At its meeting held on Wednesday, October 12, 2002 the Council of the Croatian National Bank, chaired by Governor Dr Željko Rohatinski, reviewed recent economic and monetary developments and adopted the monetary projection for the last quarter of this year. In addition, the CNB Council reduced the central bank discount rate from 5.9 to 4.5 percent. Despite the marginal importance of the discount rate for the Croatian financial system, as opposed to some other countries, this change is significant as it reflects an overall decline in market-determined interest rates.

The interest rate on CNB bills with 35-days maturity fell from the average of 3.89 percent in January to 1.99 percent in September and on CNB bills with 182-days maturity from 4.91 percent in January to 2.6 percent in September. Interest rates on treasury bills have fallen as well: at the first October auction the interest rate on treasury bills with 364-days maturity was 4.45 percent. In October, interest rates on the direct over-night market fluctuated between 0.25 and 3.76 percent and on the Zagreb Money Market between 0.34 and 5.3 percent.

At the end of August bank lending was 24.2 percent higher than a year ago. Foreign exchange deposits rose again in July and August. A considerable growth in corporate demand deposits has also been observed (51.2 percent annually). This can be viewed as the result of introducing the new payment system, but also as an indicator of the growing liquidity of enterprises.

Preliminary data for the second quarter of 2002 show a real GDP growth of 4.0 percent, while the growth in the first quarter was corrected from 4.6 to 4.3 percent. According to the available indicators, the total level of prices will not rise significantly, despite the fact that the inflation rate at the end of 2002 will largely depend on the developments in oil prices during the remaining period of the year. The price growth observed so far was below the forecast values, so that the rise in electricity prices alone should not result in exceeding the expected annual inflation rate. The exchange rate has been stable for a longer period now, requiring no central bank interventions.

The instruments to be used for further maintenance of price and exchange rate stability will largely be determined by the budget deficit level and its coverage from international sources. At end-July foreign debt reached USD 13.3 billion, which is USD 2.1 billion more than in the same period last year with the depreciation of the dollar accounting for USD 0.9 billion.

At the Wednesday meeting the CNB Council gave its approval for appointing Mr. Zoran Sikirica as member of the management board of Hypo Alpe Adria Bank d.d. Zagreb, Ms. Marija Ružić as chairwoman of Međimurska štedionica d.d. Čakovec and Ms. Anka Tomas as chairwoman and Ms. Nada Senčar as member of the management board of Banka Sonic d.d. Zagreb.

Furthermore, the members of the CNB Council were briefed on the discussions led by the Croatian delegation with the representatives of the International Monetary Fund and the World Bank during the annual meetings of these financial institutions.