CENTRAL BANK SATISFIED WITH INDICATORS OF MACROECONOMIC STABILITY

ZAGREB, Jan 21 (Hina) - The basic indicators of the macroeconomic stability in the last year were completely satisfactory, the Croatian National Bank (HNB) council said on Wednesday. A rise in retail prices was 5.4 per cent , but if the immediate effects of the introductions of the Value Added Tax (VAT) be excluded, an annual rate of inflation amounted to satisfactory 3 to 4 percent, just like in 1997. In 1998, the exchange rate of kuna toward the German mark depreciated by 6.4 percent, while kuna appreciated toward US dollar at the rate of 0.9 per cent. The last three months of 1998 were marked by the Central Bank's bigger interventions in the foreign exchange market. At the end of 1998, the HNB had 2.8 billion dollars of reserves in foreign currencies, with an increase of 277.6 million dollars since 1997. The Bank held that the gross national product (GNP) could increase by about 3 per cent in 1998. After November marked by stagnation, in December a significant rise had been noticed in the foreign currency deposits of citizens in the Croatian banks. This proved that problems with several banks did not dent the trust in the entire Croatian banking system. The average interest rate on bank loans has stagnated for some time, but attempts to reduce it further are faced with problems of the failure to pay. These problems should be solved by a more efficient legal system as well. The current account deficit came to 878.2 million dollars in the first nine months of 1998, and was reduced by 19.1 per cent in comparison to the same period in 1997. According to the Bank's figures on the foreign trade collected from the first eleven months of last year, the current account deficit could be eight percent of the GNP, and the Bank assessed it as more favourable than it was in 1997 when that deficit had totalled 12.6 percent of the GNP. (hina) ms