts an exception, but that when it was established that most overdrafts had turned into tacit overdrafts, a decision was made to impose the same regulation mechanism for those overdrafts as for authorized overdrafts.

In the case of authorized overdrafts, the effective interest rate is capped and banks have the obligation, when opting to cancel that service, to offer their client the possibility of repaying their debt in 12 installments.

"This legal proposal is an attempt to set a maximum effective interest rate (on tacit overdrafts) and make banks offer repayment in installments if their clients get into problems. Banks can do that now but they are not obliged to. In the future, they will have to do just that," said Vujčić.

He noted that the legal proposal was not about abolishing tacit overdrafts.

New agreements on tacit overdrafts will thus have to be limited to 90 days and HRK 1,500, and Vujčić said that the adoption of the new law could result in a drop in bank revenue of HRK 100 million annually, noting that that would depend on the final version of the bill, however, the estimate was not expected to change significantly.

Depending on the type of loan, wage, and overdraft amount, consumers would be able to save between HRK 150 and 450 a year.

Interest rates should reflect product-related risks 

Vujčić also said that of some 1,000 consumer complaints the HNB received in 2020, seven referred to tacit overdrafts, and when asked if the HNB could have reacted sooner, he said that this was not a problem previously as the effective interest rate on tacit overdrafts was not high.

The average effective interest rate for overdrafts grew in 2020 because banks raised their fees, not interest rates. "Before that, we did not have any reason to intervene, and now we do," he said.

Vujčić said that the matter was a very complex and sensitive one and that putting a cap on the interest rate was not, as believed by some, necessarily the best solution because it could exclude a large number of citizens from the market.

He noted that interest rates should reflect product-related risks and that in principle tacit overdrafts indeed entailed the most risk as there was no collateral and the client's creditworthiness was not checked, hence the high-interest rate.

He added that interest rates on tacit overdrafts in Croatia were lower on average than in EU countries that had not introduced the euro and higher than in those that were part of the euro area, but that that was not the case with other financial products.

Speaking of inflation, Vujčić said that there was no risk of very high inflation rates.

"However, in the euro area the inflation rate is slightly higher than forecast but we are still between 2% and 3%, which should not be worrying," he said.

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