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  1. Standard presentation format 3rd quarter 2014

  2. Agenda • Central bank’s objectives and structure • Real sector • Monetary policy • External sector • Banking sector

  3. Central bank’s objectives and tasks • STABILITY OF PRICES • SUPPORTING THE ECONOMIC POLICY OF THE GOVERNMENT, WITHOUT PREJUDICE TO ITS PRIMARY OBJECTIVE • Management of the international reserves • Issuing banknotes and coins • Issuing and revoking licenses for banks and bank supervision • Regulating, improving and supervising the payment system • Performance of operations on behalf of the Republic of Croatia, as provided by law

  4. Independence of the CNB • Institutional: decisions are reached independently of other institutions’ influence • Functional: clear by defined goal and independence in choosing the instruments and measures for achieving that goal • Personal: guarantees the protection of the Governor and the Council members from various kinds of pressure, precisely determines the conditions for the appointment and removal from office, and guards against the conflict of interest • Financial: revenues and expenditures of the CNB are solely determined by the nature of the monetary and exchange rate policies

  5. Structure of the CNB

  6. Agenda • Central bank’s objectives and structure • Real sector • Aggregate demand and supply • Labour market • Prices • Fiscal policy • Monetary policy • External sector • Banking sector

  7. Real GDP rates of change Croatia Peer countries * The data refer to first quarter.The data after 2012 are provisional. More information can be found on www.dzs.hr Source: CBS. Average annual growth rate, 2003 – 2013 Sources: Eurostat and CBS.

  8. Gross value added structure,in current prices, 2014* * The data refer to first quarter.Source: CBS.

  9. Contributions of domestic and net foreign demand to GDP growth * The data refer to first quarter. Source: CBS.

  10. Unemployment rate Croatia ILO unemployment rate, peer countries, 2014* Since the beginning of 2007 results from the Labour Force Survey have been published in quarterly dynamics. ILO unemployment rate refers to persons aged 15 years and over. * CBS figure – January – June 2014; ILO unemployment rate – first quarter of 2014 Source: CBS. * The data refer to first quarter.Note: ILO unemployment rate refers to persons aged 15 – 74. Sources: Eurostat and CBS.

  11. Nominal and real net wages * Data for January – June 2014Sources: CBS and CNB.

  12. Total monthly labour costsin the economy, 2013 Total labour cost is shown as average monthly gross wage.Sources: CBS and national statistical offices.

  13. Gross value added in industry per person employed * The data refer to first quarter.Source: CBS.

  14. Inflation Croatia Year-on-year inflation rates and components’ contribution to consumer price inflation in Croatia * January – June 2014.CPI inflation (1996-1998 RPI inflation)and core inflation, average year-on-year rate of change.Source: CBS. Source: CBS.

  15. Inflation in Croatia, eurozone and peer countries Average year-on-year rate of change. Inflation in Croatia is measured by consumer price index, and in the otherselected countries by harmonized index of consumer prices. Sources: CBS and Eurostat.

  16. Consolidated general government revenues and expenditures Croatia Peer countries, 2013 All data are shown on cash basis, except data on HAC and HC after 2004.Consolidated general government revenues and expenditures are shown according to GFS 2001 methodology. Expenditures include acquisition of nonfinancial assets. From 2008 HAC is excluded from the general government. Source: MoF. According to ESA 95 methodology.Sources: Eurostat and CBS.

  17. Consolidated general government balance Croatia Peer countries, 2013 Overall fiscal balance (GFS 2001) in the 2002 - 2003 period is shown on a cash basis and from 2004 on modified accrual basis. From 2008 HAC is excluded from the general government. Pensioner debt repayments are included in calculation of the balance (for more information on the methodology of balance calucaltion see Box 4 in Bulletin 165.The amount of the overall fiscal balance in 2013 is corrected for the estimated amount of issued bonds.Sources: Eurostat, CBS, MoF and CNB. According to ESA 95.Sources: Eurostat and CBS.

  18. General government debt Croatia Peer countries, 2013 Government guaranteed debt includes other sectors' domestic and external debt guaranteed by central government (including HBOR). From 2008 general government debt does not include debt of HAC.Source: CNB. Sources: Eurostat and CNB.

  19. Agenda • Central bank’s objectives and structure • Real sector • Monetary policy • Central bank’s policy • Monetary developments • Interest rates • External sector • Banking sector

  20. Foreign exchange interventions and exchange rate Note: EUR/HRK exchange rate before 1999 is calculated as product of DEM/HRK exchange rate and conversion factor (1.95583).Source: CNB.

  21. Exchange rate movements before CNB intervention and amount of intervention, 1996 – 2014 Exchange rate of the intervention day relative to exchange rate 4 days prior to intervention (y-axis) and the intervention amount (x-axis).Note: EUR/HRK exchange rate before 1999 is calculated as product of DEM/HRK exchange rate and conversion factor (1.95583). Source: CNB.

