At its meeting held on Wednesday, September 6 2000, the Council of the Croatian National Bank, chaired by governor dr. Zeljko Rohatinski, reviewed recent economic and monetary developments, financial statements of the central bank for the first half of 2000 and made several decisions acting in accordance with its authority.
Recent real sector developments have been marked by the revival of industrial output, retail trade turnover and, especially, by a significant increase in the number of tourists and overnight stays by tourists (total increase reached 50 percent). After a 0.5 percent increase in July, retail prices stagnated in August. Total August retail prices growth was 6.5 percent year on year. In the first eight months of 2000, compared with the same period last year, retail prices grew 5.5 percent. Producer prices for industrial products stabilized in August as well. In July and August, the exchange rate of the kuna appreciated against the German mark and euro by about 1 percent, while depreciating against the US dollar by 4.6 percent, both in nominal terms. During that period only one foreign exchange intervention of the central bank proved necessary - the one at the beginning of July.
In June and July, all monetary aggregates grew, including the enterprise sector deposit money. This increase is attributable to seasonal factors (primarily to the good tourism season), but also considerably to the fact that the government continued paying its arrears stemming from preceding years. Another important financial indicator is a further increase in savings: in July and August, foreign currency savings increased by HRK 1.76 billion (considerably more than in the three preceding months) and domestic currency savings by about HRK 560 million.
The liquidity of the banking system is very high, which is mirrored in the fall of interest rates to the historically lowest levels. In August, the supply on the Money Market was two, even three times higher than the demand on several occasions. The interest rate in daily transactions used to fall to levels even under 2.5 percent (on callable loans), decreasing as far as to 0.54 percent in overnight transactions. In July, the average interest rate on new kuna lending was 11.4 percent and the average interest rate on short-term corporate lending stood at about 7.4 percent.
However, it is unfavorable that despite the high liquidity and lower interest rates, bank lending to the enterprise sector has not increased. According to available data, banks are reluctant to engage in such transactions and take the risks inherent to them. Members of the CNB Council emphasized that such attitude is a confirmation of the thesis that macroeconomic stability and abundant liquidity of the banking system can not suffice for achieving the desired GDP growth, unless coupled with adequate real sector reforms and efficient functioning of the law-governed state.
At the Wednesday meeting, the CNB Council approved the nomination of Mr. Pavao Parat for member of the management board of Varazdinska banka d.d. Varazdin. In addition, the Council gave its approval to Varazdinska banka to acquire an additional 26.89 percent stake in Hrvatska stambena stedionica d.d. Varazdin. Trajektna luka Split was given approval to acquire additional 12.62 percent of shares in Imex banka d.d. Split.