Boris Vujčić, Governor of the Croatian National Bank : We are taking initial steps towards introducing the euro

For the birthday issue of Diplomacy & Commerce magazine, we have asked Croatian officials for their opinion on political and economic challenges that awaits Croatia in 2020 and the key challenges on a global scale.

Boris Vujčić, Governor of the Croatian National Bank for Diplomacy&Commerce says:

Boris Vujcic, guverner Hrvatske narodne banke.
Photo: Anto Magzan/PIXSELL
  1. What political and economic challenges await Croatia in 2020?

Looking towards 2020, there are two major historic milestones Croatia is about to reach. On the political front, that is certainly the EU presidency in the first half of the year, while on the economic front, it is the entry into the Exchange Rate Mechanism (ERM II), and in parallel, the entry into the Single Supervisory Mechanism (SSM) and Single Resolution Mechanism (SRM). Although ERM II entry might look like as an easy job – one should just join in – it has been quite a journey for Croatia to become ready to take that step: a critical step towards the euro adoption. Croatia sent a letter to the ECB requesting to enter into close cooperation in May (which incorporates both the SSM and the SRM entry), and in July, announced its intention to participate in the ERM II by sending a letter to the euro area member states and EU institutions. The Eurogroup welcomed the Croatian letter, which in short meant – do what you said you would do to enter the ERM II.

The task amounts to the implementation of 19 measures in six areas. Some of the most important segments are the preparations for establishing close cooperation with the ECB, upgrading macro-prudential powers, reinforcing the capacity of the national statistical office, continuing the anti-money laundering and terrorist financing activities, upgrading the country’s business climate and improving business conditions by further trimming parafiscal charges. So, this is exactly what we are doing now, and we plan to deliver on all measures by May next year so we can present ourselves as a serious candidate to enter the ERM II in early summer 2020.

 

  1. What will be the key challenges on a global scale?

The peak of economic uncertainty in the next year is going to be important and potentially even a turning point for the global economy. On a global scale, we are going to see whether today’s flagging economic growth in Europe is only a temporary slowdown or just the first sign of a serious decline in economic activity. With or without a deal, we are going to witness the aftermath of Brexit. We are also going to see if the peak of the US-China trade dispute is finally behind us or a further escalation is yet to come. Besides, 2020 is going to be a pivotal year for China, where data paints an increasingly cloudy outlook on the economy with significant concerns about its structural imbalances. Finally, perhaps the greatest challenge lies with monetary policymakers, who are eager to find a way to stimulate the sluggish economy on the one hand and to address the issues associated with an unconventional monetary policy on the other.

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