19:16 / 07.10.2021.

Author: Domagoj Ferenčić

Vujčić says inflation is transitory and argues that Croatia will benefit from adopting the Euro

Croatian National Bank Governor Boris Vujčić

Croatian National Bank Governor Boris Vujčić

Foto: Patrik Macek / PIXSELL

In Parliament the Governor of the Croatian National Bank presented his semi-annual report to MPs on Thursday. According to his report Croatia’s GDP dropped by almost 9% on an annual basis in the second half of 2020 due to the restrictive coronavirus measures.

The governor of the Croatian National Bank, Boris Vujčić, tried to reassure MPs in Parliament today regarding inflation and fears over the introduction of the Euro as Croatia’s official currency. He stressed that inflation has not significantly deviated from projections and that the national bank has maintained price stability: "The stability of the inflation rate is defined as close to 2 percent, and for this year we estimate that it will be 2.3 percent, which means that there is no significant deviation, and we estimate that most shocks are short-lived. We are maintaining price stability, we have stabilized the market and enabled wages to grow faster than prices, the standard of living in Croatia is rising and the Croatian National Bank will continue to maintain exchange rate stability and ease import pressures."

Vujčić concluded that the primary drivers behind the inflation are rising energy and food prices, adding that this primarily deals with imported components. He added that the most important thing is to not allow the exchange rate to affect the increase in import prices.

Regarding the introduction of the Euro as Croatia’s official currency, Vujčić said that Croatia stands to benefit from joining the Eurozone, noting that it will improving the living standard, eliminating currency risk, reduce interest rates, increase ratings and make Croatia more attractive to investors.

However, not everyone agreed with his assessment. DP MP Stephen Nikola Bartulica argued that the introduction of the Euro was being used as a substitute for implementing much needed reforms. The governor responded by saying that Croatia is a highly Euro-ized country and the introduction of the Euro is strongly supported by entrepreneurs because 80% of their debt is denominated in Euros.

Croatian Sovereigntists MP Hrvoje Zekanović questioned why Croatia is in a headlong rush to join the Eurozone: "You say that our inflation is 2.3 percent, in Germany it is 5%! And that’s in the Eurozone! Why then, are we rushing to join the Eurozone when the economic situation there is worse than in Croatia?"

Vujčić responded by saying that all EU countries, including Germany, saw salaries and pensions grow faster than prices, and that as a result they all saw their standard of living improve.

Source: HRT

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