Croatia's gross foreign exchange reserves reached a record high €17.4 billion in December 2018, up by some €400 million from November, with analysts expecting them to keep going up.

Year-on-year, the reserves increased by €1.7 billion or 11 percent from December 2017. Around 85 percent of Croatia’s reserves are held in euros, another 13 percent in US dollars, with the remaining 2 percent in special drawing rights (SDR).

The recent increase was largely due to the central bank’s purchases of foreign currency from commercial banks. In December, the central bank had three separate interventions in which it bought €1.1 billion on the currency market in order to ease appreciation pressures on the local currency kuna.

For years Croatia’s central bank maintains the kuna exchange rate in a narrow fluctuation band, set between approximately 7.4 and 7.6 to the euro.

Commenting on the nation’s foreign reserves levels, Raiffeisenbank Austria analysts said that they are likely to increase in the coming months.

“We expect that the central bank will remain committed to its policy of maintaining a stable exchange rate. In the event of pressures to the exchange rate and increased volatility the bank would certainly intervene in the currency market again, with further purchases of euros seeming more likely. As a result, we can expect foreign reserves to continue increasing in 2019,” analysts said.

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