Croatia will continue with the next stage of its plan for adopting the euro despite any adverse effects of the coronavirus pandemic on the economy, the central bank said on Tuesday.
Last July Croatia promised the European Central Bank and Brussels to implement reforms within a year which would win it approval to join the ERM-2, a preparatory stage for the adoption of the euro where a candidate country must spend at least two years and prove it can keep its currency stable.
“Our action plan for the ERM-2 is going on despite the current crisis and we will meet all our commitments. In that context joining the ERM-2 in the second half of this year remains very realistic,” the central bank said in an emailed response to Reuters.
So far Croatia has reported 790 cases of coronavirus and six deaths. The authorities have imposed a lockdown and announced measures to support the economy, including a 3-month postponement on tax payments and a scheme for the state to pay minimum wages to employees of companies affected by the crisis.
Officials have said it is too early to predict the economic impact of the pandemic. On Friday the head of the International Monetary Fund said the coronavirus has already driven the global economy into recession.
Reforms required for ERM-2 membership include banking supervision measures and money laundering prevention measures.
“A possible worsening of the macroeconomic situation will not affect our efforts to join the ERM-2 where we must spend at least two years. It is impossible now to provide a reliable assessment on whether Croatia will meet all the criteria (for joining the euro zone) after that time,” the central bank said.
Among the key criteria for taking over the euro are the public debt below or close to 60% of GDP and a budget deficit below 3% of GDP.
Due to strong fiscal consolidation in the last few years Croatia has managed to achieve a balanced budget and to reduce the public debt to around 70% of gross domestic product (GDP)from around 85%.
But public debt is expected to rise again following the government efforts to preserve liquidity and jobs. The initial package of measures adopted this month is assessed to be worth some 30 billion kuna ($4.33 billion) and new measures are expected this week.