ZAGREB, March 13, 2020 - The Croatian National Bank (HNB) on Friday intervened on the foreign exchange market for the third time this week, selling €479.55 million to commercial banks.

HNB sold €479.55 million at a middle exchange rate of HRK 7.564914, withdrawing an additional HRK 3.63 billion from the financial system.

This is the third time in a week and this year the central bank has intervened with more than €1.2 billion being sold to banks withdrawing about HRK 9.1 billion from the financial system.

HNB on Monday sold €387 million at a rate of 7.512738 for HRK 2.9 billion. On Thursday it sold an additional €347.8 million at a rate of HRK 7.554019 withdrawing HRK 2.63 billion from the system.

Despite the three interventions the kuna continued to depreciate against the euro with the exchange rate decreasing by 0.16% against the euro currency since Wednesday.

The middle exchange rate to be applied as of Saturday will be €1 = HRK 7.569972, which is its highest level of the euro on the Croatian market since November 2017.

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ZAGREB, February 21, 2020 - A total of 228 counterfeit kuna banknotes were withdrawn from circulation in the second half of 2019, a 3.4% decrease compared with the same period in 2018, while the number of counterfeit euro notes increased by more than 14 times to over 4,000, the Croatian National Bank (HNB) said on Thursday.

Between July and December 2019, 4,056 counterfeit euro notes were withdrawn from circulation in Croatia, which is an increase of 1,323.2% compared with the same period in 2018 when 285 such notes were removed from circulation, the central bank said.

The majority of counterfeit banknotes, 3,771 or 93%, were 500-euro notes.

A total of 4,341 counterfeit banknotes of all currencies were registered in the second half of 2019, an increase of 608.2% over the same period in 2018.

"Despite a higher nominal value of registered counterfeit euro banknotes, counterfeits registered in the second half of 2019, as regards their quantity and production quality, did not cause any disturbances in cash operations, neither in specialised institutions nor among the general public," the central bank says.

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ZAGREB, February 13, 2020 - The available monthly indicators suggest that Croatia's real GDP growth slowed in the fourth quarter of 2019, while the labour market continued to see favourable trends, including increased employment and wages and a fall in unemployment, the Croatian National Bank (HNB) Council said a statement on Wednesday.

The HNB Council met to discuss the latest monetary and economic trends and analyse the financial stability of the banking system in the last quarter of 2019.

Inflation picked up from 0.7% in November to 1.4% in December, mostly due to food prices, notably a strong increase in pork prices, and oil prices.

Financing costs mainly continued to decrease as a result of the accommodative monetary policy.

The annual rise in bank loans accelerated to 4.2% at the end of 2019 on the back of the rise in household and corporate loans. At the same time, the annual rise in loans to non-financial companies was mostly due to the fading of the negative effect of the activation of state guarantees for shipyards in late 2018.

The available fiscal data for the third quarter of 2019 indicate a continuation of favourable trends in public finance as budget revenues grew faster than expenditures, the statement said.

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

ZAGREB, February 6, 2020 - Croatian National Bank (HNB) Governor Boris Vujčić submitted a report on the implementation of monetary policy in 2018-2019 to Parliament on Wednesday, saying that positive economic trends continued on the labour market with increased employment and wages.

"We also saw increased personal spending which led to GDP growth of 3.1%, while the positive effects on exports after Croatia's accession to the EU were decreasing as expected," Vujčić said.

He added that the HNB was pursuing an expansionary monetary policy, securing liquidity on the capital market and exchange rate stability. Interest rates dropped to record lows, while international reserves were at their historically highest levels.

Croatia is a highly euroized country and the adoption of the euro would have multiple benefits for the country, the central bank governor said. He expressed regret that criminal complaints filed against the HNB were used as "political marketing" and added that such behaviour should be sanctioned.

Marin Škribola of the Youth Independent List asked the governor what had been done about the attempt by RBA bank to exert pressure on the Constitutional Court in connection with the court case concerning CHF-denominated loans. Expressing a suspicion that other banks had tried the same, he accused the central bank of defending the interests of banking institutions rather than Croatian citizens and warned that they would be closely monitoring the HNB's steps in that regard.

Vujčić said that the matter was being looked into and after the examination was over, the HNB would respond accordingly. He recalled that RBA's board chairman had resigned in the meantime.

