Bank System to Remain Stable Regardless of Agrokor Outcome

By 18 May 2018

ZAGREB, May 18, 2018 - Croatian National Bank (HNB) Governor Boris Vujčić said that even if a solution is not reached in the ailing Agrokor food and retail conglomerate, the banking system will remain stable and banks well capitalised.

"Even in the worst case scenario, even if no solution is reached and banks have to write-off all their claims, get nothing back, the banking system will remain stable and banks will stay well capitalised," Vujčić told reporters on the margins of a conference on Croatia's money market. He added, however, that he expects a settlement to be reached in Agrokor.

Asked how the situation in Agrokor will unfold considering the latest circumstances and whether the conglomerate would still be able to obtain loans, Vujčić said that that depended on the settlement model. "In the short term, it will certainly be able to get loans, whereas in the long term that depends on the structure of the settlement. I think that it shouldn't have any problems in getting long term loans either," he said and added that Agrokor's biggest creditors were banks.

"Our estimate was that the influence of developments in Agrokor in 2017 was a 0.2% or 0.3% lower GDP than if that didn't occur, above all because investments stopped, not just by Agrokor but related companies that have come into problems," he said.

Asked about his cooperation with Prime Minister Andrej Plenković, Vujčić said that they were mostly cooperating on the project to introduce the euro currency and that so far that cooperation had been good.

Addressing the conference, Vujčić spoke about monetary policies in 2018-2019 and challenges on the labour market in conditions of demographic changes and automated work. He said that at the moment there were two very important trends that will define the structure of the labour market in the world and in Croatia in future.

"One is that we have a demographic decline which has been enhanced with strong emigration after we joined the EU, which decreases the available labour force in Croatia, while on the other hand we have a growing number of jobs that can't be filled," he said.

He concluded that that leads to two things – one is pressure on salary growth and the other is that this year the first significant immigration will occur as there are 30,000 new work permits available for imported workers.