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.

Just how ready is Croatia to join the Eurozone? The topic is one that has many sides to it and a lot of opposition from both the public and from certain politicians and political parties, yet it seems the Croatian Government is steaming ahead with their plans for the country to enter into the Eurozone and abandon the kuna.

As Poslovni Dnevnik/Jadranka Dozan writes on the 19th of May, 2019, the Croatian Government has proposed urgent amendments to the ZOKI, which creates a normative framework for the accession process to the banking union, a step that implies officially applying for the country's entry into the ERM II Exchange Rate Mechanism.

However, the Republic of Croatia has not yet submitted the aforementioned type of official request for entry into the ERM II Exchange Rate Mechanism, which is considered to be one of the first steps towards official entry into the controversial Eurozone.

This news could see more steps actively taken to enter into the banking union and establish "close co-operation with the European Central Bank (ECB)", which is usually part and parcel of a request to enter the ERM II.

In addition to the fact that the process of close co-operation with the ECB was the subject of a panel discussion on the first day of the Croatian Money Market conference in Opatija in Kvarner, the Croatian Government issued a proposal for a supplement to the Credit Institutions Act on Wednesday for public consultation, which refers precisely to the creation of a normative framework for the assignment of certain tasks to the European Central Bank.

In practice, this means, in the first instance, Croatia's inclusion in a Single Supervisory Mechanism (SSM), and that means that in the furure, the ECB will be able to carry out comprehensive assessments of such credit institutions, while for example, Asset Quality Review has so far covered euro-denominated countries.

At the aforementioned Opatija conference, the introductory speech on the path to Croatia's entrance into the Eurozone was given by an envoy to the President of the Republic of Croatia, with the Croatian Minister of State Property, Goran Marić, also having a part to play. It was stated that the single currency is one of the important aspects of unification, ie, in Croatia's accession to the European Union, and that Croatia has an obligation to respond readily and properly to this process.

That means, as was stated, the need to carry out all of the necessary preparations - monetary, political and others, including those aimed at the wider public, with a view to understanding the changes and eliminating fear, propaganda and potential insecurity. The main focus of the presentation of the Governor of the Croatian National Bank (HNB/CNB) Boris Vujčić was the macroeconomic prospects and challenges, and this is usually a reference to structural reforms without which Croatia will lag behind in reaching the level of development of much older EU member states, especially in terms of Croatia's development in comparison to other, older member states of the Union.

Croatia's business climate in us is still not good enough, remotely. To improve the country's overall business environment, the governor emphasised that what is particularly important is the raising of the quality of Croatia's institutions which greatly affects the general level of investment into the country, and that this is a key to faster productivity growth.

Therefore, in the first quarter of 2019, the indicators are solid: strong growth in industrial production, personal consumption and construction, the continued growth of exports (as well as imports) and favourable labour market trends (but with the increasing and very concerning problem of a lacking labour force owing to Croatia's demographic crisis).

In the case of economic slowdown today, however, there is a significant fiscal space that, at least according to Boris Vujčić, should be used in the case of a recession occurring. Otherwise, the Croatian National Bank expects to further reduce surplus on current and capital account balances this year, as well as significant appreciation pressures on the Croatian kuna.

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Click here for the original article by Jadranka Dozan for Poslovni Dnevnik

The Republic of Croatia is in a group of four European Union member states with a lower uncovered demand for workers when compared to one year earlier. The Croatian paradox of staff fighting over workers who either don't exist or don't want to work, while would-be staff complain about there being no jobs continues.

As Ana Blaskovic/Poslovni Dnevnik writes on the 19th of March, 2019, the workforce problem is rapidly becoming one of the most burning issues not only here in Croatia but across the European Union. In the last quarter of last year, Croatia ranked among the four EU member states with a lower uncovered demand for workers than was recorded during the same period last year, Eurostat figures show.

At the Union level, as well as at its very core in which the euro currency wains, the rate of vacancies grew to 2.3 percent during the fourth quarter of 2018. Just for comparison, this rate, which shows uncovered demand for labour, was 2.1 percent in the previous quarter, and 2.2 percent in the Eurozone.

The availability of labour in the last year has become the top theme for domestic employers. While a few years ago this issue was only mentioned from time to time, in the last surveys answered by business owners, it emerged at the very top of the list. In Poslovni Dnevnik's recent interview with AmCham, Andrea Doko Jelušić pointed out that when the last survey was taken, their members underlined this topic as the main constraining factor in 2018, while back in 2017, it was placed on the list for the first time ever.

