November the 12th, 2022 - Croatian euro coins will be available for purchase as of the 1st of December, 2022, but won't be legal tender until the first day of 2023.

As Poslovni Dnevnik writes, the production of Croatian euro coins in preparation for the country's entry into the Eurozone started this summer, and by the end of the year, all the quantities planned for this year will finally have been minted. These quantities will be used, among other things, for packaging in so-called initial packages of Croatian euro coins for both individuals and businesses to purchase.

People will be able to get their hands on these initial packages of brand new Croatian euro coins from banks, FINA and post offices from December the 1st this year, with the Croatian National Bank (CNB) also publishing a picture of that initial package.

The initial packages of Croatian euro coins for citizens will be packed in small plastic bags containing 33 euro coins worth 13.28 euros in total. People will be able to purchase a maximum of two bags per transaction, and a total of 1.2 million pieces will be made available for these needs.

What about ATMs?

With the introduction of the euro as Croatia's official currency scheduled for January the 1st next year, ATMs will allow people to withdraw 10 or 20 euro banknotes, and requested amounts such as 50 and 100 euros will be paid out in those same 10 and 20 euro banknotes, the Croatian National Bank (HNB) revealed.

From January the 1st next year, dual circulation of both kuna and euros will remain in effect for two weeks, during which time change from payments made in either euros or kuna when buying groceries in stores will be returned to customers solely in euros.

In the period from December the 15th to the 31st, 2022, free kuna withdrawals will be introduced at all and any ATMs across the country. This will be maintained until January the 15th, 2023, in order not to have a negative impact on the availability of cash in kuna, they stated from the Croatian National Bank.

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

October the 26th, 2022 - With Croatian Eurozone entry looming, more and more kuna cash is appearing in bank accounts having made its way there from sock drawers and under mattresses. How much of it is legitimate, however? With many of these amounts not exactly being small, these deposits might well attract the taxman's unwanted radar.

As Poslovni Dnevnik writes, as RTL has learned from the Croatian Association of Banks (HUB), back in June this year, household deposits reached 255.2 billion kuna, in July they rose to 259.6 billion kuna, and according to the latest Croatian National Bank (CNB) data, they rose to 263.4 billion kuna this August.

When compared to the same month last year, at least according to the Croatian National Bank, this is an increase in deposits of this kind by 22.3 billion kuna or 9.4%. Peoples' deposits have been growing rapidly for a couple of years already, meaning the growth of deposits was similar a year earlier compared to 2020, when they grew by 20.7 billion kuna or 9.2%. People in this country typically deposit far more foreign currency than they do kuna cash, so the share of foreign currency deposits was 59.4% or 156.5 billion kuna, while the share of kuna cash savings and stood at 7.1% or 18.9 billion kuna.

In this way, some of the money that has been under the radar until now will surely end up being deposited into various different bank accounts. If a larger amount appears on someone's account, the spotlight might well be switched on and the bank's due diligence and analysis procedures will automatically be activated. On top of that, there there is also the Law on the Prevention of Money Laundering and the Financing of Terrorism, which also prescribes which alarms need to be raised and when.

"Measures of in-depth analysis should basically ensure that banks get to know their clients and the transactions being carried out in detail, and include establishing the identity and verifying the identity of the party, collecting data on the purpose and intended nature of the business relationship, and carrying out the constant monitoring of the business relationship", they stated rom the CNB.

If an amount greater than 200,000 kuna appears in someone's account all of a sudden, regardless of who is carrying out that cash transaction, the bank is also obliged to collect information on the source of the funds.

For more, make sure to keep up with our dedicated news section.

October the 5th, 2022 - Croatia is entering the Eurozone during particularly difficult and turbulent times, following a global pandemic, and now during the Russia-Ukraine war which has resulted in spiralling inflation and an energy crisis, but what are the positives?

As Poslovni Dnevnik writes, all Croatian kuna that people have at home will have to be exchanged for euros unless they want to keep hold of it for historical, nostalgic purposes (and I'm sure we'll all be keeping a coin or two). It's interesting to note that some of that money will be flowing into the purchase of real estate. Croatia's accession to the Eurozone, according to the Croatian National Bank (CNB), only partially caused huge growth in the property business.

''This boom in the market has been happening for the last few years, we've all been witnessing it, it isn't something that is exclusively related to Croatia joining the Eurozone, it's something that I'd primarily associate with the fact that we have lived for too many years in the zone of zero interest rates,'' said vice-governor Michael Foulend of the Croatian National Bank for HRT.

