Croatia became a full-fledged member of the European Union in 2013, but it still awaits entry into the eurozone. Still, it’s ripe for investment now, the country’s top banker says.
Croatian National Bank Governor Boris Vujčić declared Croatia was in a prime spot—not only to meld seamlessly into the eurozone (the process of which they are currently undergoing), but to garner foreign investment. A concern for many investors looking to Croatia is the risk of exchange rate instability, given the country still uses the kuna. But Vujčić says investors shouldn’t worry.
“For the foreign investors, the key thing here is the exchange rate stability,” Vujčić said onstage at Fortune‘s Global Forum in Paris, France on Tuesday. “[Exchange rate stability] has been there for now 25 years, so I am absolutely sure that it will stay there for the next three or four years before we get into the eurozone. … Our foreign exchange reserves are now almost 40% of GDP—one of the highest worldwide, not only in Europe.” For that reason, Vujčić says, “there’s no reason to wait.”
As the smallest country in the EU not currently in the eurozone, Croatia’s steady growth (at a rate of 3% this year, and expected to outgrow the eurozone average by three times for the next two years, Vujčić says) puts it in a good position to continue benefitting from EU-status.
One area that’s helped buoy growth? Croatia’s IT sector—the country’s fastest growing area, Vujčić says. “It can only be helped further by joining the eurozone,” he said. “What you’ve seen after we got into the EU is that the rates of growth of exports went up to double-digits for three years in a row—over 10%. This was clearly the fact of joining the EU because nothing else has happened.”
With so much attention on Britain and Brexit, it can sound odd to some to hear a full-throated endorsement of membership in the economic bloc. Vujčić maintains the “euro effect will provide additional benefits” for small and mid-size enterprises (or SMEs), which benefit from seamless borders in the EU. To wit, taking up the euro will create “lots of certainty for investors,” Vujčić says.
But while joining the eurozone officially may still be some ways off (the goal is 2023), Vujčić doesn’t think that’s any reason to wait to invest in his homeland. As Croatia bids to join the European Exchange Rate Commission (ERM-2) next year, Croatia’s exchange rate stability and high volume of euros in savings and credit are already attracting investors, he said.
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