Reflecting on the workforce as an inevitable issue of the competitiveness of the domestic economy, CNB/HNB Governor Boris Vujčić said on Monday that Croatia is specific in the EU because as many as 40 percent of working-age citizens don't work. "When looking at the employment rate, Croatia is the second worst in the European Union after Greece, which means that everyone else has to work harder to maintain the same level of living standards," said the governor.

The key to the mobilisation of this population, Vujčić believes, is to evaluate the positive changes in pension regulations which extend the working life. The EU and the Eurozone are currently experiencing the most problems with finding workers in the service sector, with the job vacancy rate standing at 2.6 percent. Industry and construction account for 2.1 percent in the EU, and 2 percent in the Eurozone. In Croatia, the vacancy rate in the fourth quarter fell to 1.4 percent, which was the lowest level in just over a year. The highest jump in labour demand for the same period last year was in the fourth quarter in the Czech Republic, Austria, Malta, and Germany.

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Click here for the original article by Ana Blaskovic for Poslovni Dnevnik

ZAGREB, February 26, 2019 - Croatian National Bank (HNB) Governor Boris Vujčić announced on Monday that a letter of intent for ERM membership (European Exchange Rate Mechanism II) was expected to be sent "some time in the second quarter of this year."

Responding to questions to the press after delivering a lecture on Croatia's prospects of entering the euro area at the Croatian Academy of Sciences and Arts (HAZU), Vujčić said that the letter would certainly not be sent by the end of this month and would most likely be sent "some time in the second quarter".

"In any case, first there will be a report from the European Commission, then we will continue consultations with our partners - the European Central Bank, the Commission and the Eurogroup, and after that we will decide on an exact date," Vujčić said, adding that he hoped Croatia would soon get out of the excessive imbalance procedure, on which the Commission is soon to release a report.

Asked if Croatia could be expected to join the exchange rate mechanism in 2020, the governor said this was a tentative time frame, but he would not speculate about an exact date.

Vujčić said that Croatia "de facto" meets all five nominal convergence criteria, while "de iure" it does not meet one relating to exchange rate stability. He said that the exchange rate stability requirement can be met only within the exchange rate mechanism, and that this is the first key step for entering the mechanism.

On the other hand, there is a range of indicators relating to excessive macroeconomic imbalances, such as public debt, external debt, unemployment rates and labour market participation. "Here we stand much better than we did five years ago because external imbalances have been reduced as a result of the decline in public debt, which right now is three times faster than that required by the EU procedures."

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

ZAGREB, February 16, 2019 - The Croatian National Bank (HNB) has been warning since late 2018 about a strong increase in all-purpose personal loans, and in an interview with the Novi List daily of Saturday, Governor Boris Vujčić said the central bank would introduce measures to curb their excessive growth.

HNB statistics show that total household lending in late 2018 was 124.4 billion kuna, 5.5 billion kuna or 4.6% more than at the end of 2017.

With a 38.3% share in total household loans, all-purpose personal loans were 11% up in December 2018 to 47.7 billion kuna. December 2018 was the seventh consecutive month to see a two-digit increase in all-purpose loans.

The HNB said in late 2018 that the high growth of unsecured cash loans with relatively long repayment periods was worrying and that it would have to analyse the situation to see if it required action on its part.

The central bank also warned that all-purpose loans could be obtained very quickly and that clients should therefore be careful not to take loans on impulse.

In the interview with Novi List, Governor Vujčić said that all-purpose personal loans were mostly granted in the national currency kuna, with fixed interest rates, and that therefore risks were much smaller than had been the case with loans pegged to the Swiss franc.

Nonetheless, some parallels can be drawn, he said. "For example, due to the less strict criteria for the assessment of creditworthiness, in some cases banks approve a more expensive all-purpose loan that is less favourable for the client even if they estimate that the client's creditworthiness for a housing loan of the same value and with the same repayment period is poor," said the governor.

He said that this called for harmonising criteria for the assessment of creditworthiness for different types of loans.

"Also, we want banks to include potential losses related to this type of loans in their internal estimates of capital requirements as well as secure clear mechanisms for the return of a part of banker bonuses in case of excessive losses related to all-purpose loans," said Vujčić.

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

For some, the mere idea of the introduction of the euro in Croatia is enough to induce passionate debate. For others, the introduction of the single European currency is the next step to leaving the country's tumultuous past behind, and joining the ''ever closer union'' that Eurocrats in Brussels speak so highly of. While the United Kingdom managed to secure a way out of the currency's introduction much earlier, Croatia had to agree to take on the euro in order to join the bloc.

Introducing the euro in Croatia is likely to bring problems as well as solve them, but what use is the adoption of the single currency when many of Croatia's national institutions are in total disarray? Until state institutions can be brought into line, the introduction of the euro and the overhaul that involves will only work to contribute to existing issues, rather than help to solve them.

