CNB Governor Boris Vujcic Discusses Economy and Unemployment Rate

Lauren Simmonds

As Novac writes on the 23rd of August, 2020, the Governor of the Croatian National Bank (CNB/HNB), Boris Vujcic, said as a guest on HTV’s Dnevnik that at this moment in time, given the fact that the results from the Croatian tourism sector are better than predicted, a smaller decline in GDP can be expected. He stated that as long as something unforeseen doesn’t happen, strong recovery of the Croatian economy is possible next year.

This, he noted, will also depend on other branches of the economy and on what will happen with the ongoing coronavirus pandemic in autumn. Boris Vujcic also announced the strong growth of public debt this year, while it is expected to fall again next year. The CNB estimates that the share of public debt in GDP would increase from 73 to 87 percent of GDP this year.

“Public debt will increase more this year than the total reduction of public debt was from 2014 to last year. We’ve had a continuous reduction in public debt and will now come to 87, almost 90 percent in one year. It’s good that we can see a reduction in public debt next year, because we expect the strong recovery of the economy,” said Boris Vujcic.

When asked what citizens can expect, Boris Vujcic said that a further drop in interest rates should be expected as we approach entry into the Eurozone. He also supported the claim that interest rates are currently at the historically lowest levels with the fact that those on housing loans have now reached about 2.5 percent, from some 3 percent back in 2019.

Asked about the possible impact of the coronavirus crisis on the banking system, Vujcic said that the economy will fall sharply this year and banks will feel the consequences in terms of reduced revenues, reduced profits, and some will have losses.

”However, the banks are very well capitalised, so they’re able to withstand the decline in results this year. And in that sense, savings are safe,” the governor said.

When asked about estimates of unemployment, he reminded us of the fact that the biggest contraction in Croatia’s economic activity was recorded in the second quarter of 2020 and that part of the effects of rising unemployment will be seen in the fourth quarter. However, this growth will not be nearly as strong as it was after the financial crisis of 2008. Boris Vukcic estimates that it will be relatively moderate.

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