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.

December the 11th, 2021 - The Republic of Croatia finally meets all of the many requirements for Schengen entry, and European Union member states agreed this on Thursday, paving the way for a final decision on the matter.

As Poslovni Dnevnik writes, the 27 EU member states agreed that Croatia meets all the conditions for implementing the Schengen acquis, paving the way for a final decision on Schengen entry which is without any control when crossing the European Union's internal borders.

The agreed text of the conclusions was formally adopted by EU member states' interior ministers on Thursday without further discussion.

Two other member states, the Netherlands and Sweden, had procedural reservations at a meeting of the Permanent Representatives Committee (Coreper) on Wednesday as their representatives awaited consultation(s) with the relevant committees in their respective parliaments, and conclusions couldn't be reached without the consent of all member states. The green light finally arrived for Croatian Schengen entry on Thursday, in time for the interior ministers who gathered in Brussels to officially confirm it.

Representatives of both of the aforementioned countries said that in principle they had no substantive objections to the text of the conclusions, but that these are common procedures in their countries when a position to be represented by their representatives in Brussels has sought consultations with the relevant parliamentary committees.

"Croatia has met all of the necessary conditions for the implementation of all parts of the Schengen acquis," the text of the agreed conclusions reads. This created the preconditions for the Council to take a decision in accordance with Article 4 (2) of the Agreement on the Accession of Croatia, which allows for the abolition of internal border controls. "With a view to Croatia's accession to Schengen, Croatia is called upon to continue to consistently implement the Schengen acquis and the obligations related to the Schengen acquis," the conclusions said.

These conclusions are a procedurally necessary condition for making a decision on Croatian Schengen entry and removing border controls at the Croatian land border with Slovenia and Hungary, as well as at airports and seaports.

The final decision on Schengen entry could be made in about six months during the French EU presidency, and it requires the explicit consent of all Schengen member states. The Council should also seek the opinion of the European Parliament, which it may or may not follow.

The adopted conclusions don't mean that the decision for Croatia to join Schengen is guaranteed as it cannot be ruled out that some of member states might block the decision. Conclusions on Schengen readiness for Bulgaria and Romania were adopted way back in 2011, and the two countries are still outside Schengen.

The text itself states that the adopted conclusions meet the preconditions for the Council to be able to subsequently decide that all parts of the Schengen acquis apply in Croatia.

"The Council can begin work on the draft decision with a view to forwarding it to the European Parliament for consultation as soon as possible," the conclusions said.

Schengen entry requires thorough evaluations to assess whether the country can take responsibility for external border control on behalf of other Schengen countries, to cooperate effectively with the police authorities of other Schengen member states in order to maintain a high level of security after the abolition of border controls, to apply Schengen rules, such as the control of land, sea and air borders (airports), the issuance of Schengen visas, police cooperation and protection of personal data, and the connection with and use of the Schengen Information System.

Onthr 6th of March 2015, Croatia sent a letter stating that it was ready to start evaluations in all relevant areas of the Schengen acquis as of the 1st of July of the same year. The evaluation process began in June 2016 and was completed in May 2019, and the European Commission confirmed on the 22nd of October 2019 that Croatia meets all the technical requirements for Schengen entry.

The procedure was carried out by teams of experts from the European Commission and EU member states, who, after carrying out all of the inspections, wrote a series of reports and recommendations to correct all of Croatia's identified shortcomings. Following these recommendations, Croatia has developed action plans to address these shortcomings. The last action plan for the area of ​​external border management was concluded back in February this year.

Croatia has gone through the most comprehensive and detailed process of assessing its readiness for Schengen membership, which no EU member state has encountered so far. It fulfilled 281 recommendations in eight areas of the Schengen acquis, of which 145 recommendations related solely to the area of ​​external border control.

With the help of the EU, Croatia has invested significant funds in its border protection, which is guarded by six and a half thousand police officers. It has been under a lot of pressure from migrants trying to enter EU territory for a long time and border police have been accused by the media and NGOs of forcibly returning and inhumanely treating illegal migrants trying to cross.