Miro Bulj of the MOST party said that the HNB should be more engaged in protecting the interests of Croatian citizens, while Ivan Lovrinović of the Živi Zid and Let's Change Croatia group said that the HNB, along with the judiciary, was the main destabiliser of the Croatian society, state and economy.

Lovrinović said that a good part of the shipbuilding industry, as well as the wood processing industry, had collapsed because of the central bank's exchange rate policy, adding that the economic policies of the HDZ and SDP parties had forced 300,000 citizens to leave the country in search of better livelihoods.

Lovrinović said that CHF loans, granted by eight banks, were toxic and had landed half a million people in financial trouble, while the HNB had done nothing to protect them. He said that the HNB should support growth and development rather than banks in loansharking the citizens. He concluded by saying that the HND should be brought under democratic oversight.

More economic news can be found in the Business section.

ZAGREB, January 10, 2020 - In 2020 the Croatian National Bank (HNB) will have additional macro-prudential measures at its disposal and it will impose them on commercial banks to maintain the financial system's stability, and the exchange of data on customers' creditworthiness will be reintroduced, according to some of the draft acts that are to be adopted.

In late 2019, the Finance Ministry put to public consultation a set of draft acts adjusted to the European acquis within the context of steps which should be taken on Croatia's journey towards the euro area. The public consultation lasted until this week.

One of the steps is a letter which Croatia sent in 2019 considering its admission to the Exchange Rate Mechanism (ERM II).

The letter of intent expresses Croatia's intention to enter the exchange rate mechanism and to implement 19 measures in six areas in the next 12 months on the path towards the introduction of the euro as the official currency.

In this regard, Croatia is set to amend the legislation on credit institutions to enable the exchange of data on customers regarding the assessment of their creditworthiness.

Some 15 years ago a score of commercial lenders operating in Croatia set up a register of credit obligations of customers (HROK) enabling those lenders to exchange information on credits taken by customers.

However, the General Data Protection Regulation (GDRP), introduced by the European Union in mid-2018, eliminated this register.

The latest amendments provide for legal security in the exchange of information between banks for the purpose of assessing their customers' creditworthiness.

Also, one of the novelties is that it will be the HNB and not the Croatian Banking Association that will calculate the national reference rate of the average cost for financing the banking system. The abbreviation in Croatian for this rate is NRS.

The outcome of a comprehensive stress test for five leading Croatian banks, conducted by the European Central Bank (ECB), will be announced in May.

The set of amended laws will enable the Croatian central bank to impose measures if they turn out to be necessary in accordance with the stress tests' outcome.

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ZAGREB, December 31, 2019 - The Croatian National Bank (HNB) on Tuesday released an updated list of systemically important financial institutions (SIFI) which continued to include seven commercial banks.

The seven banks are Zagrebačka Banka (ZABA), Privredna Banka Zagreb (PBZ), Erste&Steiermaerkische Bank (Erste), Raiffeisenbank Austria (RBA), OTP Banka Hrvatska, Addiko Bank and Hrvatska Poštanska Banka (HPB).

In 2016, the HNB started applying the criterion of the capital conservation buffer (CCoB), which is a certain percentage of a bank’s total exposures that needs to be met and its objective is to conserve a bank’s capital. When a bank breaches the buffer, automatic safeguards apply to limit the amount of dividend and bonus payments it can make.

The central bank applies a 2% rate of CCoB to five commercial lenders: ZABA, PBZ, Erste, RBA and OTP, while Addiko is subject to a CCoB rate of 1% and HPB is subject to 0.5%.

The 2% rate applied to the five banks remained the same as at the start of the year, whereas Addiko's rate was reduced by one percentage point in comparison to the start of 2019 and HPB's rate went up from 0.2% to 0.5%.

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ZAGREB, December 16, 2019 - Croatia's economy is expected to grow by 3% in 2019 and slow down to 2.8% in 2020, while favourable labour market trends are expected to continue, the Croatian National Bank (HNB) said on Monday.

Inflation is projected at 0.8% in 2019, due to a reduction of VAT on certain products and a fall in oil prices, while in 2020 it is expected to pick up to 1.4% as a result of increased food prices and higher excise taxes.

The HNB forecasts a higher current account and capital account surplus than last year, thanks to increased exports, stronger absorption of EU funds and a rise in revenues from remittances, while next year a lower surplus is expected.

