As Poslovni Dnevnik writes on the 21st of April, 2020, Croatian National Bank Governor Boris Vujcic spoke on Dnevnik N1 about moves the Croatian National Bank (CNB/HNB) is making in connection with the ongoing coronavirus crisis. He said that Croatia is currently in an unusual situation, as is the case when part of the economy needs to be shut down.

"Estimates which are now being made roughly estimate that one month of shutting down the economy brings us a three-point drop in GDP. According to the IMF, the GDP drop 3 percent every month,'' Boris Vujcic said, adding that at the moment, the need to finance the budget is adding up to about ten billion kuna a month.

''We're doing a scenario model where we go with three scenarios - optimistic, pessimistic and basic. They're based on the assumptions of how long the economy can function in this restrictive model. The longer that time goes on, the longer Croatia's GDP falls. We don't know how long it will take, so we can't do a single projection. The depth of the recession this year will depend on whether it's six, nine or twelve weeks of the economy having to work in quarantine.

We expect strong economic recovery in 2021, but not one that would allow for the economy to reach the GDP level of 2019 by the time 2022 rolls around. In an optimistic scenario, we can expect to reach that level of GDP at the end of the projection horizon,'' Boris Vujcic said.

Finance Minister Zdravko Maric said Croatia needed between 60 and 75 billion kuna for three months' worth of assistance packages.

''The need for financing can be done partly on the domestic financial market, by banks and other financial participants, the other way of financing is funds and the third part can be done on the foreign market.

The CNB has done several things. At the beginning of the crisis, it ensured the stability of the exchange rate through foreign exchange interventions on the market. The second part of these actions was to provide additional liquidity on the market, and the third part was related to securities, with which we stabilised the Croatian state's bond market.

We're ready to defend that [same] course. The CNB kept the kuna exchange rate stable and will continue to do so until the introduction of the euro happens. Now is the opportunity to see how important it is to have large international reserves,'' the Governor explained.

If Croatia had introduced the euro today, we would have been in a more favourable position, Vujcic added.

"If we were in the Eurozone, we wouldn't have had an issue with maintaining the exchange rate stability, we'd have the monetary policy of the European Central Bank, which prints one of the two major world currencies. We'd have the resources of the European Stability Mechanism, in addition to that of the ECB, where each Eurozone country can obtain two percent of its GDP, which would have meant another billion euros in our case,'' Boris Vujcic said.

"The CNB has changed, adjusting its regulatory framework for banks for a year, which allows banks to be able to allow customers to defer their payments of liabilities for a period of three months to a year. Not every client has the same commitment and not everyone will be equally affected. If a law were written on this issue, it would be difficult to enact it by determining who has a right and who has no right. Some need that for a short period of time, some need it for a long period of time, some don't need any time at all.

At the end of last week, out of 30,000 business owners who had taken out a loan, 9,000 requested a deferral of their obligations. About 30,000 people have asked for a delay in servicing their obligations,'' Boris Vujcic said.

Make sure to follow our dedicated section for more on coronavirus in relation to Croatia.

As Poslovni Dnevnik writes on the 30th of March, 2020, the financial markets are in constant turmoil, the level of uncertainty is extremely high, and all this will require very careful management of budget financing, the governor of the Croatian National Bank, Boris Vujcic, said.

''The Croatian National Bank (CNB) has taken a number of measures to maintain exchange rate stability, strengthen the financial system's liquidity and revive the government bond market. The main measures were promptly announced to the general public, with all the aims that were initially sought. In mid-March, we intervened four times on the foreign exchange market totalling €1.6 billion to stabilise it. That's what we've achieved, the exchange rate has now been stabilised. The second objective was to create additional, and partly longer-term, cheap liquidity. On regular and structural operations, we created 4.5 billion kuna of additional, mostly long-term liquidity for banks at a very low interest rate,'' said Boris Vujcic, according to a report from Vecernji list.

''We've placed the funds for banks for five years at an interest rate of 0.25 percent, and short-term loans are at an interest rate of 0.05 percent. Thirdly, since the additional liquidity created by banks didn't reach other financial institutions and threatened to freeze the government securities market, which would adversely affect the financing conditions of all domestic sectors, we intervened in regard to that market as well. The situation was such that when we announced our interventions, even the market for the highest quality German Government securities was under a huge amount of stress. At two auctions, we purchased 4.3 billion kuna in government bonds, which is the first time the CNB has acted in such a manner,'' Boris Vujcic went on to explain.

