At its meeting today, the Croatian National Bank Council reviewed recent economic and monetary trends and a report on the condition of the banking system in the first half of the year, adopted the monetary policy projection for the 2018 to 2021 period, and made several decisions on matters within its area of responsibility.
Available monthly indicators of real economic activity suggest that real GDP growth continued in the third quarter of 2018, albeit at a slower pace than in the quarter before. Favourable trends in the labour market also continued at weaker intensity than in the preceding part of the year. The annual consumer price inflation rate dropped to 1.4% in September. The Croatian National Bank continued to pursue an expansionary monetary policy, maintaining high levels of liquidity in the domestic financial system in September. The annual growth of placements to non-financial corporations remained at the level recorded in the previous month, while the annual growth of placements to households picked up. In the second quarter, the surplus in the current and capital account of the balance of payments went up on an annual basis. Ministry of Finance cash-basis data show that the general government budget ran a sizeable surplus in the second quarter of 2018, so that the general government debt-to-GDP ratio shrank even more.
Taking account of the latest developments, an estimate of real economic growth for 2018 has been slightly lowered (to 2.7%) in CNB projections, while the growth structure deteriorated. More precisely, based on favourable trends in the labour market, expected personal consumption growth has been revised up, while expected growth in investment and exports of goods and services has been revised down. A further strengthening of protectionist measures and the related slower growth in some of Croatia's major trading partners may adversely affect future economic developments. In addition, there is limited room for use of countercyclical monetary policy in the euro area as interest rates are very low, whereas high public debt levels restrict the room for countercyclical fiscal policy. Croatia's real GDP growth continues to relatively lag behind that of new EU member states.
Notwithstanding favourable macroeconomic trends, financial system exposure to systemic risks has remained moderate due to the persistently high level of public and private debt, which is subject to considerable foreign exchange and interest rate risks. The risks identified might materialise in case of a significant deterioration of financing conditions in international markets, which may be largely spurred by a stronger-than-expected tightening of monetary policy in major global economies or political uncertainties, particularly in light of the recent events in Italy.
At the meeting, the CNB Council approved the appointment of Murat Betoner as Chairman of the Management Board of KentBank d.d., Zagreb, and the appointment of Petar Repušić as Chairman and Luka Čulo as Member of the Management Board of Partner banka d.d., Zagreb.
In addition, the CNB Council adopted a decision on the issue and sale of commemorative silver coins marking the 100th anniversary of the end of the First World War. The 150 kuna silver coins are to be released for sale on 31 October 2018.