As Ana Blaskovic/Poslovni Dnevnik writes on the 9th of January, 2019, just over a year after the announcement of the Croatian Government's intention to introduce the euro, encouraged by positive signals from Europe, Croatia will send a letter of intent to enter the exchange rate mechanism (ERM) by the summer. The aforementioned mechanism is known as the ''waiting room" for a country's introduction of the euro as its currency. Although the letter is only the first formal step in the process of replacing the kuna with the formerly problematic single currency, its content is not merely a pleasant yet rather empty formality.

The letter will involve the Croatian Government agreeing on a series of concrete reform moves, in a relatively short period of about a year. "The ball is now in the government's court to make a list of moves that can be completed within a year, within the gauge that they're achievable, easily measurable, and are written in the letter of intent," an interlocutor close to the central bank told Poslovni Dnevnik.

Judging by the Bulgarian version of the letter that Sofia officially sent to a number of European Union addresses at the end of July, the answer to the question of what exactly Andreja Plenković's government could or should put on paper doesn't need great philosophical effort put into it. There is already a list of specific recommendations from Brussels for the Republic of Croatia.

Reforms is a word that everyone in Croatia gets sick of hearing, and this next political move involves a well-known series of infamous reforms, the implementation of which has been largely shifted to ''next year''. The euro in Croatia however, demands certain reforms be met, and sooner rather than later.

For example, there are administration reforms (including those regarding salaries), reforms to the utterly bizarre Croatian justice system, the establishing of a more just system of social benefits and rights, the strengthening of the fiscal framework, and the introduction of property taxes, a controversial idea which Plenković has moved around quite a lot on.

"The European Commission supports member states' efforts to introduce the euro, not only politically, but in also providing the necessary technical assistance and potential financial resources," said Valdis Dombrovskis, adding that Croatia is very serious in its intentions and is working intensively to meet the conditions for its eventual entry into the eurozone. One of the panelists at that conference was the Croatian National Bank's Boris Vujčić, which is also regarded by all as a firm sign of Croatia's support.

"The most difficult thing to do is to enter the ERM II, because there are no clear criteria that a country needs to meet in order to enter the exchange rate mechanism. Once you're in the ERM, the criteria for introducing the euro is clear, although some of it is constantly changing, so you do need a bit of luck on your side in order to be able to fulfil it,'' said Latvia's governer. One thing is certain, unlike the correspondence Croatia has had with the European Commission until now (primarily concerning becoming a member of the EU), the rules for a country's adoption of the euro are much stricter.

Make sure to stay up to date for more information on the intended introduction of the euro in Croatia and much more by following our dedicated politics page.

Click here for the original article by Ana Blaskovic for Poslovni Dnevnik

As tportal writes on the 3rd of January, 2019, The Banker, a magazine which belongs to the Financial Times group and is issued monthly, gave two prestigious awards of recognition to the Governor of the Croatian National Bank, Boris Vujčić, for the year 2018 - one as the best European governor, and the one for the best central banker on a global scale.

The Banker has been following various financial developments across the entire world since 1926. It has been declaring the best regional governor and governor of the year on an international level each year in its January issue, and the winners are based on the magazine's editorial rating and research conducted among bankers and economic analysts.

Recognition from The Banker is guided by the criterion that the winners are those responsible for "stimulating growth and stabilising the economies in which they operate". The recognition is awarded globally, as well as regionally - for Europe, North and South America, the Middle East, Asia-Pacific and Africa. The Banker also gave recognition to the former Governor of the CNB (HNB), Željko Rohatinski, back in 2008.

In the article published by The Banker on the occasion of the award to Croatia's Boris Vujčić, his versatility was emphasised: "Seven years before Croatia's entry into the European Union in 2013, he was the deputy chief negotiator during the successful candidacy of that country for joining the European Union. He was Deputy Governor of the Croatian National Bank and has been Governor since 2012. He has recently co-ordinated central bank management and the development of the Croatian strategy for joining the Eurozone with the chairmanship of the Vienna Initiative steering committee.''

The explanation further states that the Vienna Initiative, which is less known outside of the region, was launched in 2009 at the height of the global financial crisis with a view to securing the financial stability of emerging economies with markets in Central and Eastern Europe. There was a fear that the major Western and Northern European banks, which dominated the financial systems of these countries, would withdraw from lending and cause a catastrophic credit crunch. Since then, the Vienna Initiative has spread to seventeen countries in the region, as well as to international financial institutions, the European Commission, and to several major European lenders.