For more, check out our dedicated politics section.

December the 1st, 2021 - The French-Croatian economic partnership is set to be ramped up even further and cover a variety of different fields following the French President's recent visit to Zagreb in which he stated Croatia's Schengen readiness.

As Poslovni Dnevnik/Marija Brnic writes, last week, French President Emmanuel Macron and Croatian Prime Minister Andrej Plenkovic signed the Strategic Partnership Agreement between the two countries, which is a political declaration with a broader scope in which the two countries will engage in deeper French-Croatian cooperation.

The focus of the public, due to the simultaneous signing of the contract on the purchase of twelve Rafale fighter jets, was the military aspect of future cooperation with the country that is now the largest European Union military power, as well as to open French support for Croatia's entry into the Eurozone and the Schengen area.

This French-Croatian strategic document also brings preferences in bilateral relations between the two economies, part of which refers to the engagement of Croatian companies in the implementation of contracts for the procurement of combat squadrons.

The details haven't been specified, but it is stated that "France is ready to increase the development of further high-value aeronautical support activities at the industrial level in Croatia in connection with the Rafale aircraft."

From this it can be concluded that the doors are well and truly open to industrial cooperation in the aviation industry between the two nations. Cooperation between small and medium-sized and large companies and universities, as well as the participation in industrial consortia financed from the EU budget is also envisaged.

French-Croatian foreign trade relations have only been growing from year to year and the Agreement states that greater importance is needed in increasing the recognition of each country's economies and their investments. In the long run, mutual cooperation in education and scholarships will contribute to this, and in the short term, the foundations for stronger networking will be the two countries' plans which are primarily based on going green and the digital transition, as well as the EU's multiannual financial framework.

In addition to connecting to specific projects, France is also offering its support for the development of technology parks and the ecosystem of start-ups in Croatia, and will share its best experiences in supporting startups and growing companies. With experience in infrastructure projects and the automotive industry, a special space is being opened up in waste management, water management, green energy and digitalisation.

The two countries intend to improve their cooperation in the field of tourism, primarily in the search for models on how to escape from the bings of problematic mass tourism. France is the world's number one tourist destination at the moment, it is visited by the most tourists annually, while Croatia is the European country that receives the most tourists per capita. Therefore, the issue of sustainable tourism is becoming more and more significant, and judging by the Partnership Agreement, the way out will be cultural tourism and joint archaeological research programmes..

There is also talk of cooperation through ITER (International Experimental Thermonuclear Reactor), the construction of an experimental nuclear reactor, the largest investment in science in which all countries of the world participate, and its "host" is France. Getting electricity from fusion energy in France is seen as a priority goal to ensure non-carbon energy sources and sustainable development. This agreement does not, therefore, bring individual projects with specific participants into the ''game'', but instead proposes a proper framework for future French-Croatian partnerships, from which three-year action plans will be adopted at a later stage.

This isn't the first strategic partnership between Croatia and France, as they signed a similar agreement back in 2010, but with the acquisition of the Rafale planes, and also with its 2013 status of an EU member state, Croatia is now receiving more attention.

For more, check out our dedicated politics section.

November the 27th, 2021 - Croatian banks will have a hefty sum on their hands as the country's Eurozone entry approaches. The costs of the transition alone are eye-watering.

As Poslovni Dnevnik/Jadranka Dozan writes, based on the Action Plan for the Adjustment of the Financial System to the Introduction of the Euro as the Official Currency, about a month ago the Croatian National Bank instructed commercial Croatian banks to prepare a simulation of the costs of adjusting to the euro.

Estimates of the expected effects on revenues and expenditures directly related to the adjustment process, from the beginning of this year to 12 months after the date of the introduction of the euro, must be submitted to the CNB by the end of this year.

According to the CNB's instructions, the simulation includes all points of the Action Plan related to the implementation of the conversion, the double reporting of prices, the notification of users and adjustments following the introduction of the euro.