  22. Creation and withdrawal of reserve money Note: Foreign exchange transactions include purchases and sales of foreign currency by the CNB with credit institutions, MF, EC and swap agreements. Positive values ​​reflect the purchase of foreign currency. Values ​​for the reverse repo transactions and lombard loans are shown as change in one quarter.Source: CNB.

  23. Reserve requirements and minimum f/c liquidity Shaded area represent periods when banks' credit growth was regulated with compulsory CNB bills. Source: CNB.

  24. Liquidity surplus and overnight interest rate Source: CNB.

  25. Base money M0 Source: CNB.

  26. CNB's international reserves and money supply Source: CNB.

  27. Credit institutions' assets Source: CNB.

  28. Credit institution placements (excluding government) Credit institution placements (excluding government) Placements to GDP ratio Sources: Eurostat and CNB. Note: In 2012 the Ministry of Finance took over shipyards' credit liabilities, while one credit institution transferred a part of its claims to a company indirectly owned by a parent bank, which substantiallydecreased total loans. Source: CNB.

  29. Credit institutions' loans year-on-year rate of changeNote: In 2012 the Ministry of Finance took over shipyards' credit liabilities, while one credit institution transferred a part of its claims to a company indirectly owned by a parent bank, which substantially decreased total loans to corporate sector. Source: CNB.

  30. Loans to households - structure Source: CNB.

  31. Currency structure of credit institutions' placements Note: Loans in foreign currency include loans denominated in that currency and loans indexed to that currency.Source: CNB.

  32. Broad money (M4) * including kuna deposits with a currency clause Source: CNB.

  33. Euroisation Source: CNB.

  34. Average lending interest rates Note: Details about the new interest rate statistics: Bulletin. 204, June 2014 (http://www.hnb.hr/publikac/bilten/arhiv/bilten-204/hbilt204.pdf).Source: CNB.

  35. Average deposit interest rates Note: Details about the new interest rate statistics: Bulletin. 204, June 2014 (http://www.hnb.hr/publikac/bilten/arhiv/bilten-204/hbilt204.pdf).Source: CNB.

  36. Interest rate spread * without a currency clause ** with a currency clauseNote: Details about the new interest rate statistics: Bulletin. 204, June 2014 (http://www.hnb.hr/publikac/bilten/arhiv/bilten-204/hbilt204.pdf). Source: CNB.

  37. Yield on T-bills and kuna government bond T-bills – average price in a month; BND – price on the last trading day in a month; BND-10 years – average price in a month.Note: Since the five-year kuna government bond matured in 28 May 2008, the seven-year kuna government bond, which matures in 11 July 2013, has been chosen for the purpose of further display of government bonds' yields movements. Seven-year kuna government bond matured in 11 July 2013 and has been replaced by the ten-year kuna government bond, which matures in 5 March 2020.Sources: MoF and ZSE.

  38. Bonds listed on the ZSE Stock as at 30 July 2014. Source: ZSE.

  39. Agenda • Central bank’s objectives and structure • Real sector • Monetary policy • External sector • Exchange rate • Foreign trade • Current account • External debt • FDI • Banking sector

  40. Exchange rate policy • Managed floating • Exchange rate is market determined and based on supply and demand • Central bank intervenes on the forex market through forex auctions, but it DOES NOT defend any predetermined rate or band

  41. Foreign exchange market • Kuna is fully convertible • No restrictions on repatriation of profits and liquidation of investments • Banks freely determine the exchange rate, engage in the foreign exchange operations and conduct international payment transactions

  42. Current account deficit and FDI inflows in Croatia Note: FDI inflows to Croatia and current account balance exclude Pliva's transfer of patentrights to the affiliated company abroad in 2003.Negative values of current acount deficit indicate a surplus on the current account. Source: CNB.

  43. Structure of the current account balance Source: CNB.

  44. Current account balance by countries, 2013 Sources: Eurostat and CNB.

  45. Daily nominal exchange rates HRK vs. EUR, USD and CHF Source: CNB.

  46. Index of nominal and real effective kuna exchange rate The real effective exchange rate of the kuna deflated by producer prices is based on the Croatian indexof industrial producer prices on the non-domestic market, which is available from January 2010.In 2014 CNB revised the effective exchange rates of the kuna by extending the basket of the maintrading partner countries and applying time varying weights.The fall of index denotes appreciation of the kuna. Source: CNB.

  47. Index of real effective exchange rate deflated by CPI The fall of index denotes real effective appreciation.Sources: BIS and CNB.

  48. Merchandise trade Seasonally adjusted data. Sources: CBS and CNB.

  49. Gross external debt by debtors Source: CNB.

  50. Gross external debt by creditors Source: CNB.