1. This statement reports on recent developments and adds to the information contained in the staff report for the 2008 Article IV consultation. It does not change the thrust of the staff appraisal.
2. Recent data releases are broadly consistent with the outlook in the staff report. Twelve-month CPI inflation fell to 5.7 percent in March. Year-on-year growth in domestic bank credit to the nongovernment sector eased to 12.3 percent at end-March. In line with EU requirements, the Croatian National Bank has changed the external debt reporting system. This resulted in an upward revision to Croatia’s end-2007 external debt of 1.3 percent of GDP.
3. Staffs proposal to reclassify Croatia’s de facto exchange rate arrangement from “managed floating with no preannounced path for the exchange rate” to “conventional pegged arrangement” (as from September 1, 2006) remains under consideration.