Among other things, it should include all foreseeable costs of pre-supply, indirect pre-supply and the cost of additional processing and the transportation of cash and additional cash insurance in branches of Croatian banks, as well as all foreseeable costs related to changes in the operation of payment systems. In addition, Croatian banks are expected to calculate related to regulatory reporting requirements, but also with all the expected savings associated with the conversion.

On their behalf, the Croatian Association of Banks provided a rough estimate. "For the needs of the technical process of adjusting the banking system, one-time costs are estimated at between 80 and 100 million euros. In addition to the above, the turnover on the foreign exchange market of kuna/euro will stand at about one billion kuna per year,'' stated the director of HUB, Zdenko Adrovic. One-time costs related to the introduction of the euro, he says, are primarily related to the adjustment of information systems and ATM networks.

However, HUB emphasised that both Croatian banks and their clients will find it easier to manage any currency risk in the long run, which means that risks will generally be reduced, and the collectibility of placements will be higher on average than it would be if Croatia were to keep the kuna.

HUB also emphasised that the introduction of the euro is extremely important for increasing investment, financing conditions and long-term growth of the Croatian economy. They add that the technical introduction of the euro is a very complex process that requires intensive engagement and cooperation of all bank employees.

"Croatian banks will play an important role in the whole process, given that they'll adjust the software of their POS devices and digital services and the entire ATM network so that people have the opportunity to use all banking services and withdraw their cash from the moment the euro is introduced. In addition, banks will convert deposits and loans and inform their clients in a timely and detailed manner about all they need to know,'' they concluded.

In any case, despite the instructions of the CNB to Croatian banks, this year was largely marked by the preoccupation with the euro project and all of the related preparatory activities. Although the Government continues to insist on the "fast track" move, so the target date for entry into the Eurozone is still the 1st of January 2023 (the earliest possible date according to the rules related to ERM II), the exact date will be known only next year.

Whether it is the beginning, middle or end of the year, operational activities to replace the kuna require very careful coordination. This is especially true for IT system customisations, which also account for a large share of the aforementioned costs. Regarding technical and technological adjustments to the transition to the common European currency, it is enough to mention, for example, that the number of devices on which payment cards are accepted in Croatia exceeds 113 thousand.

Most of them, slightly less than 108 thousand, refer to EFTPOS devices for payments at points of sale, and despite the long-term trend of reducing the ATM network, there were almost 4900 ATMs at the beginning of this year. Like most other banks, Erste Bank says they're already working intensively on the euro adjustment process to prepare in time for the introduction of the new currency. In terms of costs, most of it relates to the IT segment.

For more, follow our politics section.

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, 16 Sept 2021 - The government on Thursday adopted a conclusion on amending 46 laws and 72 regulations until 15 July 2022  as part of the roadmap for the euro changeover process.

Finance Minister Zdravko Marić informed the cabinet that in the last month, the competent agencies had itemized a total of 118 laws and regulations which should be amended within the national plan for the adoption of the euro.

The time frame for Croatia's admission to the euro area in 2023 thus entails the amending of the necessary legislation until 15 July 2022.

Prime Minister Andrej Plenković recalled that three days ago, the European Commission Executive Vice President  Valdis Dombrovskis, who attended the 11th meeting of the national council for the introduction of the euro as Croatia's official currency, strongly supported the work and ambitions of the government and other Croatian institutions to join the euro area.

Last Thursday the Irish Finance Minister and Eurogroup President, Paschal Donohoe visited Zagreb and said that Croatia had made important and positive progress on the road to euro area membership.

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

September the 14th, 2021 - The topic of new Croatian euro coins is being intensively discussed among all involved parties as Croatia's entry into the Eurozone edges ever closer.

As Poslovni Dnevnik writes, a memorandum of understanding was recently signed by the Executive Vice President of the European Commission Valdis Dombrovskis, the Commissioner for Economy Paolo Gentiloni, the President of the Eurogroup Paschal Donohoe and the Governor of the Croatian National Bank Boris Vujcic.

A memorandum of understanding between Croatia, eurozone members and the European Commission on the start of production of new Croatian euro coins and preparatory activities before the start of production was signed on Friday, after a meeting of Eurogroup leaders in Brdo near Kranj, the Croatian National Bank and the European Commission both reported.

