CROATIAN NATIONAL BANK CONSIDERS ECONOMIC SITUATION FAVOURABLE

( Editorial: --> 6701 ) ZAGREB, Jan 23 (Hina) - Inflation according to retail prices was very low last year, 3.6 per cent. Economic growth was very big - a 6.8 per cent increase in industrial production - 7 per cent of gross domestic product, Croatian National Bank governor Marko Skreb said at Friday's session of the Croatian Parliament House of Representatives. Interest rates decreased last year. The average interest rate in business banks was 20% and by the end of the year 14%, Skreb said, admitting that this was after all a high rate which burdens the economy. Skreb added to last year's big credit expansion with information that total bank investments had risen by 40%, while public loans increased by 60%. Pointing out that new statistics of balance of payments was being drawn up, Skreb said that, although the level of deficit had not been concerning last year, its increase was noticeable. In 1996 the deficit in the balance of payments with foreign countries was 4.5% of Gross Domestic Product, and nine per cent is expected in 1997. Stressing that production had to be stimulated, not expenditure, Marin Jurjevic of the Social Democratic Party (SDP) warned about the consequences of the introduction of the Value Added Tax. Ante Tukic of the Croatian Social Liberal Party (HSLS) asked what is to be done to repair the bad situation in foreign trade. He suggested that MPs should be provided with information from other central banks, which would make it clear that "not one central bank holds 94.3% of its assets outside of the country". We are not the only such central bank, others do that as well, such as in Argentina, Singapore, Bulgaria..., and such policy is conditional upon a big inflow of money, Skreb said. He said that the VAT would not increase inflation, and official information about prices in the first three month was necessary in order to see whether any measures had to be undertaken. The Lower House also ended a discussion on four bills concerning the benefit rates of pension and health insurance. (hina) lm mm 231344 MET jan 98