At its meeting held on Wednesday, May 9 2001, the Council of the Croatian National Bank, chaired by Governor dr. Zeljko Rohatinski, reviewed recent monetary and economic developments, Annual Reports of the Croatian National Bank and the Croatian Mint for the past year, and made a number of decisions related to foreign currency transactions and banking operations.
After the GDP growth of 3.7 percent in 2000, available indicators of economic developments in this year point at further recovery of economic activity in the most important sectors of the economy. In March, the industrial production volume was 4.6 percent higher than in the same month last year. In the first three months of this year it increased 5.5 percent compared with the same period last year. Data showing that the production of capital goods is growing most rapidly indicate also the recovery of investment. Bank lending developments support this indication.
From the beginning of this year until April 20 total commercial bank lending grew by HRK 5.7 billion, with corporate loans accounting for HRK 2.9 billion (a 12 percent increase) and household credit lines for HRK 2.3 billion (a 10.4 percent increase) of the amount. Such developments were enhanced by the reduction of interest rates abroad, as well as by the fall of interest rates on CNB bills and Treasury bills. However, the withdrawal of foreign assets and their conversion into domestic currency loans has impacted the exchange rate - it has caused appreciation pressures earlier than usually. The 2.5 depreciation of the exchange rate of the kuna against euro observed in the period from October 2000 to February 2001 was followed by the appreciation of the exchange rate in March and April this year. Consequently, at the end of April kuna was 2.4 percent stronger in relation to euro than a year ago.
Should the central bank considerably increase its interventions in the foreign exchange market (at the auctions held in the past two weeks the central bank purchased EUR 102.1 million ), there lingers the danger that an additional growth of the already high liquidity could enhance increase of prices. The members of the CNB Council concluded that this clearly illustrates the restricted potential of monetary policy in providing impetus to economic growth, if the growth is not based on structural reforms in production, competitive exports and accompanied by the reduction of public spending and balancing of budgetary revenues and expenditures, these being the preconditions for the parallel maintenance of price and exchange rate stability.
In April, retail prices were 1.4 percent higher than in March, 2.1 percent higher than in December and 6.8 percent higher than in April last year. Producer prices were on the same level as in the previous month, 1.4 percent lower than in December and 5.1 percent higher than in April last year. Considering these developments and the fact that no intensified cost pressures are caused by exchange rate movements, it can be concluded that the envisaged 4.5 inflation rate (on December level) can still be attained. However, since more than a half of the April increase of retail prices directly mirrors the rise in prices of oil products (caused by the introduction of the road building tax and rise of prices on international markets), the caution against its possible indirect effects on further developments of prices is well in place.
At the meeting held on Wedneday, Dresdner Bank AG Frankfurt was given approval for taking over the additional 50 percent of voting shares in BNP-Dresdner Bank (Croatia) d.d. Zagreb by purchasing them from Banque Nationale de Paris A.A. Paris. Due to this transaction, the Croatian subsidiary founded by both of the aforementioned foreign banks will be fully owned by the German bank and will in future operate under the name Dresdner Bank Croatia d.d. Zagreb. The company Heruc d.d. Zagreb was approved acquiring the additional 6.47 percent of voting shares in Centar banka d.d. Zagreb. This will increase the share of voting shares Heruc holds in Centar banka to 55.27 percent.
The CNB Council further agreed with the nomination of Ms. Zdenka Batinic for chairwoman of Prva obrtnicka stedionica d.d. Zagreb, Ms. Dunja Vidosevic for chairwoman and Mr. Srecko Macekovic for member of the management board of Prva stambena stedionica d.d. Zagreb.
The Council of the Croatian National Bank did not agree with licensing Stedionica za razvoj i obnovu d.o.o. Zagreb for performing bank operations stipulated in the Article 35 of the Banking Law. The operating license of this savings bank was revoked on March 22, 2000 on the basis of the final and enforcing decision of the CNB Council due to numerous irregularities in its operation and failure to implement measures prescribed by the CNB for the purpose of bringing the operation of this savings bank in compliance with regulations. The savings bank was obliged to initiate liquidation proceedings immediately, but failed to fulfill this legal obligation. In addition, the savings bank has not met the conditions for performing bank operations in accordance with Article 35 of the Banking Law.