Focus is on the exchange rate; the economy is doing well
Boris Vujčić’s value to a successful but smallish economy in a region struggling in the face of another round of emerging market turbulence was underlined in July 2018 when he was backed to lead Croatia’s central bank for a second, six year term.
EUROZONE GOAL
Under the aegis of the 54 year old, the Hrvatska Narodna Banka (HNB) has focused four square on its exchange rate, with the aim of entering the European common currency’s ‘waiting room’ by 2020 by keeping the kuna anchored to the euro. In the longer term the aim is to gain an invitation from Brussels to become a fully paid-up member of the euro area. “Entry into the eurozone is the natural next step and we believe that Croatia will soon become a good candidate for the ERM-2,” Vujčić said shortly after securing a second term at the HNB.
Croatia’s economy is ticking along nicely too, with economic output tipped by the IMF to expand by 2.8% this year and by 2.6% in 2019. Inflation remains low as it does throughout much of the CEE region while the country is set to post a 3%-plus current account surplus for the second year in a row in 2018.
There are a few bumps in the road ahead. A few lenders were shaken by the unravelling of Agrokor, the country’s largest corporation, in 2017 — though by and large the banking sector is in good shape. Of greater import is the need to cut public debt, which stood at 78% of GDP at the end of 2017, above the 60% threshold required for ERM-2 entry. But Croatia is on the right fiscal path, analysts and economists say, with foreign currency reserves hitting an all-time high of €16.5bn ($19.4bn) in June. “Vujčić is doing a tough job well and is doing so unrecognised,” says the chief economist of a CEE-focused bank.