CNB Council: Slowdown of economic recovery at the end of the third and the beginning of the fourth quarter

Published: 11/11/2020

In the first nine months of 2020, real GDP decreased by 8.3% from the same period in 2019


At its session today, the Croatian National Bank Council examined the latest economic and financial trends, adopted the Semi-annual Information on the Financial Condition, the Degree of Price Stability Achieved and the Implementation of Monetary Policy in the First Half of 2020 and adopted several decisions on matters falling within its competence.

According to the available monthly indicators, it is expected that in the third quarter the economic activity will grow from the previous quarter, after a sharp decline in the second quarter, caused by the coronavirus pandemic and restrictive measures introduced to suppress it. Based on the estimate for the third quarter and the data for the first half of the year, real GDP decreased by 8.3% in the first nine months of 2020 from the same period of the previous year. The high-frequency indicators show that the recovery slowed down at the end of the third and the beginning of the fourth quarter. The end of October saw a significant deterioration of the epidemiological situation, which might have a negative impact on the trends in the fourth quarter. Employment continued to grow and the number of unemployed persons continued to decline in September. Although the current trend on the labour market has been favourable, the numbers of employed and unemployed persons continue to be significantly less favourable when compared with the period before the pandemic outbreak. The total annual consumer price inflation rose slightly, from –0.1% in August to 0% in September. By contrast, core inflation fell from 1.2% to 0.7% as a result of the fall of the annual rate of change in prices of certain food products, clothing and footwear, as well as catering and accommodation services. The highly expansionary monetary policy continued into October with the banks’ free reserves reaching a historical high, fuelled by a fall in currency in circulation and government kuna deposits with the CNB. The annual growth of the total bank placements accelerated to 3.7% in September, with accelerated growth of placements to non-financial corporations due to the base effect, while the annual growth of household placements mildly slowed down. Following a significant general government budget deficit amounting to HRK 13.2bn in the first half of the year, the monthly data of the Ministry of Finance point to more favourable budgetary trends in the third quarter. At the end of July, the relative indicator of general government debt stood at 82.5% of GDP, up 9.7 percentage points from the end of 2019, which primarily reflects a considerable increase of the need for budget deficit financing.

The CNB Council also adopted the decision on the issuance and the sale of the commemorative gold coin with the motif of the 1 kuna circulation coin, within the scope of a new series of Gold Kuna commemorative coin. The Council also approved the issuing of commemorative silver coin, marking the 200th anniversary of the founding of the Archaeological Museum in Split, the oldest museum institution in the Republic of Croatia.

Finally, at its today's session the CNB Council also approved the proposal submitted by the Supervisory Board of Raiffeisen stambena štedionica d.d. for the appointment of Tomislav Matić as the president of its Management Board.