The Council of the National Bank of Croatia chaired by Governor Dr. Marko Škreb met on Wednesday, February 5, to review economic and monetary developments in the past year and in the first month of this year, and set the targets of monetary policy for February 1997.

Although price indicators for January stand above those recorded in the previous months - compared to December, retail prices went up by 1%, producer prices by 0.5%, and cost of living by 1.5% - the Council concluded that such developments do not require changes in monetary policy. Thus, monetary policy in February will continue to be neutral. Namely, certain indicators point out that this could be a one-shot price increase caused chiefly by seasonal factors, as well as by bad weather conditions. It was noted that such an increase proved to be similar to price variations that had occurred twice last year and twice in 1995, which had been followed by a steadier pattern of price movements, thus making it possible to maintain the desired level of inflation.

However, should close monitoring of further developments provide evidence of a continuing upward trend in prices, monetary policy should resort to more restrictive measures, acting in accordance with its main objective, which is the maintenance of the stability of prices and the exchange rate, both being a key prerequisite for healthy growth of the economy and increased direct foreign investment. There can be no doubt that achieved macroeconomic stability played a crucial role in the assessment of the country's credit rating that has been made by the three most important international agencies. All three agencies included Croatia among forty most reliable investment destinations, which should enable easier obtaining of capital necessary for development.

When making estimates of future economic developments, it should be noted that another recent decrease in domestic banks' lending rates of about 1.7 percentage points proves to be rather encouraging. The exchange rate of the kuna continues to be stable, except for minor fluctuations. According to the available data and estimates, the 1996 current account deficit is expected to be at the level of projected figures, and exports should, due to a December increase and movements in the exchange rates of foreign currencies, show at least a slight increase when expressed in kunas.

The Council of the National Bank of Croatia also approved the nominations of Mr. Julio Krevelj for the Chairman of the Management Board of Volksbank d.d. Zagreb and Mr. Heinrich Angelides for the Member of the Management Board of the same bank, as well as the nomination of Mr. Patrick Porscher for the Member of the Management Board of the branch office of Societe Generale in Zagreb.