ZAGREB, Sept 11 (Hina) - By the end of this year, Croatia's foreign debt, along with the balance of payments deficit of seven percent of GDP, could total close to 21 billion dollars, i.e. it could exceed 70 percent of GDP, Croatian
National Bank (HNB) governor Zeljko Rohatinski said at a news conference on Thursday.
ZAGREB, Sept 11 (Hina) - By the end of this year, Croatia's foreign
debt, along with the balance of payments deficit of seven percent of
GDP, could total close to 21 billion dollars, i.e. it could exceed
70 percent of GDP, Croatian National Bank (HNB) governor Zeljko
Rohatinski said at a news conference on Thursday. #L#
The situation is not disastrous, but with a debt which accounts for
70 percent of GDP, one cannot afford the luxury of accumulating the
deficit, Rohatinski said.
According to HNB data, the deficit in the balance of payments in
this year's first six months totalled as much as 2.45 billion
dollars, which is a nominal increase of almost 50 percent compared
to the same time last year. Dollar exchange rate movements taken
into account, the deficit is higher by 30 percent. The deficit of
the balance of payments in the first six months accounted for seven
percent of GDP and is still high. According to a memorandum with the
IMF, it should not exceed 5.5 percent of GDP.
The governor said that IMF representatives, who are on a working
visit to Croatia, had stated that the level of the foreign debt was
acceptable for them only if it was the maximum allowed amount.
Rohatinski recalled measures which were introduced at the
beginning of the year and in early September, estimating that it was
now evident that they had yielded expected results.
The exchange rate is still stable and will remain stable, and there
has been no rise in inflation. In the first eight months, the kuna
depreciated in relation to the euro by 0.2 percent or by 0.4 percent
in the last 12 months, while the inflation rate in the first eight
months was 1.4 percent compared to the same time last year, which is
at the EU level, Rohatinski said.
Based on data on the growth of industrial production, construction
and tourism, the HNB governor estimates that the real growth of GDP
this year would be at least 4.5 percent.
Imports in the first seven months (expressed in kuna) were by 11.8
percent higher than at the same time last year, while exports rose
by half the rate - 5.7 percent. The deficit in trade balance
increased from 14.3 to 16 percent of GDP, although it was slowed
down. The export-import ratio was reduced from 46.6 to 44 percent.
The situation would be much worse if it was not for the HNB's
measures from the beginning of the year, Rohatinski said, adding
that the deficit in trade and services was reduced from 9.6 to 7.6
percent of GDP.
Rohatinski also said that despite continued increase in trade
deficit, foreign currency influx had increased thanks to a rise in
services.
However, the balance of payments is generally worse due to the
transfer of company and bank profits abroad and the one-off profit
reinvestment of one company (Pliva), totalling one billion
dollars, the governor said.
In order to strengthen the effect of the measures on the balance of
payments, the HNB Council has decided to increase the share of
banks' compulsory foreign currency reserves from 25 to 35 percent.
The measure has resulted in the immobilisation of 2.4 billion kuna,
Rohatinski said, adding that banks had reacted by increasing
interest on the inter-bank market. However, he believes that
interest rates on the financial market will drop once compulsory
reserves are calculated and liquid assets are secured.
The governor expects that interest on loans granted to citizens and
companies will not increase this and next year.
The central bank's measures have increased banks' expenses, but
interest rates have not increased also due to strong competition.
Despite the situation, banks are doing good business, Rohatinski
said. He also presented data indicating that interest rates have
actually dropped this year. This is an average estimate but it
indicates that the central bank's measures have not and will not
cause a rise in interest rates, Rohatinski said.
The governor has also said that in light of the current measures, no
other monetary restriction measures would be needed this year. Next
year, there will be no limiting of loan issuing, he said.
(hina) rml