''Finally, given the need for additional funding from the state due to the package of measures released in the face of the COVID-19 epidemic, we reduced the reserve requirement last week, freeing up an additional 10.5 billion kuna. These amounts cannot be added together because they're different measures. While foreign exchange interventions convert kuna liquidity into foreign currency, the bank financing operation and the redemption of bonds create additional kuna liquidity, and lowering the reserve requirement rate gives banks existing liquidity blocked by central bank monetary measures. However, all of these moves were complementary and were aimed at preserving favourable financing conditions for all bank clients despite the economic downturn and huge disruptions affecting global financial markets, all while maintaining exchange rate stability,'' Vujcic said, adding that government funding would could facilitate the expected increase in private savings that will ultimately require secure investments. On the other hand, financial markets are facing constant upheaval, uncertainty is extremely high, and this will all require very careful management of budget financing, the governor noted.

''We're entering a health crisis from a position of considerable surplus in the current and capital account, in other words, we've got higher exports than imports, and higher capital inflows than capital outflows. We've used this surplus in recent years to repay foreign currencies and strengthen our foreign exchange reserves, which is our first shock absorber in a situation where exports fall. Although funding conditions have tightened for emerging markets, including the Croatian market, borrowing is still possible. We'll only spend more on reserves if the coronavirus crisis escalates. If that does happen, it will be a sign that our foreign exchange reserves have served a purpose and that we've been able to maintain domestic demand. The CNB's gross reserves, even after the foreign exchange interventions that stabilised the exchange rate after the outbreak of the epidemic, are in excess of €17 billion,'' Boris Vujcic assured.

''The foreign exchange assets of banks needs to be added to that, which amount to approximately five and a half billion euros, and they can serve the same purpose as foreign currency reserves. Foreign exchange sold recently are mainly in the foreign exchange assets of banks and therefore haven't disappeared from the country's financial system,'' Boris Vujcic concluded.

For rolling information and updates in English on coronavirus in Croatia, follow our dedicated section. For more on the Croatian economy, follow our business page.

Just how is the Croatian banking system doing in these tying coronavirus-dominated times?

As Poslovni Dnevnik writes on the 17th of March, 2020, the Croatian National Bank's Governor Boris Vujcic said that since the beginning of last week, there has been some stronger pressure on the kuna exchange rate. He also stated that the CNB has intervened and stabilised the exchange rate and announced that it will continue to work.

According to Vujcic, the Croatian banking system is currently very stable and that, despite the coronavirus epidemic which is rocking the global economy, there is currently no threat to its normal functioning, so residents certainly do not need to withdraw their cash from banks.

''As for the Croatian banking system, it's very well capitalised and very stable and there's no need for residents to start withdrawing their money from banks. At the moment, we don't see any problems that could jeopardise any normal functioning, regardless of what will happen with the virus or the epidemic,'' Vujcic told reporters.

"The kuna exchange rate will remain as stable as it has been for the last quarter of a century," Vujcic assured strongly.

Namely, since the beginning of last week, the CNB has carried out four foreign exchange interventions, through which more than 1.6 billion euros were sold to banks, bringing a total of 12.2 billion kuna out of the Croatian banking system, and yesterday, after two weeks of the weakening of the kuna, it managed to strengthen against the euro.

Vujcic said that the CNB had very high foreign currency reserves, as well as the ability to create liquidity as and when needed.

When asked about the proposals for the postponing of loan repayments and the request of a state guarantee scheme, Vujcic replied that the state guarantees should be discussed with the state, but also said that the Croatian banking system and the population as a whole are currently in an unusual situation thanks to coronavirus.

"It's in everyone's interest to overcome this situation by postponing some claims/loans that exist against those who will not be able to do business in due time due to the epidemic," Vujcic said, adding that despite the current issues, he believes that the economy then has the capacity to overcome it.

He believes that it is reasonable to expect a budget rebalance, as well for the CNB to accordingly adjust its economic growth projection, which it will do when the time comes.

"If the cycle of this epidemic is the same as we've seen in other countries, then we could see an economic recovery in the third quarter, but it depends a lot on the length of that cycle. The sooner it's over, the sooner the recovery will begin,'' Vujcic said.

He expects that the Croatian economy will see some structural changes, such as a likely increase in agricultural production, which he hopes will remain as such even after the coronavirus crisis passes, in the sense that it will increase Croatia's self-sufficiency in this regard.

