CNB Governor Boris Vujčić participated today in a panel entitled "How to Accelerate Green, Resilient, and Inclusive Global Growth" at the World Economic Forum in Davos.

The panel discussed the political, fiscal and monetary changes needed to accelerate global growth as well as the ways to make economic growth greener, more resilient and inclusive. The panellists, in addition to the CNB Governor, included world-renowned scientists and experts, Dr. Keyu Jin, Associate Professor of Economics, London School of Economics, Dr. Kenneth Rogoff, Professor of Economics and Head of the Department of International Economics, Maurits C., Harvard University, and Dr. Beata Javorcik, Chief Economist, European Bank for Reconstruction and Development. The panel was moderated by Marcin Piątkowski, Professor at Kozminski University and Senior Economist at the World Bank.

Responding to a question about the geopolitical trends of deglobalization and the strengthening of national protectionist policies, Boris Vujčić said that the continuation of these trends could be expected in the medium term. "Some of the plans that lead to the fragmentation of world trade flows have yet to be implemented, so it is realistic to expect the continuation of these trends. Of course, policies that lead to the fragmentation of global trade flows and foreign direct investment flows can lead to higher inflation and higher interest rates, but this is something that we will have to deal with in the coming period, including us from the central banking sector," the CNB Governor said on this occasion.

Speaking about the advantages of joining the eurozone for Croatia, the Governor pointed out that this led to the elimination of currency risk, relatively lower interest rates, lower transaction costs and, finally, greater resilience to financial crises and shocks, as expected. "In Croatia, the private sector has already felt positive effects of the euro on financing conditions – there has been a less pronounced increase in interest rates on loans to non-financial corporations and housing loans compared to non-euro area Member States. Interest rates in Croatia rose equally as those in the euro area, and on household loans even less, which is a much lower increase compared to Hungary, the Czech Republic or Poland – these countries have considerably higher inflation and interest rates than Croatia. Croatia’s entry into the euro area a year ago shows that the euro is attractive – especially for small open European countries. In fact, the complex external environment, the tense geopolitical context and adverse shocks, such as the pandemic and inflation, affecting our economies make the single currency even more attractive. This is primarily because participation in the euro area improves a country’s economic competitiveness and, as I have already said, guarantees a higher degree of resilience to shocks. Figuratively speaking, it is much safer to sail stormy seas on a large ship than on a small ship. In crises, the markets first choose smaller countries and, in professional jargon, they sell you short," said Vujčić.

When asked about the direction in which the EU and the eurozone could develop, the CNB Governor replied that the European Monetary Union (EMU) had an asymmetric structure, implying a common monetary policy, but national fiscal policies, and therefore closer cooperation in the fiscal area would probably take a longer period. "In addition to the common fiscal policy, there is a problem of a too low level of risk sharing in the EMU, especially when it comes to market risk sharing, as capital markets in the EMU play a much smaller role in risk sharing than elsewhere. While we have already seen an almost complete decline in cross-border capital flows in the euro area in times of crisis, progress towards a capital union is rather modest. Therefore, in the coming years we will probably see a lot of fine-tuning of the existing framework similar to the agreement reached regarding fiscal rules and a lot of long-term negotiations on the construction of new institutions such as the (finalization) of the banking union," said the CNB Governor. Responding to the question about the demographic problems of developed countries, Boris Vujčić said that this problem brought with it the need to adopt a "smart immigration" policy. "In doing so, each company must decide whether to encourage the resolution of labour shortages by importing foreign workers from abroad or by increasing the employment rate, including greater engagement of the elderly population," the Governor stressed.

The full panel can be viewed at  https://www.youtube.com/watch?v=Nla3gpfpNHQ (from 3:07:00).