At its meeting today, the Council of the Croatian National Bank reviewed the most recent economic and monetary developments and adopted a monetary policy projection for the second quarter of 2006 and forecasts for the rest of the year. It also approved the CNB Financial Statements and Independent Auditors' Opinion presented therein, as well as the Report on the CNB International Reserves Management for 2005; and adopted several decisions falling within its field of competence. The CNB Council was briefed on the Analysis of External Debt of the Republic of Croatia, made by the CNB experts.

The available indicators point to heightened activity, compared with the previous year, in all major economic sectors. In the first two months of the year, markedly higher growth rates were recorded in industry, trade, construction and tourism. The banking sector has maintained its high levels of liquidity, reflected in low interest rates on overnight loans (the weighted monthly interest rates on overnight loans were 0.88 percent and 0.91 percent in February and March respectively). This also applied to the interest rates in the Ministry of Finance Treasury Bill auctions (depending on maturity, they stood in a range between 2.99 percent and 3.68 percent in March).

In the first quarter, monetary developments were marked by continued growth in bank placements to the non-banking sector and increased foreign borrowing of commercial banks. As a result, the banks have already achieved the placement growth projected for the entire 2006. Contrary to the expectations that both the implemented and announced CNB measures would discourage banks' further borrowing abroad, banks' external debt continued to rise at high rates over the first months of the current year. Thus, foreign liabilities of banks went up by EUR 920 million in the first three months of 2006. While the government's external borrowing decreased slightly over the period, direct corporate external borrowing increased at roughly the same pace.

At this meeting the CNB Council also adopted amendments to the Decision on the Manner of and Conditions for Investment of Residents into Foreign Securities and Stakes in Foreign Investment Funds. The amendments included the lifting of some restrictions which became unnecessary after coming into force of the new Investment Funds Act, laying down detailed rules for foreign investment funds' operations on the Croatian market.

At today's meeting, the Council granted its approval to Hrvatska poštanska banka d.d. Zagreb for the establishment of a housing savings bank, and consented to the proposal of the bank's Supervisory Board for appointing Dunja Vidošević as chairwoman and Jasminka Makarun as member of the Management Board of the savings bank being established.