2005 monetary policy projection adopted

Published: 13/7/2005

At its Wednesday meeting chaired by Governor Dr. Željko Rohatinski, the CNB Council analyzed recent economic and monetary developments, adopted a monetary policy projection for the third and fourth quarters of 2005 and passed several decisions falling within its field of competence.

The available indicators point to a more dynamic economic activity in the second quarter compared with the first quarter. Consumer prices currently remain within the target range, but their further growth might be mostly fuelled by the continuing rise in oil prices. Due to the stabilized exchange rate the Croatian National Bank has not intervened on the foreign exchange market since mid-June. The CNB' activities are currently focused on the open market operations whose volume reached a record high of HRK 3.6bn today.

The monetary policy projection for the remaining part of 2005 is based on an estimated budget deficit of 4.2 percent of GDP and the assumption that the government will offset this year's budget shortfalls exclusively by domestic borrowing. This would also remove appreciation pressures on the exchange rate, caused by the government's external borrowing. It is also assumed that the banking sector's external liabilities will remain at the current level. Given the estimated budget deficit, somewhat faster growth of goods exports compared with goods imports and an increase in revenues from tourism, the current account deficit for 2005 could be about 4.7 percent.

The Council also adopted a new decision on the terms and methods of conducting external payment transactions, which is in closer harmony with the EU regulations and practice than the previous decision, and gives more accurate definitions of certain rights and obligations of participants in external payment operations. The new decision shall apply as of 1 April next year.

The Council endorsed the proposals of the supervisory board of Erste&Steriermärkische Bank d.d. Rijeka for the reappointment of Petar Radaković as chairman of the bank's management board and the appointment of Borislav Centner, Sava Ivanov Dalbokov, Slađana Jagar and Tomislav Vuić as management board members, as well as the proposal of the supervisory board of Samoborska banka d.d. Samobor for the appointment of Verica Ljubičić as the bank's management board member.

At today's meeting, the CNB Council also adopted a decision on putting into circulation of commemorative 25 kuna coins "Republic of Croatia - Candidate for EU Membership, 18 April 2004" and a decision on the issuance and sale of commemorative silver coins "Winter Olympic Games, Italy, 2006" and "World Football Championship, Germany 2006".