The agreement regulates issues related to the preparatory activities for the introduction of the euro in the Republic of Croatia, which includes the production of a certain amount of test euro coins. The topic of Croatia's entry into the Eurozone has been overshadowed over the last eighteen or so months by much more pressing matters, including the state of the economy as a result of the ongoing global coronavirus pandemic, but plans are still very much being made.

The CNB statement states that on the basis of this memorandum, Croatia can start with its Eurozone preparatory activities, meaning it can now start drafting a detailed scenario for the changeover to the euro in the country, the proper preparation for the distribution of brand new Croatian euro coins, the withdrawal of the kuna as the national currency and the visual selection of the Croatian national side on new euro coins.

It can also start with the implementation of technical preparations for the common side of the new euro coins, the preparation of a production plant for the production of euro coins, the procurement of plates for minting euro coins as well as the procurement and production of tools for minting those same coins. Finally, the country is free to start making test copies of Croatian euro coins.

For more, make sure to check out our dedicated politics section.

September the 14th, 2021 - As Croatia prepares to adopt the euro as its national currency and send the kuna to the history books, just how much time do we actually have to switch any kuna cash to euros?

As Poslovni Dnevnik writes, last Friday, at a Eurogroup meeting in the Slovenian capital city of Ljubljana, a "Memorandum of Understanding" was signed between the European Central Bank, the Croatian National Bank and the European Commission. Tihomir Mavricek, Executive Director of the CNB's Cash Department, spoke about the bureaucratic phrase (memorandum of understanding) regarding the issuance and production of euro coins in Croatia on HRT's Studio 4 show.

Mavricek simplified the memorandum, why it is important and whether it means that Croatia can mint the euro itself.

The memorandum signed has its own symbolism and practical side. It is symbolic because it is the first official document signed between the three parties, and practical because it completes all of Croatia's preparations for accession to the Eurozone.

How much does it cost to mint the euro?

When asked who will do it in Croatia and how much it will cost, Mavricek said that it will be minted by the Croatian Monetary Institute.

''They've already started their preparations, and the real minting of euro banknotes is possible only after the Council of the European Union makes a decision on Croatia's accession to the Eurozone,'' said Mavricek.

''Based on the memorandum, we can make one million test pieces of each of the eight denominations of euro coins. We can test how ready we'd be to mint all the necessary quantities of euro coins after the Council's decision,'' he said, adding that the cost of making one euro coin costs about 10 cents on average.

Kuna cash and its storage

As for the storage of the Croatian kuna, which will soon be replaced by the euro, he said that since the beginning of the introduction of the kuna, the CNB has produced 2.8 billion pieces of kuna coins.

''If we lined them up next to each other and vertically, we'd get 4500 km of coins, which is from Zagreb to Riyadh in Saudi Arabia. They weigh about 10,000 tonnes. Based on the experience of other countries, we expect that about 35 percent of those coins will be returned, or 1.13 billion pieces. That's about 5200 tonnes, which corresponds to the weight of 124 new Zagreb trams. If a truck can load 20 tonnes of coins, we're talking about about 260 trucks of kuna coins,'' Mavricek illustrated.

He said that there would be fewer euro coins, but not because of the exchange rate or the ratio of approximately 7.5: 1.

''There's a conversion methodology developed by the European Monetary Institute, which is based on the fact that we have the same number of coins and banknotes as we had for our national currency. According to the budget formula, we'll get approximately the same number of coins and banknotes, but it will still be a little less,'' Mavricek explained.

He added that according to information from the Deutsche Bundesbank, a huge amount of German marks remained everywhere, and still do. According to some estimates, it amounts to almost 6 billion marks. Even today, stamps can be converted into euros.

''The CNB is preparing for the safe storage of both kuna cash (banknotes) and coins. Banknote issues have already been resolved, and for coins it is currently being resolved. It will be in a safe location that will be guarded non-stop,'' Mavricek said.