Make sure to follow our business page for more on the Croatian banking system and our dedicated section for information on coronavirus in Croatia.

What does the Croatian National Bank's main man say the Croatian economy can realistically expect in 2020?

As Jadranka Dozan/Poslovni Dnevnik writes on the 17th of December, 2019, if you were to ask Croatian entrepreneurs, finding an adequate workforce is at the top of the list of the most important problems. According to the survey of the central bank, entrepreneurs consider the problem of regulation or bad or complicated regulations to be bigger than finding staff, while that was only their sixth "concern" a mere four years ago.

Labour supply pressures are also one of the main drivers of wage growth. Since back in 2017, they have been showing solid growth in Croatia, especially when one takes into account that the employee benefits with their salary due to tax changes.

At the Croatian National Bank, as part of the economic projections for the current and the coming year, they pointed out that, following the acceleration of wage growth in 2019, next year Croatia can expect further acceleration, with the public sector leading the way, and not the private sector. Croatian National Bank analysts estimate that in the public sector, nominal gross wages will rise by about 4.3 percent this year, and by more than seven percent in 2020, while the private sector expects about 3.7 percent this year, and about 4.5 percent in 2020.

Looking in the proverbial rearview mirror, statistics suggest that Croatian wage recovery is still below expectations, but the Croatian National Bank notes that this may be partly explained by changes in the structure of total employees, because stronger employment growth occurs in fields with relatively lower average wages (in tourism, for example, with 80 percent of the total average).

Overall, on the labour market - and in terms of wages and overall employment - the Croatian National Bank's Governor Boris Vujčić said that positive developments are expected to continue. In recent years, employment has grown on average around two percent, which is relatively modest, given the fact that the employment rate in Croatia is among the lowest in the European Union and certainly represents one of the major structural weaknesses of the country's entire economy.

Compared to continued favourable developments on the labour market, economic growth could reach three percent in real terms this year, with the central bank projecting a slowdown in GDP growth of 2.8 percent in 2020, which is slightly higher than in previous projections (2.7 percent). In general expectations for the Croatian economy next year are slightly better than what was forecasted last autumn.

Despite the woes of the now truly insufferable topic of Brexit, all estimates suggest that its impact on leading EU economies, some of which are Croatia's main foreign trade partners, will be smaller than expected a few months ago, when worrying recession scenarios were predicted for some. According to current forecasts, the Eurozone is expected to grow by 1.2 percent this year, and by an encouraging 1.4 percent in 2020.

In any case, foreign demand should remain solid, so the expectations for the growth of exports of goods and services from the Croatian National Bank in ​​2020 remain good (ranging from 2.8 to 3.3 percent).

The consumer price inflation forecast has also increased. After this year's slowdown to (an expected) 0.8 percent (owing to the reduction in the VAT rate on certain products and falling oil prices), they expect the central bank to accelerate to 1.4 percent next year as a result of an increase in the annual growth rate, the cost of food and the rise in excise taxes. In previous projections, the Croatian National Bank has calculated a slightly lower 1.1 percent when it comes to inflation.

Thanks in particular to growth in services exports, the stronger and better use of EU funds and growth in remittance revenues, the current and capital account surplus will be higher this year than it was last year, but it is realistic to expect that this surplus will be slightly lower once again in 2020.

Relative indicators of foreign indebtedness should also remain positive, which means a decrease from 75.7 percent to 70.6 percent of GDP this year.

In such a macroeconomic environment, the Croatian National Bank intends to continue expanding its monetary policy, supporting the high liquidity of the monetary system while maintaining the nominal exchange rate of the kuna against the euro in a stable way, Vujčić emphasised.

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ZAGREB, August 16, 2019 - In the first half of 2019, a total of 555 counterfeit banknotes were detected in circulation in Croatia, the Croatian National Bank (HNB) has reported, underscoring that it "is a decrease of 62.7% from total registered banknote counterfeits of all currencies in the same period in 2018".

Of those 555 forged banknotes, 278 counterfeits were kuna banknotes, which is an increase of 5.7% relative to 263 registered counterfeit kuna banknotes withdrawn from circulation in the same period in 2018.

"Given an average of 254.3 million kuna banknotes in circulation in the first half of 2019, an average of 1.1 counterfeit kuna banknotes were detected per 1 million genuine banknotes in circulation in the said period."

"The most frequently counterfeited domestic currency denomination was a 200 kuna banknote, with 124 counterfeits registered (44.6% of total kuna counterfeits), followed by 1000 and 500 kuna banknotes, which together accounted for 38.1% of total registered kuna banknote counterfeits," the bank has reported.

