The Council of the National Bank of Croatia chaired by Governor Dr. Marko Škreb met on Wednesday, April 2, to review economic and financial developments in the first quarter of 1997, examine the expectations for April, and consider the adoption of adequate monetary policy measures. The Council also made several decisions, acting in accordance with the power entrusted to the central bank.

It was concluded that price stability and the exchange rate stability continued to be salient features of the country's macroeconomic framework. Retail prices in March were only 0.1 % higher than in the previous month, and 3.9 % higher than a year earlier, while the cost of living went up by 0.3% compared to the previous month, and 3.6 % compared to a year ago. Producer prices in March were 0.7 % lower than in February, and 2.2 % higher than in March 1996. The exchange rate of the kuna against the Deutschmark remained stable, which was evidenced by the quarterly nominal depreciation of the exchange rate amounting to 0.35 %. During the first quarter of 1997, due to global changes in cross rate relationships between foreign currencies, the kuna depreciated against the US dollar by 8.16 %, which was reflected in the statistics of the international reserves.

The level of government borrowing from the central bank continued to be low. During the first three months of the year liquidity of the banking system proved to be satisfactory, so that there were few interventions of the National Bank of Croatia in the foreign exchange market. The total monetary effect of these intervention purchases amounted to HRK 126.7 million. After the Council had already enacted the decision pursuant to which the required reserve ratio should be reduced by 1 percentage point starting from April 1, the reserve requirement is to be further reduced on the basis of the decision the Council made on April 2, according to which all commercial bank deposits representing balances transferred to banks by the Croatian Bank for Reconstruction and Development should be excluded from the basis for the calculation of required reserves as from April 14, 1997. It was stated that any further reduction of the reserve requirement should be contingent upon developments in domestic liquidity, especially upon future capital inflows, and that any future decision in that area should be made after taking into consideration the necessity of maintaining the achieved level of macroeconomic stability.

In terms of economic indicators, due attention was given to the data providing evidence of a gradual recovery in industrial production, followed by a significant upturn in foreign trade levels: in the first two months of the current year the dollar values of exports and imports, compared to the same period last year, rose by 28 % and 33 % respectively.

The average net wage paid in February was, measured in real terms, about 14 % higher than a year earlier, and about 10 % higher than the average annual wage for the last year. Since this was chiefly due to changes in the taxation of income, it was estimated that there was no considerable disagreement between the wage increases and productivity levels, and that such increases had no pro-inflationary effects.

The Council also approved the annual report of the Payments System Bureau (Zavod za platni promet, ZAP) for the year 1996. Further, at the request of Mr. Bogumil Cota, which had been submitted to the Council a long while ago, the Council decided to relieve Mr. Cota of his duty as General Manager of the Payments System Bureau. Mr. Cota has been at the helm of the Bureau for four years and is about to assume the position of an Advisor to the Governor of the National Bank of Croatia on payments system issues.

The Council appointed Mr. Dinko Zidarević to be new General Manager of the Payments System Bureau. Mr. Zidarević was born in Zagreb in 1960 and has received a Bachelor of Laws' degree. Until his latest appointment, he served as an official at the Ministry of Finance where, since 1993, he had held the position of the head of the Internal Audit Unit at the headquarters of the Revenue Guard Service (Financial Police). He had also worked for a number of years at the former Social Accounting Service, which was subsequently transformed into the Payments System Bureau, where he gained broad experience dealing with the issues in the area of external auditing, including the auditing of annual financial statements.

In addition, the Council granted an operating licence to Štedionica Banica-Credo d.o.o. Split, and approved the nominations of Mr. Mirko Vukušić for Chairman of its Management Board and Mrs. Ksenija Ljubičić for Member of the Management Board of the same bank. The Council also approved the nomination of Mr. Darko Živković for Member of the Management Board of Bank Austria Croatia d.d. Zagreb, the nomination of Mr. Ivica Filipović for Member of the Management Board of Credo banka d.d. Split, the nomination of Mr. Vilko Marković for Chairman of the Management Board of Štedionica Marvil d.o.o. Zagreb, and the nomination of Ms. Nada Hamilton for Member of the Management Board of Štedionica za razvoj i obnovu d.o.o. Zagreb.