Vujčić: HNB will reduce the inflation forecast for 2024 from four to 3.5 percent

The Governor of the Croatian National Bank (HNB) Boris Vujčić announced on Wednesday that the HNB’s forecast for this year’s inflation rate in Croatia will be reduced from four to 3.5 percent, and emphasized that the real increase in wages this year will be lower than last year’s.

– We will reduce the inflation forecast for 2024 from four to approximately 3.5 percent because inflation is currently decreasing faster than in our forecasts – said Vujčić at the Mediterranean central banks conference held in Podstrana near Split.

Reflecting on the announcements regarding this year’s wage increases, Vujčić stated that this should be interpreted with caution.

– What we have seen in the budget for 2024 regarding wage increases should be interpreted with caution. We will actually have a carryover of the wage increases that occurred in 2023, where a large part of that increase has already been realized, so we will have lower wage growth than last year. Wage growth this year will be positive, but realistically lower than in 2023 – said Vujčić.

He added that wage growth in 2023 was 5.7 percent, and this year that growth will be around 3.6 percent, which, he said, should not affect the inflation growth rate.

Vujčić also announced that the GDP forecast for Croatia this year will be increased from the initial three percent.

– In the next forecast, we will increase the GDP growth rate forecast, but the main risk for achieving that projection is foreign demand. Germany is one of our two largest trading partners, and any reduction in economic activity in Germany also affects Croatia, but it does not significantly impact the GDP growth rate – said Vujčić.

Regarding credit activity in Croatia, according to Vujčić, it is still alive and the demand for loans is “not significantly lower” than before, with a greater decrease in the corporate sector than in the household sector.

According to him, interest rates in Croatia are lower than in the Eurozone. He emphasized that the current amount of time deposits in banks in Croatia is around six billion euros, whereas it was previously around 26 or 27 billion euros.

Vujčić stated that experiences in banking operations are exchanged at the eighth Mediterranean central banks conference. – We are discussing the inclusion of women in the labor market, especially in African countries, and the consequences of climate change on financial systems and what central banks are doing – said Vujčić.