Of 277 counterfeited foreign currency banknotes, fake euro banknotes accounted for 224 of them.

"A total of 224 counterfeit euro banknotes were registered from January to June 2019, which is a decrease of 81.4% relative to 1,203 registered counterfeit euro banknotes withdrawn from circulation in the same period in 2018., the HNB says.

"With 112 banknotes withdrawn from circulation, 50-euro banknotes accounted for the largest share (50.0%) in the total number of registered counterfeit euro banknotes."

The amount of the counterfeit money in the said period did not cause any major disturbances in the money flows.

More news about the Croatian National Bank can be found in the Business section.

ZAGREB, July 14, 2019 - The Croatian National Bank (HNB) and the International Monetary Fund (IMF) have organised the conference entitled "Demographics, Jobs and Growth: Navigating the Future in Central, Eastern and Southeastern Europe" which starts in the Adriatic resort of Dubrovnik on Sunday.

This year’s conference "focuses on labour market and demographic challenges, the future of labour, and policies needed to sustain growth and reach Western European levels of income," the HNB says on its web site.

"During the first part of the conference, panellists will discuss the economic developments and capacity constraints arising from labour market shortages and skill mismatches.

"The issues of ageing population, emigration and the impact of these demographic shifts on income growth and convergence, will be addressed in the second part of the conference. Panellists will also discuss the potential role of technology, alongside other policies, in mitigating the adverse impact of demographic trends," the central bank says.

Tao Zhang, Deputy Managing Director of the IMF is quoted as saying that "the conference will address one of the most significant challenges for the region – a shrinking and aging population."

Apart from the IMF and CNB representatives, in attendance at the event will be Croatian Prime Minister Andrej Plenković and about fifteen CESEE central bank governors and finance ministers, representatives of the World Bank, the European Commission, the Bank for International Settlements and other institutions, as well as experts from the universities of Oxford, London and Tartu.

More news about the HNB can be found in the Business section.

ZAGREB, July 11, 2019 - The Croatian National Bank (HNB) has increased its projection of economic growth this year to 3.1%, a HNB Council said in a press release on Wednesday.

The current indicators of economic activity and the expected growth of public and private investments as well as household consumption indicate that the growth rate of real GDP in 2019 could be 3.1%, the press release said.

The HNB's forecasts at the end of last year projected a growth of 2.7%, while in spring it was decreased to 2.5%.

The latest increase is in line with the European Commission forecast published yesterday. The Commission revised its forecast of Croatia's economic growth this year to 3.1% from the earlier projected 2.6%.

The HNB also estimates that employment growth and the decrease of unemployment could slow down very gradually, and that this year's inflation rate could shrink to 0.7%.

The surplus on the current and capital accounts is expected at 3.1% of GDP and its reduction in comparison with last year is due to the deeper foreign trade deficit, whose effects are alleviated by the growth of the net export of services and higher absorption of EU funds, the press release said, adding that the relative indicators of foreign indebtedness therefore could slow down.

According to the government's convergence programme, the general government's deficit could be about 0.3% of GDP this year, while the European Commission forecasts a possible budget surplus, the HNB said.

The HNB will therefore continue to implement an expansionary monetary policy and support economic growth, while maintaining a stable kuna-euro exchange rate, the press release said, adding that the expansionary monetary policy and reduced interest on lending by domestic credit institutions resulted in stronger household lending.

The financial system remains moderately exposed to risks, the continuation of economic growth has a positive impact on structural imbalances, non-financial companies have better business results, and households' currency clause and interest risks are being reduced, the HNB said, adding that the banking system remained highly capitalised and liquid.

More news about the Croatian National Bank can be found in the Business section.

Don't worry, the Croatian kuna isn't being phased out in time for the euro's introduction just yet, but there are several old Croatian banknotes, some (but not all) of which might look no different to the usual ones you spend, that are actually no longer legal tender in Croatia.

As Poslovni Dnevnik writes on the 15th of June, 2019, the Croatian banknotes you need to be checking your wallets, jacket pockets and the crevices of your sofa are 5, 10, 20, 50, 100 and 200 kuna notes which bear the date of issue as October the 31st, 1993 and January the 15th, 1995, according to vijesti.hr.

