February the 16th, 2022 - Croatian National Bank economist Vedran Sosic has spoken out about interest rates and when prices in general might return to some form of normality.

As Poslovni Dnevnik writes, economist Vedran Sosic has stated that currently, inflation is expected to peak in the second quarter, after the peak of electricity and gas prices, and should calm down entirely by the end of the year. Raw material and energy prices have boosted inflation and it's normal that we're currently troubled by the price of oil, it is difficult to predict what will happen there. A slight descent is expected towards the end of the year, but all this is all still shrouded in uncertainty.

''Energy prices have quickly made their mark on prices being paid for fuel at the pumps, although we still have a limit on petrol prices, we'll see what happens with fuel costs in April - we have a package that should alleviate this spillover. Food is currently the largest contributor to inflation, with prices rising by around 8 percent, sometimes by even more. Producer food prices rose by about 4 percent, less than the case with retail. Traders say they're trying to take on part of the cost growth on margins, but according to statistics, it seems that margins haven't yet been reduced. A lot of what happened last year has already been absorbed in terms of prices, so that's something we shouldn't be seeing in the coming months,'' explained economist Vedran Sosic.

He also spoke to N1 and said that it is possible to use the growth of raw material prices to increase the price of the final product: "It's possible for that to happen. That is the greatest danger. Inflation is also a psychological phenomenon, the more we talk about it, the greater the risk that the inflationary spiral will roll, which is harder to bring back down again.''

"Interest rates will rise, but people can protect themselves now"

Commenting on interest rates on loans, CNB's main economist Vedran Sosic explained:

“Back in October last year, when it became apparent that inflation was going on, we warned people that interest rates would rise. The normalisation of monetary policy was expected, those expectations haven't really altered and so these jumps shouldn't be sudden. For the European Central Bank, the market expectation is about half a percentage point increase in interest rates. In some markets, this growth can be seen, Croatia borrowed more when it issued bonds, so the growth of interest rates is already visible.

Every loan is different - those that come with a fixed rate are protected. Those who have a variable, again, aren't the same as what's tied in with the interest rate. An increase of one to two percentage points for those who have a loan for a period of 20 years, could mean a 10 to 20 percent higher installment, that would of course be the worst case scenario - so about 400 kuna on a loan of 4,000 kuna. The suggestion to people is to look at what rates they have, maybe reprogramme things, change the bank… Let them ask personal bankers, inquire about protection, there's still time to change those loans.'' concluded economist Vedran Sosic.

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June the 15th, 2021 - Just what needs to be done to speed up economic recovery following the coronavirus pandemic? Respected Croatian economist Vedran Sosic says that we need to take a serious look at the number of so-called zombie companies as the pandemic draws to a close, and limit them.

As Ana Blaskovic/Poslovni Dnevnik writes, the pace of economic recovery could vary very significantly between countries, said the Croatian National Bank's chief economist Vedran Sosic in Rovinj at the 9th meeting of the region's governors, primarily due to their different economic structures and aid effectiveness. The state has helped companies out financially and with various job preservation measures, but now it's crucial that we work to reduce the number of zombie companies, and the speed of recovery will also depend on how much households will spend on ''forced'' accumulated savings due to the global crisis.

Vedran Sosic gave a presentation entitled "Post-Covid Syndrome in the Economy and Financial System: How do we Deal with It?" explaining that the current crisis will spur some structural changes in numerous economies, and that economic policies will play a key role in preserving growth potential, especially through support for companies and workers in the most affected industries.

The business of companies has been hit by restrictions, epidemiological measures have brought with them higher costs, and at the same time their demand has decreased, supply chains have been disrupted and general insecurity has increased. While strong fiscal support has helped businesses, the question now is of the optimal rate of the withdrawal of that support.

“These subsidies have reduced the insolvency rates of companies even below the levels normal for good times, which, among other things, has enabled an increase in the number of zombie companies that are squeezing out healthy companies and the damage is growing in the long run. Reforms aimed at reducing zombification are vital,'' Vedran Sosic said.

In the ongoing coronavirus crisis, the savings rate rose with a simultaneous decline in investment. "If households don't spend their accumulated additional savings, it could negatively affect the speed of recovery," the CNB chief economist said, adding that the pandemic and restrictive measures limited private consumption, while state aid compensated for part of the loss of income, and high levels of uncertainty generally reduced the propensity to spend.

"All this has led to ''forced'' savings in addition to the precautionary savings common during times of crisis. Although it isn't possible to determine exactly who saved the most during the crisis, an increase in savings was probably pronounced among those with higher incomes who will probably not significantly increase their spending during the recovery,'' said Vedran Sosic.

He also referred to the residential property market, saying that it had shown a level of resilience, meaning that the price levels more or less remained the same throughout the crisis. Here in Croatia, residential real estate prices rose by 7.7 percent last year. At the same time, due to new trends related directly to the pandemic, such as increased work from home and an increase in online shopping, prices for commercial real estate have fallen.

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