The Banker cites the role of Boris Vujčić and the Croatian National Bank in ​​keeping hold of Croatia's financial and banking stability during the recent Agrokor crisis. The article also highlights the public advocacy of the governor of the Croatian National Bank for structural reforms - particularly when it comes to education, in order to create market competencies that will dominate innovation and technological progress, as well as a smart immigration policy as one of the measures to address the problem of labour shortage which is currently enfeebling the Croatian economy.

Upon receiving the prestigious recognition, Boris Vujčić said: "I'm exceptionally honoured; this is a great tribute to the Croatian National Bank, and to me personally. This award is further motivation to me to continue working on our goals - price and exchange stability, so that every citizen of the Republic of Croatia knows, with certainty, that what they earn won't lose value. We're also thinking about Croatian companies and the security of their financial operations and financing possibilities. We will continue to monitor banks in order to maintain financial stability, as well as to improve consumer rights and information.

Success in achieving our goals contributes to creating a better environment for economic growth and the development of the entire country. And finally, we believe - and in this way we'll communicate with all citizens and companies, inform and answer every question and dilemma - that our entry into the Eurozone can further stimulate economic growth and development, make our country stronger within European frameworks, and thus serve for the prosperity of every citizen of Croatia.''

Make sure to stay up to date with our dedicated business and politics pages for much more.

With talk of a brand new digital Croatia becoming ever louder, it seems that the powers that be are following suit.

As Bernard Ivezic/Poslovni Dnevnik writes on the 14th of November, 2018, when talking about digital money, especially in the context of whether or not Croatia really needs a form of ''cryptokuna'', the example of Sweden was pointed out. Due to the high level of digital payments and the development of practices where retailers and banks have begun refusing paper money, Sweden decided to introduce a digital krona.

Croatia will not take the same path as Sweden and simply introduce digital currency, but it will have an instant payment system from December onwards, not only in euros but in Croatian kuna. This was announced at the BUG F2 Future of Fintech conference held in Zagreb by the executive director of CNB/HNB (Croatian National Bank)'s payments sector, Ivan Biluš.

The new system will most help banks to carry out business with their fintch players, especially Apple, Amazon, Facebook, Google, and Microsoft. It will also affect the strength of their relationships with card holders who see the ability to make fast payments anywhere as perhaps the most important thing. Biluš noted that the system, which would have the support of the CNB TIPS payment system, will be launched alongside that of the European Central Bank (ECB) on the 30th of November, 2018.

"As of January 2019, we'll not only have European instant payments in Croatia which are based on the euro, but also Croatian ones [based on the kuna], which will enable the instant transfer of the kuna", says Biluš. He said that banks in Croatia could negotiate the terms of the new service with the CNB/HNB by December, but also stressed that he didn't expect the first commercial example of the service to actually be on the market before January next year.

TIPS will enable banks to offer services that are already on offer in the United States and in the United Kingdom, where customers can quickly transfer money from their bank account using IBAN to a foreign IBAN account.

Some of the most well known applications which use fast pay include PayPal, Venmo, Square Cash and Zelle, but also Google Wallet and Facebook Messenger. Despite the country's desire for a digital Croatia, these apps are not yet available with such a payment function here on the Croatian market.

Biluš repeated several times during his presentation that the race between the fintech and the banks is an unequal one, but that major changes are expected on both sides shortly. He said that the EU, with the ECB, has its own interest in creating a single digital market for the European Union and that it was that which made the central bank enter into this business.

Although the ECB initially announced that the TIPS would cost 0.2 cents per transaction, work within ten seconds and set a limit on the transaction amount to 15,000 euros, the executive director of the payment sector at the CNB claims that the transaction cost will be 0.1 percentage points, and that the money transfer will be able to be completed in no more than two seconds.

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Click here for the original article by Bernard Ivezic for Poslovni Dnevnik

Finances are something that are constantly on every adult's mind to some degree or another, but just how much does the average Croat have deposited in the bank and in other credit institutions?

As Poslovni Dnevnik writes on the 31st of October, 2018, the absolute value of these deposits in the continental part of the country is 35.8 percent higher than it is in the coastal part of the country, primarily because of Zagreb's continental location, the city in which 28 percent of all deposits in the country are concentrated.

With their typical policy of low interest rates on savings, Croatia's banks have helped to widen the construction sector in the often overlooked eastern part of Croatia, particularly in the City of Osijek, the seat of the largest Slavonian county, Osijek-Baranja County, in a welcome move which has at least partially awakened the construction sector, Glas Slavonije writes.

So, much much does the average Croat have deposited in the bank? It's something many wonder about, despite the common lack of desire to discuss personal finances.

