The exchange rate is set at a fair market level which is also expected, says Velimir Šonje, an analyst from Arhivanalitika.
– The central parity determined upon entry into ERM II does not have to be the final exchange parity if it turns out during the period of stay in ERM II that the central parity significantly deviates from the equilibrium market exchange rate as the moment of exchange approaches. At this moment, there is no serious threat that the central parity is overvalued, which would lead to significant and prolonged depletion of foreign exchange reserves, says Šonje.
However, he notes, if it turns out in two years that this is the case, the parity can be adjusted towards the equilibrium value before the exchange.
– It is worth noting that most countries have conducted currency exchanges precisely at the exchange rate determined upon entry into the waiting room for the euro. Slovakia is the only case where the central parity was changed after entering ERM II. It was a change in the opposite direction: the central parity was initially undervalued. The Slovaks therefore had huge surpluses on their current account balance and accumulated significant amounts of reserves, so the central parity was subsequently revalued, i.e., the crown was strengthened before the currency exchange. For now, there are no indications that such a case could occur in Croatia. As far as we can see at this moment, the exchange rate appears balanced – concludes Šonje.
