At its meeting held on Wednesday, February 12, 2003, the Council of the Croatian National Bank, chaired by Governor Dr Željko Rohatinski, reviewed recent economic and monetary developments and made a number of decisions within its authority.

The end of last year was marked by heightened economic activity. Gross domestic product increased by 6.5 percent in the third quarter, so that the cumulative annual GDP growth rate reached 5 percent. Available industrial production, retail trade and construction industry indicators for the third quarter point to a further growth. Retail prices in January were 0.4 percent higher than in the previous month, and 1.6 percent higher than in January 2003. A decrease in the annual rate of inflation in relation with the December rate of 2.3 percent was also due to a high January 2002 base. The kuna exchange rate at the end of January was 1.52 percent weaker in nominal terms than at the end of December last year and was close to the rate observed at the end of January 2002. The Croatian National Bank intervened twice in the foreign exchange market in January, selling EUR 115.7 million to commercial banks.

A very rapid credit growth from previous months continued into December, reaching 30.5 percent on an annual level, and was accompanied by a simultaneous reduction in banks' net foreign assets. Enterprise lending grew at the rate of 22.7 percent and household lending grew almost twice as fast (43 percent). Commercial banks' interest rates on enterprise lending have been moderately reduced, but interest rates on household lending increased. The spread between interest rates on forex deposits and interest rates on kuna credits with a currency clause grew to 6.88 percentage points. According to preliminary data, the upward trend in bank lending seems to have continued in January: monthly credit growth (about 1.6 percent) is lower than in December (2.3 percent), but still unusually high for the first month of the year. According to the CNB Council members, such developments prove that the restrictive measures introduced by the central bank were necessary and that their postponement was not justified.

At the same Wednesday meeting, the CNB Council approved the amalgamation of Privredna banka d.d. Zagreb with Riadria banka d.d. Rijeka, a bank in majority ownership of PBZ. The Council also agreed with the nominations of Ms Anđelka Čavlek as member of the management board of Hrvatska poštanska banka d.d. Zagreb and Mr Ratko Špirelja as member of the management board of Banka Kovanica d.d. Varaždin.