Namely, a good amount of those individuals who have tens of thousands of euros in deposits, have been the most disappointed with rather unstimulating interest rate (0.01 percent), and they often withdraw their money from the bank and invests in the purchase of real estate, most often in apartments. Over the last couple of years in Osijek, the housing construction sector has resumed its business operations to a certain degree. The fact that this is no real exception was confirmed at yesterday's round table on the occasion of the marking of World Savings Day held in the headquarters of the Croatian Chamber of Commerce (HGK).

''At the end of 2017, the average resident in Croatia had about 45,600 kuna of deposits in credit institutions, while classic term deposits represent the largest single part of the financial assets of households in both Croatia and the Euro region. Due to the fall in passive interest rates and the introduction of savings taxes, citizens have diverted their funds into equity and other investment funds,'' stated Zvonimir Savić from HGK.

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In case you didn't know, Martina Dalic, the former deputy prime minister who spent a long time at Andrej Plenkovic's side, left her position earlier this year amid not only the Hotmail affair, in which she was sending highly sensitive emails via no less than Hotmail, but amid growing suspicion surrounding her in regard to the very messy Agrokor affair.

Now, despite the public's general opinion of her being less than sparkling and with all sorts of unsavoury suspicions and accusations about her involvement in Agrokor still flying around, left unanswered, Martina Dalic went ahead and published a book on Agrokor, causing raised eyebrows among many politicians, including MOST's leader Bozo Petrov, who was heavily involved in the Agrokor situation when it first came to light, especially given the fact that the crisis saw the former HDZ-MOST coalition collapse.

As Poslovni Dnevnik/Tomislav Pili writes on the 30th of October, 2018, Finance Minister Zdravko Maric, who felt the very personal unpleasantness of the Agrokor crisis on his own skin, stated quite bluntly that he didn't have any desire to comment on whether or not Martina Dalic should return to the government at all.

Marić used to work for Agrokor before taking up his position within the Croatian Government, this caused a lot of suspicion around him, too, as many across the political spectrum and in the general public failed to believe that he had no knowledge of the plethora of underhand deals and the threatening collapse of the company that eventually raised its ugly head in the spring of 2017. Despite the controversy, Maric stuck to his guns and held onto his position, with the situation eventually blowing over. Despite that, it doesn't come as much of a surprise that he'd prefer to avoid discussing Martina Dalic or her new book.

"I've got a good relationship with all the people I've worked with and am working with now, and if we have some disagreement, then we find a common language," the finance minister said briefly.

''I haven't read Martina Dalic's book and I don't know if I'll manage to,'' Maric added at the margins of Poslovni Dnevnik's conference. In response to a journalist's question as to whether everything worked well in regard to Agrokor's extraordinary administration, and why Martina Dalic had to leave, Maric expressed his lack of desire to comment on whether or not she should return to the government.

As for the dangers the Uljanik shipyard situation represents towards public debt, Maric said Uljanik's influence will of course have an effect on the overall fiscal policy outcome for this year.

"The only good thing about it is that it will have a one-off effect. From our side, we intend to solve [the situation] as soon as possible so as to avoid any further consequences. Nevertheless, by the end of the year, according to our projections and expectations, public debt will continue to decline,'' Maric emphasised.

"With regard to taking further steps, we can't influence the worsening global environment that much, but do we have certain mechanisms in our hands. I, as finance minister, am responsible for implementing fiscal policy. All we propose is a responsible, rational fiscal policy that suits all of the challenges we're facing. We're putting emphasis on a more stable public debt, but the basic idea of us all should be ​​economic growth, which will lead to stronger employment growth,'' Maric noted.

Journalists present at the conference in were also very interested in the disappearance of the so-called "mantra" about budget savings which has been being talking about a lot over recent years.

"I wouldn't say that is stopped. If you look at the structure of the expenditure side of the budget, the biggest item is the retirement expenditure. It's true that the issue of expenditure has been challenged more than once and we must not give up on that. We reduced interest costs by over two billion kuna, but we're still paying too much,'' Maric said.

Regarding retirement, the question of whether or not retirement benefits in the new Law on Croatian Defenders represent a budgetary burden arose, to which Maric responded that his ministry had looked into potential financial implications during the process of the adoption of the naw Law on Croatian Defenders.

"The Law on Croatian Defenders is fiscally viable and isn't an additional burden for the budget," Maric concluded.

Want to find out more about what exactly happened within Agrokor and learn more about Martina Dalic's role within it all? Click here and follow the news on Dalić, the Hotmail affair, the writing of Lex Agrokor, and more.

Click here for the original article by Tomislav Pili for Poslovni Dnevnik