At its session today, the CNB Council analysed recent monetary and economic developments, adopted the Semi-annual Information on the Financial Condition, the Degree of Price Stability Achieved and the Implementation of Monetary Policy in the second half of 2018 and issued several decisions falling within its scope of competence.
Having stagnated at the end of the previous year, real GDP continued to grow in the first quarter of 2019. Labour market developments remained favourable. The annual growth rate of consumer prices accelerated from 0.5% in February to 0.9% in March, primarily due to an increase in the annual growth rate of energy prices (most notably of refined petroleum prices) and processed food product prices. Corporate and household placements continued growth on the back of mainly favourable financing cost trends, supported by the CNB’s expansive monetary policy. Having increased in the last quarter of the previous year, net external debt of domestic sectors rose further in the first two months of 2019. According to the CBS’s fiscal report for April, the general government budget again ran a surplus in 2018, although it was considerably lower than in 2017 due to a strong growth on the expenditure side, largely driven by the activation of guarantees issued to some shipyards. The general government debt-to-GDP ratio continued to decline, dropping to 74.6% at the end of the previous year.
The latest financial stability analysis indicates that the overall systemic risk exposure of the Croatian financial system remained unchanged and that the system continued to be stable in 2018 and in early 2019. The structural vulnerabilities of the economy decreased due to a continuing decline in structural imbalances and favourable economic developments, while growing uncertainties in world financial markets and those related to geopolitical and trade tensions increased the impact of risks from the international environment. As enterprises and households increasingly borrow at fixed interest rates and in the domestic currency, their interest rate and currency risks, as well as related currency induced credit risk for banks, continued to decline. Favourable macroeconomic developments and the implementation of the subsidised housing loan scheme resulted in an increase in housing lending and a real estate market recovery. Despite this increase, residential real estate prices remained considerably below their peak levels recorded in 2008. Cash general-purpose loans to households increased at a much stronger pace and were granted under significantly more lenient conditions than housing loans. In early 2019, the CNB responded to the resulting increase in credit risk in the banking system by the Recommendation on actions in granting non-housing consumer loans, aimed at defining more uniform criteria for assessing consumers' creditworthiness for various types of long-term consumer loans. The banking system remained highly capitalised and liquid, the credit portfolio quality continued to improve, as did profitability. The banking system's overall resilience to shocks thus remained relatively high, and so the CNB did not change the level of capital buffers for credit institutions in 2018 and in early 2019.
The CNB Council also adopted a decision on issuing a 25 kuna coin to mark the 25th anniversary of the introduction of the kuna as the monetary unit of the Republic of Croatia. The coin has a mintage of 30 000 pieces and will be put into circulation on 30 May this year.