Croatia should prepare for increase in interest rates

Croatia should prepare for increase in interest rates as it is very difficult to predict what the trends would be both in the country and abroad, HNB governor Boris Vujcic said. He elaborated that rates might either remain relatively low or increase quickly. In the latter case, Croatia has room to cushion the increases, by reducing the risk premiums for the government and by raising the potential growth rate and pursue with fiscal consolidation to reduce public debt as percentage in GDP. With debt getting lower, the impact of growing interest rates on the country would be lower. Vujcic said the above at a conference, in which EconMin and deputy PM Martina Dalic also participated and spoke in the same vein. Dalic also stated that Croatia should prepare for increase in interest rate and that this should happen through reforms to ensure market mechanisms work more effectively and productively. She stated that there was room for keeping rates low a while longer by reducing domestic riskiness.

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