The Croatian National Bank (HNB) expects the existing economic growth rate to remain at four percent in 2005 and it expects economic growth to be based primarily on investments, not so much on investments in the infrastructure but investments in private businesses.
The net export is expected to start having positive effects on growth rates, with continued reduction of the balance of payments current transactions deficit to 4.8 percent of GDP expressed in euros. The foreign debt is expected to be below 78 percent of GDP (expressed in euros). Inflation may be slightly higher than this year - 2.5 percent.
On the monetary front, the HNB does not intend to change its basic instruments and the only change is the launching of open market operations in the first quarter of 2005.
Bank loans to the non-financial sector are expected to grow by 13 percent and loans to citizens are expected to grow faster than loans to businesses.
This year was not marked by any major shocks in the monetary and real sectors, HNB governor Zeljko Rohatinski said on Thursday.
The most important factor contributing to this year's GDP growth rate of 3.9 percent are investments, which grew by almost seven percent. There were no negative effects of the foreign trade deficit on the GDP growth rate.
This has considerably affected a reduction in the balance of payments current transactions deficit, which is estimated at 5.1 percent of GDP expressed in euros, two percentage points lower than last year and three percentage points lower than in 2002, which is primarily the result of an increase in the export of goods.
The situation with the balance of payments is gradually stabilising, and this has had an impact on the foreign debt, which has been stagnating since July and is expected to account for less than 78 percent of GDP expressed in euros. The HNB has also curbed the seeking of loans abroad by domestic banks.
The IMF too has assessed these results in the foreign debt as a significant success, which has led to its setting the foreign debt limit as the main priority in Croatia's overall economic policy and the HNB's role in that policy, Rohatinski said.