Foreign debt indicators should continue to improve in 2020.

In such a macroeconomic environment the HNB intends to continue an expansionary monetary policy, supporting the high liquidity of the monetary system, while at the same time keeping the nominal kuna-euro exchange rate stable.

After running a surplus in 2018, the general government budget is expected to show a deficit of 0.1% of GDP in 2019 and a surplus of 0.2% in 2020. General government debt is likely to continue to shrink in accordance with fiscal rules, the HNB said.

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ZAGREB, November 14, 2019 - Croatia's real GDP growth picked up in the third quarter of 2019, the Croatian National Bank (HNB) said in a statement from a meeting of the HNB Council on Thursday.

The HNB Council discussed a report on the latest economic and monetary trends and adopted a semi-annual report on the financial situation, the degree of price stability and the implementation of monetary policy in the first half of 2019.

According to available monthly indicators, real GDP growth accelerated in the third quarter of 2019. Following stagnation in the second quarter, unemployment continued to decrease, while employment growth slowed. In the third quarter, nominal wage growth picked up slightly, with wages in the public and private sectors increasing, the central bank said.

The annual consumer price inflation rate in September remained at August's level, at 0.8%.

Financing costs mainly continued to decrease, also thanks to the accommodative monetary policy stance. The annual rise in bank lending slowed to 3% at the end of September as a result of a decrease in corporate lending.

In the second quarter of 2019, the general government budget ran a surplus of slightly under 2.5 billion kuna, an increase of 200 million kuna compared with the same period in 2018. The strong revenue growth, backed by the favourable effect of growth in personal consumption and imports as as well as the greater use of EU funding, was offset by roughly equal growth in expenditure, the HNB said.

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

ZAGREB, November 6, 2019 - Croatian National Bank governor Boris Vujčić said on Wednesday a recession was not expected in the next two years, only a relatively mild slowing of GDP growth, both in the euro area and Croatia.

He was responding to questions from the press in Opatija on the fringes of a conference on Croatia's 2020 economic policy.

Vujčić said that did not mean a recession was ruled out. As we know, economists are not very good in predicting recessions and so far, there has not been much success in forecasting when one would happen, he added.

The current projection is that the euro area will likely grow a little under 1% in 2020 and that Croatia's GDP could grow about 2.5%, Vujčić said.

The main current risks are the trade war, primarily the one between the U.S. and China, he said. Possible sanctions have been announced, tariffs which the U.S. could impose on Europe, primarily the auto industry.

If that happens and trade tensions become even more strained, it will have a bad effect on growth and some countries in Europe could fall into a recession, but even in that case we expect only GDP growth to slow down, not a recession, Vujčić said.

"One can never definitely say there will be no recession, but we can definitely say that it will occur one day. When? That's a different matter, but we don't expect it in the next two years."

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

ZAGREB, October 25, 2019 - Finance Minister Zdravko Marić and Croatian National Bank (HNB) Governor Boris Vujčić said that the progress made by Croatia in the latest Doing Business report was good news and that it should be taken as an encouragement for further reform.

Croatia has continued to improve its business regulations and is catching up with global regulatory best practices, the World Bank said on Thursday. Croatia placed 51st among 190 countries in the ease of doing business ranking, moving up from 58th spot last year.

Marić told reporters that the report provided a good picture and a good comparison with other countries in terms of where Croatia stands and in what direction it should be going. He said that all should be done to ease the conditions for doing business as a prerequisite for economic growth.

The minister said that the progress made was due to methodological adjustments and reforms that had been made in the last year, primarily with regard to starting a business, the transfer of ownership and obtaining a building permit.

"This improvement is good news and should encourage us all to continue in this direction. We should not be satisfied now and say, this is good, we have improved our rating, but should look forward," Marić said, adding that further progress should be made in structural reform.

Marić recently led a Croatian delegation to the annual meetings of the World Bank and the International Monetary Fund in Washington. He said that Croatia would continue to use World Bank loans for projects such as modernisation of land registries and further development of the judiciary for the purposes of the economy.

Vujčić said that the Doing Business report was a very important indicator of competitiveness and business climate. "I don't think we should be satisfied with 51st place, but should move on and make the economy even more competitive and further improve the business environment," the central bank governor said.

More news about doing business in Croatia can be found in the Business section.