The Croatian National Bank (HNB) Council said on Wednesday that favourable economic trends continued at the end of 2015 after economic activity strongly intensified in the third quarter of that year.
"After economic activity strongly intensified in the third quarter of 2015, favourable trends continued at the end of the year. The growth of industrial production and retail trade was relatively strong, and the decline in the construction sector was stopped. Such trends had a positive effect on the labour market, where a continued increase in the number of workers and a drop in unemployment were recorded," reads a statement issued after today's session of the HNB Council.
The annual drop in consumer prices slowed down in December, reflecting primarily a less negative contribution of energy prices.
The HNB's monetary policy at the end of 2015 and the beginning of 2016 retained its expansive character, with the banks' obligation to set aside the foreign currency part of their reserve requirements at the HNB having been removed, as a result of which the banks can now flexibly manage those funds, the HNB said. Monetary trends continue to be characterised by corporate and household deleveraging.
As for public finance, the first nine months of 2015 were marked by an increase in general government revenues, while expenditures stagnated, which resulted in a significantly lower annual deficit, the HNB said.
The HNB Council's session, which was chaired by HNB Vice Governor Relja Martic and attended by Finance Minister Zdravko Maric and the chairman of the parliamentary Finance and Budget Committee, Goran Maric, also discussed the financial stability of the system, and it was underlined that continued favourable conditions on international money markets reduced risks for Croatia's financial stability.
However, the relatively slow economic recovery, combined with the fast growing and high public debt, high exposure of domestic sectors to interest rate changes and consequently a high country risk premium, are the main weaknesses of the national financial system, the HNB warned.