After the European Central Bank's latest increase in reference interest rates of 0.75 percentage points, Finance Minister Marko Primorac said the tightening of monetary policy is the only currently effective instrument to fight inflationary pressures, while fiscal policy "can do little" in that regard.

Answering questions from reporters on Thursday, Primorac said that the increase in reference interest rates was as expected and that it would probably contribute to the stabilisation of inflation. It will cause interest rates to rise and will probably have a partial spillover effect on other debt instruments as well, the minister said.

When asked “what kind of impact” on loan interest rates citizens can expect, the minister said that this was a matter of bank business policy. However, banks have quite good liquidity, which should contribute to interest rates not rising significantly, he said.

Primorac also noted that on several occasions he had warned about the potential risk of an increase in loan annuities that do not have a fixed interest rate, and that it would be good for citizens and companies to obtain fixed interest rates on their loans if possible.

Reporters asked Primorac if he was afraid of stagflation and he replied that the prospects for economic growth in 2023 are quite uncertain, and that they are not optimistic, given that the government has forecast that economic growth will slow down to 0.7%.

However, he is certain that the government’s measures and fiscal policy, as well as EU funds, will contribute to growth being maintained.