The CNB Council examined today recent monetary and economic developments and adopted the report on the work and performance of the central bank for the previous year which will be submitted to the Croatian Parliament.

During discussion on the annual report for 2013, it was pointed out that despite less than favourable economic conditions, the Croatian National Bank was again successful last year in achieving its legally prescribed tasks, both in monetary policy and in bank supervision. Price stability was maintained and so was the stability of the exchange rate, and international reserves increased. The CNB continued to pursue the policy of high banking system liquidity, which resulted in lower interest rates and easier government borrowing on the domestic market. The banking system remained stable, characterised by high capital adequacy ratio and the provisions policy which helped build its resilience against potential major shocks. The Croatian National Bank also actively participated in the work of the European System of Central Banks and in the project of development of the European Banking Union.

The first quarter of this year saw economic activity recovery on a quarterly level: the total volume of industrial output rose 3.4% from the previous quarter, foreign trade in goods improved, with imports and exports rising by 5.8% and 2.8%, respectively, and retail trade increasing by 1%. In construction, however, the volume of construction works continued to fall. Such developments were accompanied by a small increase in consumer prices in March (0.5%), with the annual rate of inflation standing at -0.4%. The exchange rate of the kuna against the euro remained stable, with only a small depreciation of the kuna against the euro seen in the first quarter, followed by increased seasonal appreciation pressures in April.

The CNB continues to maintain high monetary system liquidity also through a repurchase of compulsory CNB bills, encouraging growth of placements to companies (from December 2013 to end-April 2014, the CNB repurchased HRK 0.6bn). The exchange rate effects excluded, placements to private companies rose by HRK 1.2bn in the first quarter of the year, in contrast with those to the government which declined by HRK 0.8bn. On an annual level, total placements of credit institutions (the government excluded) were down 0.6% at the end of March compared to the year before, with placements to companies rising by 1.5% and placements to households falling by 1.4%. After falling persistently for a year, placements to households rose in March (HRK 0.3bn or 0.2%). However, one month cannot as yet be interpreted as a confirmation of a turn in the trend of household deleveraging present so far.

The CNB Council agreed with the decision of the Supervisory Board of Primorska banka d.d., Rijeka to extend the term of office of Ante Pekić as the chairperson and Goranka Šmer as a member of the Management Board of this credit institution and agreed with the extension of the term of office of Darko Kosovac as member of the Management Board of Banka Kovanica d.d., Varaždin.

Marking the occasion of the 20th anniversary of the introduction of the kuna as the monetary unit of the Republic of Croatia, the central bank is issuing a set of commemorative 10 and 20 kuna banknotes to be put up for sale on 29 May this year, in a special holder and a total number of 40 000 pieces. The CNB will also mark this anniversary by releasing into circulation a 20 kuna banknote bearing 30 May 2014 as the date of issue.