The double display of prices in both kuna and euros in stores should prevent additional price increases due to the rounding up of prices when Croatia does adopt the euro officially, but inflation is complicating everything.

''Having learned from the experience of other Eurozone countries, we don't expect that there will be more pressure due to the introduction of the euro here. What is inconvenient is that Croatia is in a period of very high inflation, so perhaps it creates the impression that everything is linked to the euro, but that isn't at all the case,'' stressed Zvonimir Savic, special adviser to the Prime Minister on economic issues.

Croatia is entering the Eurozone at a time of great geopolitical crisis, but this country's joining should actually provide many advantages.

''It is to be assumed that entering the Eurozone means greater financial stability, lower interest rates, more favourable conditional borrowing, even during crisis times, and we are and should be aware that this current crisis is geopolitical and has very serious economic implications - then you have an umbrella, some kind of shelter you can count on,'' pointed out Mladen Vedris from Effectus University.

''Within the Eurozone itself, there are some big differences between developed and less developed member states, but also between the political leadership of those countries, so it is particularly important that we navigate these waters skillfully and as strongly as possible in this currently turbulent sea,'' concluded Vedris.

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

August the 17th, 2022 - Just how will mystery shoppers work to protect Croatian consumers and their rights out in the field as we edge ever closer to Eurozone accession?

As Poslovni Dnevnik writes, although it was said that the application would be finished by now, that has unfortunately failed to happen, meaning that the mystery shoppers haven't yet gone out into action in the country's stores.

It was also explained how these mystery shoppers will monitor the entire process of price alterations as we approach Eurozone entry and work to protect Croatian consumers.

"Each mystery shopper will keep their eye on twenty different products, they'll be the exact same products every month being sold by the same retailers or service providers. It must be checked whether the price is stated in accordance with the law. For now, we're only listing prices in kuna, because the obligation to declare prices in both kuna and euros will only been mandatory as of September the 5th, 2022. Then, we'll start checking whether the price is expressed in kuna and euros, whether there's a fixed exchange rate being used, and whether or not it's being calculated correctly. Given that the prices must be expressed to two decimal places, we have to make sure that there's no rounding up of the figures going on,'' said the president of the Association for Consumer Protection.

She also said that it is to be assumed that the rounding up of prices will also occur in Croatia if it happened in Italy, Slovenia and Austria as well.

''Croatia isn't going to be an exception, given that the country even worse than those countries in terms of legal regulation. We'll probably have to cope with that too. Since there is a lot of talk about it, I expect that it won't occur on such a large scale, that we'll manage to control it, so traders will probably also be aware that they should show the correct prices. If they start rounding up, we'll report it," she warned.

Where should Croatian consumers exercise the most care? In all situations, the president of the aforementioned association believes.

"We expect that it will be very difficult for customers in the beginning. It will be especially difficult in the period from New Year to January the 14th, 2023, when it will be possible to pay in both currencies, and merchants must only return euros. It's there where problems will occur because people will pay for items in kuna and receive euros in return. We're warning people that they should react to any issues with that right there, before they move away from the cash register," she said.

She noted that Croatian consumers must pay attention to the fact that merchants and service providers have a price list with prices in kuna and euros available to them.

She assessed the reduction of VAT on food as a bad decision by the Croatian Government.

"The opposite has now happened, items haven't become cheaper, they've become significantly more expensive. If the government had limited the prices and used that money to subsidise retailers and producers, then consumers would have benefited," the president of the Association for Consumer Protection believes.

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

August the 16th, 2022 - Numerous adaptations of Croatian laws are coming into force as Eurozone accession draws closer and closer, set to take place on the 1st of January, 2023.

As Poslovni Dnevnik writes, due to the imminent introduction of the euro as Croatia's official currency, numerous Croatian laws are being adjusted, the changes of which require to be put through at an urgent procedure due to quickly approaching deadlines.

Over the coming days, the draft proposal for changes to the Law on Value Added Tax will be publicly discussed, and in addition to the provisions that are being changed due to the switch to the euro, the already announced extension of the application of a reduced VAT rate, which should alleviate inflationary pressures and the negative impact on growth, is included in the same package. The latter should have a positive influence on the price of energy and the standards of people and of the overall economy.

At a rate of 5 percent, the supply of heating from thermal stations with accompanying fees, as well as the supply of firewood, pellets, briquettes and wood chips will be taxed in the period from the entry into force of the amendments to the Act until March the 31st next year.

