At its meeting held on Wednesday, the Council of the Croatian National Bank, chaired by Governor Željko Rohatinski, PhD, reviewed recent economic and monetary developments and adopted monetary projection for the third quarter of 2003. Acting in accordance with its authority, the Council also enacted a number of decisions.

GDP grew by 4.9% in the first quarter of 2003 in comparison with the same quarter of 2002. Compared with the same period last year, the most intensive increase was registered in gross fixed capital formation, which grew by 15.1%, while the growth of personal consumption slowed down to 4.9%. Positive developments in industrial production, which marked the first quarter of 2003, continued in the following months. As a result, total volume of industrial production rose by 5.9% in the first five months in comparison with the same period last year.

In June, the year-on-year growth rates of retail prices and core inflation stood at 1.1% and 0.5% respectively.

The kuna/euro exchange rate was stable in June. The absence of the common seasonal appreciation of the kuna exchange rate in the second quarter of 2003 made central bank interventions unnecessary in June for the third consecutive month.

Bank placements to non-banking sector continued to trend downwards in the second quarter of 2003, accompanied by a concurrent decrease in net foreign assets and stagnation of monetary aggregates. The annual growth rates of bank placements to non-banking sector stood at 26.3% in April and 24.9% in May 2003 and were the lowest annual growth rates recorded since September last year (27.1%). Following their downward trend and the CNB measures aimed at restraining bank credit growth, the annual growth rates are expected to decrease further in the coming period. In the first five months of 2003, household credits grew by 12.9% (16.8% in the same period last year), while corporate credits grew by 3.3% (9.2% in the same period last year).

At the Wednesday meeting the CNB Council also enacted several decisions related to the Foreign Exchange Act which came into effect on 18 June 2003. These included the Decision on the Conditions for and the Method of Authorized Exchange Office Operation, Decision on the Conditions for Issuing Approvals for Opening Foreign Exchange Accounts Abroad, Decision on the Conditions and the Manner Governing the Opening and Managing of Accounts of Non-residents with Banks, Decision on the Procedure Governing the Opening and Managing of Foreign Exchange Accounts and Foreign Exchange Savings Deposits Accounts of Residents with Banks, Decision the Conditions for Issuing Approvals for Personal Transfers of Assets on the Basis of Gifts and Grants, and Decision on the Transfers of Cash, Checks and Materialized Securities from and into the Republic of Croatia.

Furthermore, the CNB Council approved the following nominations proposed by the supervisory boards of the below stated financial institutions: Mr Zdenko Vidaković for chairman and Mr Mićo Tomičić for member of the management board of Banka Brod d.d. Slavonski Brod, Mr Krunoslav Brkljačić for chairman and Ms Željka Prga and Mr Dalibor Jandl for members of the management board of Croatia banka d.d. Zagreb, and Mr Krešimir Jerin for member of the management board of Gospodarsko kreditna banka d.d. Zagreb.