While these dates are now a long time ago and you might think that plain old paper banknotes might not have survived for that length of time, it has been reported that as many as nine million and 600,000 kuna worth of kuna banknotes are still in circulation within the country, and as Vecernji list states, it's possible that you have them in your wallet, or under your bed as the case may be.

If you happen to have any of the banknotes mentioned above, you can freely exchange it at the Croatian National Bank (HNB/CNB). In just one year, from the 31st of May, 2018 to the 31st of May this year, the bank received as many as 38,500 of these various now illegal banknotes from people in various denominations.

The 10 kuna bills bearing the issue date on October the 31st, 1993 ceased to be a legal instrument of payment on April the 1st, 2001. Yet according to the data of the Croatian National Bank, as of May the 31st, 2019, as many as 699,153 of these old notes are still in circulation. Of those with the date of issue being January the 15th, 1995, there are stil 2,353,407 out there somewhere.

The 20 kuna banknotes bearing the issue date of October the 31st, 1993 ceased to be legal tender on April the 1st, 2007. There are still 1,735,062 of these banknotes in circulation, even though they haven't been legal tender for a very long time now.

The situation with the other banknotes mentioned above is similar, so if you see that you have any with the date of issue being October the 31st, 1993, make sure to take them to a bank and exchange them for legal notes free of charge.

Invalid banknotes can be delivered by post to the following address: The Croatian National Bank, Treasury Department, Trg hrvatskih velikana 3, 10002, Zagreb, or, they can be taken in person to the Croatian National Bank at Franjo Rački 5, Zagreb, Croatia.

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ZAGREB, June 15, 2019 - Croatian National Bank (HNB) governor Boris Vujčić said on Saturday he expected to do very well in the Asset Quality Review before entering the Single Supervisory Mechanism (SSM) because their capital adequacy and liquidity was markedly above the euro area average and they left no doubt that the system was good and stable.

Speaking at the 25th Dubrovnik Economic Conference, he said the technical part of conducting the review was being arranged with the European Central Bank.

He said the names of the banks which would be reviewed should be known by the end of the month, after which the banks will be notified which data they need to prepare and the ECB has to invite applications for conducting the review.

Vujčić said a letter of intent for joining the European Exchange Rate Mechanism II was nearing completion and that it would be sent after an agreement with European partners. He would not speculate on dates but said it would happen "very soon".

The HNB said on May 27 that Croatia had sent a request to the ECB for establishing close cooperation in the oversight of credit institutions as part of the SSM.

The step is part of the procedure for Croatia's entry to the ERM II and then the euro area, the HNB said, adding that Croatia plans to enter the mechanism of close cooperation with the ECB and the ERM II at the same time.

The SSM is the first pillar of the banking union and it comprises the ECB and the national authorities of the participating. Participation is automatic for euro area member states and voluntary for those outside, which have to establish close cooperation with the ECB.

The SSM's main goals are to provide for the security and reliability of the European banking system and to contribute to financial integration and stability in the EU. Establishing close cooperation is a prerequisite for participating in the SSM, in which the ECB oversees credit institutions in the euro area.

More news about the introduction of euro can be found in the Business section.

ZAGREB, June 2, 2019 - The Croatian National Bank (HNB) marked the 25th anniversary of the kuna as the national currency with a 25 kuna coin released in 30,000 copies.

The kuna became the official currency on 30 May 1994, then Statehood Day, replacing the Croatian dinar, which itself had replaced the Yugoslav dinar as a transitional currency after Croatia gained independence from the former Yugoslavia.

The Archaeological Museum in Zagreb is also marking the kuna's 25th birthday with an exhibition which opened on May 30.

The HNB has issued the special 25 HRK coin on 14 occasions so far to commemorate events of special importance for Croatia.

The first one was issued on 28 May 1997 to mark the completion of the peaceful reintegration of Croatian territories under the UN Transitional Administration in Eastern Slavonia, Baranja and Western Sirmium and the restoration of Croatia's territorial integrity.

The 25 kuna coins were also issued to mark the tenth anniversary of Croatia's international recognition, the 25th anniversary of independence, the 25th anniversary of admission to the UN, the granting of EU membership candidate status, the signing of the EU accession treaty, the introduction of the euro in 11 member states in 2000, Croatia's first participation in EXPO, in Lisbon in 1998, a European Bank for Reconstruction and Development assembly held in Zagreb, and the first Croatian Esperantists' congress.

The HNB Council decided to issue the latest 25 coin kuna on May 7. The coin was designed by sculptor Damir Mataušić.

More news about the Croatian National Bank can be found in the Business section.