When it comes to changes in the Croatian laws directly related to the imminent introduction of the euro in January, adjustments related to, for example, the threshold for the acquisition of goods within the European Union (EU), the threshold for registration in the register of VAT payers, the value of deliveries up to which a taxpayer can be a quarterly VAT payer and similar items are implied.

As part of the assessment of the effects of the legal changes, which the Ministry of Finance forwarded to the e-consultation, it has been stated that "it isn't possible to predict the timing of the full achievement of the outcome, but certain effects in the form of easing price increases are expected after the entry into force of the proposed provisions.''

By extending the application of the reduced VAT rate, enterprises who supply the aforementioned energy products will be taxed at a flat 5 percent rate, with the fact that they will need to independently decide how to direct the difference caused by the reduced rate.

"Since companies are free to set their own market prices, there's a possibility to maintain the same price levels we've got now," the explanation stated.

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

ZAGREB, 28 July 2022 - The government adopted a decision to accept a letter expressing interest in submitting a request for Croatia's membership of the European Stability Mechanism (ESM), which Croatia should join in Q1 next year.

The ESM is an intergovernmental organisation established by the euro area member states in 2012. Its mission is to enable the countries of the euro area to avoid and overcome financial crises and to maintain long-term financial stability and prosperity.

The ESM provides loans and other types of financial assistance to member states in a difficult financial situations.

ESM shareholders are exclusively countries of the euro area. Croatia will join the euro area on 1 January 2023, and it is expected it will join the ESM in Q1 2023.

Finance Minister Marko Primorac said after a government session that the ESM had a total capital of nearly €705 billion, which consists of more than €80 billion of paid-in capital ensured by ESM members and nearly €624 billion of callable capital.

Every member contributes to ESM capital based on its share in the total EU population and GDP. Since Croatia's GDP per capita is below 75% of the EU average, we will have the possibility of a temporary correction of the capital contribution key for a period of 12 years, until 2035, said the minister.

Croatia will, pay in a contribution of €419 million.

The ESM provides us with additional insurance in case of financial crises, inability to access the capital markets, or financial difficulties, so that is a long-term benefit and has a positive effect on our credit rating, Primorac said.

As for the government's decision made today, which established criteria for the allocation of assistance to local units for functional and real consolidation, he said that the money granted for functional consolidation depends on the number of functions that would be common and the number of local units involved in the agreement. The assistance will be provided for financing employees in charge of those functions.

According to him, the package for real consolidation is "generous", and it provides assistance for settling outstanding credit and financial obligations on 30 June 2022. It also includes additional assistance in the form of current and capital transfers and aid totalling double the amount the smaller local unit received under the fiscal equalisation programme, as well as capital aid of HRK 7.5 million.

For more, check out our politics section.

ZAGREB, 21 July 2022 - The Croatian government on Thursday adopted a decision setting 1 January 2023 as the date for introducing the euro as legal tender in Croatia.

"The euro will become the official monetary unit and legal tender in Croatia on 1 January 2023," the government said in its decision, presented by Finance Minister Marko Primorac.

The exchange rate was fixed at HRK 7.53450 for one euro.

The period of dual circulation of the two currencies begins on 1 January 2023 at 00:00 and ends on 14 January 2023 at 24:00 hours.

The period of mandatory display of dual prices lasts from 5 September 2022 at 00:00 hours to 31 December 2023 at 24:00 hours.

For more, check out our politics section.

July the 16th, 2022 - Croatian secret shoppers chosen by the Economy Ministry are out on the field monitoring the rollout of dual pricing in the country's stores as Eurozone accession rapidly approaches.

As Poslovni Dnevnik writes, after the EU Council formalised the decision to introduce the euro as the official currency in the Republic of Croatia a mere four days ago, the Economy Ministry announced a group of Croatian secret shoppers who will monitor the situation for the sake of consumer protection during the transition to the new currency.

The competition held back in the spring selected six candidates from different parts of Croatia, who, in mid-August will start monitoring precisely how the prices of goods and services are recalculated out in the field during the mandatory dual pricing rule which is set to come into force in September 2022. Some stores, including large chains like Konzum, have already begun displaying their prices in this way.

The selected Croatian secret shoppers are from the Medjimurje Consumer Society and the Consumer Protection Development Organisation from Selnica in Medjimurje County, the Consumer Education and Information Centre from Bilje in Osijek-Baranja County, the Croatian Consumer Protection Association from Zagreb, the Consumer Rights Protection Association from Split, and the Association Consumer Centre from Rijeka.

