The Croatian banking system is very well capitalised and capable of withstanding much larger amounts of bad loans than the present ones, Croatian Central Bank (HNB) governor Boris Vujcic said at the conference "The Challenge of Change" in the northern Adriatic resort town of Rovinj on Thursday.

According to the latest data from the central bank, non-performing loans accounted for 9.21% at the end of the second quarter.

Noting that in the present circumstances of the coronavirus pandemic it was very hard to forecast economic trends, Vujcic said that autumn forecasts of global trends were more optimistic than those made in spring, although the deterioration in the epidemiological situation had halted the rise in optimism.

“Next year we expect to see continued recovery, but GDP will not reach its 2019 level. According to current projections, we will not return to that level before 2022. Next year we expect a GDP growth rate of between 5% and 6%, and a lending growth rate of between 3% and 4%,” the HNB governor said.

He added that the result of economic activity was better than the baseline scenario and that was why a smaller GDP decline could be expected. He noted that the results of the fourth quarter of this year and the first half of the next would primarily depend on the pandemic.

Vujcic said that the inflation rate was expected to return to positive territory next year as the negative contribution from oil prices diminished.

“In any case, the banking system is solvent, stable and liquid and will withstand the crisis well,” Vujcic concluded.