Uncertainty at the start of the coronavirus pandemic put great pressure on the Croatian National Bank (HNB), which at the same time needed to maintain the stability of the exchange rate and the financial system, HNB Governor Boris Vujcic said in the northern Adriatic resort town of Rovinj on Friday.

Speaking at a discussion on monetary policy and financial stability at the time of COVID-19, held as part of a meeting of central bank governors and bankers from the region, Vujcic said that the HNB had sold 6% of GDP worth of foreign currency to commercial banks and bought 5.6% of GDP worth of state bonds over a period of just three months.

“In addition, a swap arrangement with the European Central Bank considerably helped stabilise the foreign exchange rate as well,” he added.

Asked if the HNB would be willing to continue purchasing state bonds, Vujcic said it would not, “but this option is on the table and can always be used if necessary.”

Vujcic said that Croatia was going through the pandemic relatively successfully. He said that the country had been expected to suffer one of the sharpest falls in GDP in the European Union, given its heavy dependence on tourism. “Croatia, however, fared somewhat better than expected because it had more tourist arrivals and consequently higher revenues.”

The Croatian central bank governor also noted that the pandemic was affecting different sectors differently, adding that the manufacturing and construction sectors had returned to pre-crisis levels in July, while the hospitality industry was affected the most. He said that some sectors, such as IT and telecommunications, were seeing better results than last year.

Bostjan Vasle, the Governor of the Bank of Slovenia, said that his country faced the present crisis with much better prepared and well capitalised banks, but also with a reduced fiscal capacity on account of a considerable rise in public debt, compared with the previous crisis when public debt stood at about 20% of GDP while last year it reached about 65%.

The Governor of the Central Bank of Bosnia and Herzegovina, Senad Softic, said that the bank did not have many tools at its disposal given that his country has a currency board, but that it did its best to keep the system stable.

The Governor of the Bank of Lithuania, Vitalis Vasiliauskas, said that since the last recession a lot had been done to strengthen Europe’s financial system through better bank capitalisation and establishment of new supervision and resolution mechanisms at EU level.