How will it work?

Over the next thirty days, these Croatian secret shoppers will conclude a contract in which they will receive 112 to 120,000 kuna for their mystery shopping activities, and they will monitor and obtain consumer information until the end of next year, by which time the obligation of dual price reporting will be in full force and will have been for some time.

The plan is for the engaged associations to monitor price movements and the correctness of price recalculation and rounding on a monthly basis by reviewing 50 to 60 different goods and services, at a minimum of 10 points of sale and five points where various services are provided in exchange for money. The associations that have been selected as Croatian secret shoppers have the obligation to publish the results they've obtained regularly, more precisely by the 15th of each month, on their websites.

The plan is also for the situation on the ground to be checked by five people who will be hired by selected associations, and the tours should include, in addition to retailers, fuel stations, butchers, bakeries, as well as service providers such as hair salons and catering and hospitality facilities. For two hours, associations must also provide open telephone lines where consumers will be able to get information from them about those facilities who are wrongly trying to take advantage of the situation and make a profit.

Croatian secret shoppers will soon be placed in banks, as well...

It won't only be stores and other facilities under the radars of Croatian secret shoppers, banks won't be immune either. The Croatian National Bank noted that it will hire secret shoppers, or perhaps in this case it's better to call them secret clients, in order to monitor what practices are being carried out at bank counters, as well as at other credit intermediaries under its authority.

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

ZAGREB, 15 July 2022 - Standard & Poor's (S&P) Global Ratings raised its long- and short-term foreign and local currency sovereign credit ratings on Croatia to 'BBB+/A-2' from 'BBB-/A-3' on Thursday, saying that the country will benefit from accession to the euro area and its economic growth will remain steady. The outlook is stable.

S&P is the second credit rating agency to upgrade Croatia's rating in an unscheduled publication after Fitch Ratings did the same on Wednesday. Both announcements came after the Council of the European Union on Tuesday officially confirmed Croatia's accession to the euro area on 1 January 2023.

Stable outlook

S&P says that the stable outlook reflects its expectation that Croatia's economic growth will remain steady over the coming two years despite rising inflation and the economic consequences of the conflict in Ukraine.

"We expect the government will remain committed to its reform program, receive significant EU financing, and gradually rebuild the fiscal space it lost in the aftermath of the pandemic," the agency said.

The ratings could be raised if Croatia's economic growth were to accelerate beyond S&P's current expectations, leading to a step-up in economic wealth. In this scenario, the agency would expect fiscal consolidation and declining net general government debt beyond its current projections.

"Rating upside could also come from Croatia's deepening European integration, if it were to facilitate institutional improvements, for example within the judiciary, education, and the broader business environment."

On the other hand, a downgrade could be considered in the event of significantly weaker fiscal positions and structurally weaker economic growth than projected.

"Such weakening could result if a prolonged conflict in Ukraine produced increasingly severe pan-European economic consequences or if an abrupt halt to European energy supply accentuated recessionary tendencies throughout the continent. Net emigration trends and an aging population also represent a long-term risk to Croatia's growth and public finances," the agency said.

Benefits from ECB's monetary policy

In the view of S&P analysts, as a member of the euro area Croatia will benefit from the monetary policy flexibility of the European Central Bank (ECB), while residual foreign exchange risks will decline in the heavily euroised economy.

The upgrade also follows the agency's forecast of steady near-term economic prospects from expected solid tourism flows and strong near-term execution of EU-funded investments.

"In addition, we consider Croatia to have limited direct dependence on Russian hydrocarbons, in particular following the recent expansion of the Krk liquefied natural gas (LNG) terminal and advanced sea-borne oil supply substitution," the agency said.

S&P believes accession will eliminate any residual exchange-rate risks in the heavily euroised economy, where about 75% of banking sector assets and 67% of liabilities are denominated in euros, and that it will similarly eradicate the foreign currency risks of the government's balance sheet.

"This should reduce Croatia's share of government debt denominated in foreign currency from over 70% at present to close to zero, as this debt is almost exclusively denominated in euros."

Growth projection revised up to 3.5%

S&P revised its growth projection for the Croatian economy for this year from 2.5% to 3.5% on the back of resilient dynamics in the first half and prospects for a strong tourist season on par with pre-pandemic levels.

"Rising energy and commodity costs are likely to dampen disposable income and contain consumer spending during second-half 2022 and spilling over into 2023. We forecast growth will calm to 2.5% in 2023."