Deadlines for exchange of kuna cash and coins

-''Unlike kuna banknotes that will be exchanged for euros indefinitely, kuna coins will only be able to be exchanged for a period of three years. The first year will see all banks take responsibility for that, and then the following two will be dealt with solely by the CNB,'' Mavricek explained, adding that the returned kuna cash will be stored on an area of ​​about 2,000 m2.

He believes that minting euros in Croatia will be cheaper than having them done for the country elsewhere and by someone else.

For more, check out our dedicated lifestyle section.

September the 7th, 2021 - The country's many exporters are set to have life made that bit easier for them with Croatian Schengen entry on the horizon, further aided by the country finally entering the Eurozone.

As Poslovni Dnevnik/Darko Bicak writes, Minister of Economy and Sustainable Development Tomislav Coric recently said that for small and open economies, such as that boasted Croatia, exports are a prerequisite for development and survival.

"The country's GDP has been growing for years now, and of late, exports have been one of the main factors when it comes to economic growth and economic recovery. Exports recorded very good results even during pandemic-dominated 2020. This year, we've been recording a large recovery in terms of exports with 60 billion kuna, which is 11 billion kuna more than in pre-crisis 2019,'' said Coric.

He added that we must be careful in this analysis of the growth of the value of Croatian exports, because part of it is related to global inflation.

Minister Coric also pointed out that the achieved results are due to about 20,000 Croatian exporters who are the largest employers in the country, who also generate the largest share of total income and investments. He stated that both EU and national funds are a major source of funding for innovation and competitiveness of the domestic economy in the wake of the Green Plan.

"I'm aware of the challenges that Croatian exporters have been facing for years, and the Government is making great efforts to overcome bureaucratic obstacles for Croatian businessmen, and especially exporters, for greater growth and exports. By joining the Eurozone in two years, we'll take an additional step forward in eliminating exchange rate risks faced by Croatian entrepreneurs when doing business on our most important market - the single market.

In addition to the above, Croatian Schengen entry will be a benefit for all of the country's exporters because it will simplify and speed up mobility,'' concluded Minister Coric.

For more on Croatian Schengen and Eurozone entry, make sure to follow our politics section.

July the 19th, 2021 - The voting process for the appearance of the brand new Croatian euro coin when the country joins the Eurozone has now drawn to a close, with a final choice to be made soon.

Croatia's planned Eurozone entry date is growing ever closer, which many have put to the back of their minds owing to more pressing circumstances surrounding the ongoing pandemic of late. The country's entry into the Eurozone comes with concerns for many, with others asking where the referendum on the matter was, not realising that all countries with the exception of Great Britain agreed to eventually sign up to the common currency when joining the European Union in the first place.

For others, no longer having the Croatian currency which is very sensitive to exchange rate fluctuations resulting in numerous issues when working with the euro, will come as a breath of fresh air and a fuller pocket. Others fear that the introduction of the Eurozone's currency will see prices rise, despite assurances that it won't happen. 

To make this serious matter a bit lighter and bring it directly to the public, voting on what the Croatian euro coin will look like took place, in which the public got to choose from several very Croatian coin designs.

As Poslovni Dnevnik writes, the symbols for the Croatian euro coin will be chosen from the kuna, the map of Croatia, the Glagolitic alphabet, Dubrovnik and the Croatian coat of arms.

Almost 50,000 people voted for their favourites via the Croatian National Bank's official website. Some would like the Glagolitic alphabet because that was the very first Croatian script, some would like the map and the country's famous checkers because that symbol is the closest to them, but some also had new ideas, their own suggestions, writes Dnevnik.hr.

Additional proposals will also be taken into account, Croatian National Bank Governor Boris Vujcic confirmed. "The motive that was most often proposed will definitely be considered to be placed on the Croatian euro coin,'' Vujcic concluded.

By the end of the week, the Croatian National Bank's commission will choose the final symbols and which will be on which Croatian euro coin. They will then immediately announce a tender for artists who need to design the look of the coins themselves with the selected motifs.

For more, follow our dedicated lifestyle section.