CNB Council: At the end of August the amount of international reserves almost reached the level from the end of 2019

Published: 7/9/2020

In the discussion on economic and monetary developments, among other things, it was established that the extremely sharp fall in economic activity in the second quarter was short lived and that high-frequency indicators pointed to an intensive recovery, already recorded at the end of the same period and in the beginning of the third quarter. The unlocking of the economy and ongoing recovery as well as the later start of the tourist season also spurred recovery on the labour market, so that, in June and July, employment grew and unemployment declined. However, similar to economic activity, the levels of these indicators continued to be much more unfavourable than at the start of the year.

After the entry in the Exchange Rate Mechanism (ERM II) in early July, the kuna to euro exchange rate remained very stable at the levels around the central rate set at HRK 7.5345 for 1 euro. The exchange rate strengthened moderately on the back of more optimistic expectations from the results of the tourist season in July and in the first half of August. In the second half of August, following the worsened epidemiological situation and measures imposed by the individual outbound markets, the exchange rate returned to its central rate level.

While the annual inflation rate remained in negative territory under the impact of low energy prices, core inflation decelerated slightly and dropped to below 1 percent, mostly because of the decrease in the contribution of individual food products, particularly meat, oil and fats, motor vehicles and non-durable household goods.

In the previous period, the CNB continued to strengthen the degree of expansionary monetary policy and conducted yet another operation of the purchase of government securities at the end of June. As a result, domestic financial system liquidity reached historical highs and financing conditions continued to improve, which coupled with the Government’s housing loans subsidy programme and to a lesser extent by borrowing for the reconstruction of housing units affected by the earthquake, gave a boost to lending. At the end of August, the amount of international reserves recovered and almost reached the level from the end of 2019.

According to the Ministry of Finance data, unfavourable economic trends reflected in the strong deterioration in the balance of public finances in the second quarter.

At its session today, the CNB Council agreed with the proposal of Privredna banka Zagreb d.d. to appoint Alessio Cioni and Antonio Giovanni Mario Bergalio as Members of the Management Board of that bank.

addition, the CNB Council adopted the Decision on the appointment of an official person of the CNB for carrying out the procedure for imposing administrative sanctions. The Council also issued the Decision on amendments to the Decision on the conditions and the manner in which authorised currency exchange offices conduct currency exchange transactions. This Decision governs the possibility for authorised currency exchange offices to sell cash in foreign currencies abroad, not traded by the banks that operate in the Republic of Croatia.

The CNB Council also adopted the Decision on the issuance and sale of commemorative gold and silver coins “350th Anniversary of the Founding of the University of Zagreb, 1669 – 2019”.