Over the medium term, the agency forecasts Croatia's economy will settle on a solid growth path, backed by investments supported by EU financing and rebounding tourism.

Pan-European economic repercussions from Russia's military intervention in Ukraine and inflationary pressures represent near-term risks to the forecasts.

"Some lingering pandemic risks to Croatia's tourism recovery persist, however, due to comparatively low vaccination rates in the country. As of July 7, 2022, less than 60% of Croatia's population was fully vaccinated against COVID-19, compared with an EU average of 76%."

Average inflation forecast at 8.0% in 2022

"The Russia-Ukraine conflict has added pressure on energy prices, which will have an important bearing on Croatia's inflation outlook for 2022. We project a significant pickup in inflation, with the consumer price index averaging 8.0% this year (from 2.6% in 2021) due to rising energy prices, increasing wages, and rising hospitality sector costs."

S&P projects a general government deficit of 3.0% of GDP in 2022.

"The government has already introduced subsidy schemes to alleviate price pressures on fuel and energy, which add 1.1% of GDP to the expenditure bill. We believe there are risks to our deficit projections as the current energy crisis could require additional government subsidy schemes in the second half of 2022."

For more, check out our business section.

July the 15th, 2022 - Croatian Eurozone accession is now very rapidly approaching, but with all of these changes and upheavals on the way, should you take out a loan now in Croatian kuna, or wait until after January the 1st, 2023?

As Poslovni Dnevnik writes, the Croatian National Bank (HNB/CNB) said that "Croatian Eurozone accession has no implications for the riskiness of kuna loans". Regarding interest rates - if the interest rate is fixed, it will remain fixed, and if the interest rate is variable, it will remain so, they claim.

"On the day of the introduction of the euro, the principal amount of the kuna loan will be converted into euros at a fixed conversion rate to be determined by the Council of the European Union without any cost to the bank's client," they explained from the CNB for N1.

"Croatian Eurozone accession has no implications for the riskiness of loans denominated in euros. In the case of euro loans, which also applies to kuna loans with a currency clause in euro, there will be no need to recalculate the principal amount on the day of the introduction of the euro because it's already expressed in euros. When it comes to the interest rate, the approach is going to be the same as it is with kuna loans: if the interest rate is fixed, it will remain fixed, and if it's variable, then it remains variable," they added.

What will happen to interest rates?

Financial analyst Andrej Grubisic said that the conversion rate itself is no longer the primary category, but interest rates are...

"The exchange rate at which the kuna will be converted into euros is already known, it will be at a rate of 7.53450, so the exchange rate difference is de facto negligible. I don't see any room for serious arbitrage or calculations in this regard. The bigger question is what the price of an apartment will be six months from today, not what the exchange rate will be. "Whether an apartment (per square metre) will cost several tens of euros more or less is a far more important question at this moment in time," said Grubisic, adding:

"Another thing is whether six months from today the interest rates will be slightly higher than they are today.''

Grubisic also noted that the president of the Croatian Association of Banks, Zdenko Adrovic, recently stated that he wouldn't be surprised if, in the foreseeable future, interest rates are one to two percentage points higher than they are today. Let us remind you that Adrovic told N1 Studio live that the first increase in interest rates by 0.25 percent will come in July, and the next will come very soon after that, in September, also by 0.25 percent.

"Given the fact that inflation is high, we should expect that there will be an increase in interest rates", Grubisic said, before adding: "I don't think it's unrealistic to think that in 12 to 18 months from today, we'll have one or 1.5 percent higher interest rates than we have today.” He also pointed out that "even today there are pressures for interest rates to go up".

"Therefore, people shouldn't be surprised if the interest rate on a housing or other loan in six months is 0.3 or 0.5 percent higher than it is today, because we were in a period of extremely low interest rates, unusually low ones, which is unsustainable if you have inflation that is higher than the interest rate," said Grubisic.

He was asked if this means that if we can expect higher interest rates in the near future, it is better for people to take out loans now, while the kuna is in force, than to wait for Croatian Eurozone accession on the 1st of January next year? His answer was a clear one: "Exactly."

“It's wise to go for a fixed rate loan and avoid any form of calculation or uncertainty that comes from variable interest rates. So, if we're talking about housing loans, given that these are obligations which are fixed for a long period of time, nobody can tell you what will happen in five, let alone in ten or fifteen years. If today it seems to you that it's slightly higher than the existing variable interest rate, it may be today, but in the future it may change. That way, you get some certainty and you know what you can count on, there's no uncertainty with fixed interest rates," Grubisic concluded for N1.

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