The Croatian National Bank's (HNB) gross international reserves rose in September by HRK 300 million from August, to HRK 18.3 billion, and the latest data indicate that on October 16 those reserves stood at HRK 18.52 billion, shows an analysis by Raiffeisen Bank.

The increase came after a marked drop in international reserves in March, April and May, which was a direct consequence of the Covid-19 pandemic and the ensuing economic lockdown and depreciation of the national currency, which led to foreign exchange inteventions, RBA says.

The current level of gross international reserves is close to that at the end of 2019.

RBA analysts expect Croatia’s entry into the EU’s Exchange Rate Mechanism II in early July this year to have an additional positive impact on the stability of the kuna exchange rate.

They note that one should also not disregard the European Central Bank’s support in the form of an agreed currency swap which has in the meantime been extended until June 30, 2021 and which certainly additionally contributes to the kuna-euro exchange rate.

RBA analysts expect gross international reserves to continue growing but note that in the event of depreciation pressure on the kuna, one can expect the HNB to intervene by selling foreign currency, which would lead to a decrease in gross international reserves.