ZAGREB, Jan 14 (Reuters) – Croatia hopes to adopt the euro at the beginning of 2023 despite fiscal challenges that have arisen due to the COVID-19 pandemic and devastating earthquakes that hit the country last year, central bank Deputy Governor Sandra Svaljek said on Thursday.
Croatia entered the European Exchange Mechanism (ERM-2) – the single currency waiting room – in July last year.
A country must spend at least two years in ERM-2 proving the stability of its currency and the resilience of the economy, including keeping the fiscal deficit below 3% of gross domestic product (GDP).
“Meeting the fiscal target will be more challenging than it seemed before,” Svaljek said. “However, we are still quite optimistic and hope we will be able to join the euro zone by the beginning of 2023.”
For 2020, Croatia expects its budget deficit to reach some 8% of GDP and then to fall to 2.9% this year.
Croatia also hopes to reduce its public debt this year and next after it jumped to around 85% of GDP last year from around 72% at the end of 2019, largely due to the pandemic.
Besides the pandemic Croatia was hit by two strong earthquakes in 2020. In March one person was killed in the 5.3 magnitude earthquake that rattled Zagreb and in December seven people lost lives in the 6.4 earthquake that hit central Croatia with the epicentre some 50 km (30 miles) southeast of Zagreb. (Reporting by Igor Ilic; Editing by Alex Richardson)