The Croatian National Bank (HNB) revised upward the country's growth projection for 2016 to 2.3% from 1.8%, and it expects the growth to step up to 2.5% in 2017, according to a press release issued by the central bank after its Council held a meeting on Wednesday.
While considering the economic trends, the HNB Council concluded that the recovery of the Croatian economy continued in 2016, at a projected growth rate of 2.3%.
The tailwinds for the positive growth are the external demand as well as a rise in all elements in domestic demand. Likewise, the rise in personal consumption can be at a higher rate this year compared to 2015, on the back of rising employment and real gross income.
The HNB Council expects positive trends to continue in 2017 and the next year's growth is forecast at 2.5%.
The economic recovery is going on against a backdrop of a declining consumer price index that can come to 0.9% due to a drop in energy prices, and in 2017 this trend in the index is expected to rebound by 1.2%.
On Tuesday, the HNB conducted the third of the four planned structural repo operations planned for this year. A total of HRK 234.4m were auctioned for a four-year term, at the interest rate of 1.4 percent. In the three structural repo operations conducted so far, the central bank placed to the banks a total of HRK 945.9m.
"By introducing structural repo operations, the HNB continues with the expansionary monetary policy it has been pursuing for years, which has helped mitigate the negative consequences of the economic crisis by boosting liquidity in the system and lowering the costs of financing for domestic sectors in Croatia. The HNB will continue to maintain the stability of the domestic currency, taking account of the important role of the EUR/HRK exchange rate in preserving the stability of prices and the banking system as a whole. In the unlikely event that depreciation pressures arise, the HNB will use the instruments available to it, including, if necessary, foreign exchange interventions and system liquidity management, to stabilise movements in the EUR/HRK exchange rate," the central bank said before the launch of these operations.
In June, HNB Governor Boris Vujcic said that the central bank would soon revise upward the country's growth projection.
"The HNB will soon release a new projection of Gross Domestic Product, which will be higher than the previous one, having in mind the first quarter performance and results from April," Vujcic said when asked by reporters about the impact of the ongoing government crisis on the economy.