A Mission of the World Bank in charge of negotiating a Structural Adjustment Loan with Croatian authorities visited the Croatian National Bank on Wednesday, October 18 2000. The Mission, headed by Mr. Ilker Domac, met with Dr. Boris Vujcic, Deputy Governor of the Croatian National Bank, and his associates.
The World Bank Mission came to Croatia to get an insight in the most important economic indicators and measures of Croatian economic and monetary policy, explained Mr. Domac. These will be used in preparations of a credit arrangement, which would supplement Croatia's arrangement with the IMF (to be negotiated at the end of October) and support the reforms, which the Croatian Government is implementing in order to increase the efficiency and competitiveness of domestic economy. The aforementioned arrangement should mitigate social consequences of structural reforms and enhance improvements on the labor market.
An especially important indicator of developments in Croatian economy in the first nine months of this year is the revival of economic activity, with the growth of exports playing a significant role in it after several years of stagnation, said Dr. Vujcic, CNB Deputy Governor. Gradual opening of Croatian economy and steps made towards entering international organizations suggest that growth of exports could continue. It is estimated that, due to reduced trade deficit and increased tourism revenues, current account deficit for 2000 could amount to about one billion dollars - this means that its share in the Croatian GDP would be about 2 percentage points lower than in 1999. Bank lending, that has been stagnating for a certain period of time, is reviving gradually. The Croatian central bank significantly eased obligatory reserve requirements and changed their calculation method. Growth of prices observed in September was higher than usual, primarily due to reasons out of monetary policy domain. The central bank is, therefore, attentively monitoring developments in prices and is ready to introduce, should it prove necessary, adequate measures, acting in accordance with its authorities. The new Law on the Croatian National Bank should provide the central bank with a stronger mandate and autonomy in the maintenance of price stability.
High unemployment remains the most delicate problem for Croatian economic policy, also in implementation of structural reforms, assessed dr. Vujcic. Basic preconditions for initiating the turn of tendencies and enhancing the opening of productive work places are political and macroeconomic stability and adequate functioning of the law-governed state. These factors will influence crucially the increase of international competitiveness of Croatian economy and faster growth of direct foreign investments, which are preconditions both for the rise of employment and sustainable economic growth.