Croatia Country Report - February, 2015

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Croatia Country Report - February, 2015

This report reviews key macroeconomic data and microeconomic developments for Croatia published between February 7 and March 6, 2015.
In the beginning of February, Fitch Ratings affirmed Croatia's long-term foreign and local currency Issuer Default Ratings (IDR) at BB and BB+ respectively with stable outlook. The ratings agency also forecast a GDP growth of 0.5% this year due to improved industrial production and retail sales. Fitch said it sees consumer prices dropping 0.5% in 2015.
Later in the month, the European Commission said it will decide in May if it activates the excessive imbalance procedure (EIP) for Croatia after the assessment of the National Reform Programmes (NRPs) and other commitments to structural reforms announced by that date. The commission noted that the country is experiencing excessive macroeconomic imbalances, which require decisive policy action and specific monitoring.
At the beginning of March, the statistics office confirmed the Croatian economy contracted by 0.4% last year, registering its sixth year of consecutive decline. This is more positive than the expectations of the EC whih saw a 0.5% drop.
The report also provides details on the results of the state tender for onshore oil and gas exploration. It also reveals the latest plans of the government regarding the consumer bankruptcy law aimed at helping the country’s indebted citizens.


Table of Contents

EXECUTIVE SUMMARY 4
MACROECONOMIC OVERVIEW 5
EC to decide in May if excessive imbalance procedure is activated for Croatia 5
Fitch affirms Croatia’s rating with stable outlook 5
REAL SECTOR 6
1. GDP, Inflation 6
Croatia's 2014 GDP contraction confirmed at 0.4% - stats office 6
Croatia's consumer prices fall 0.9% y/y in January 6
Croatia's PPI falls 5.6% y/y in January 8
Croatia's agricultural producer prices drop 3.5% in 2014 8
2. Industry and Trade 9
Croatia's industrial output drops 5% y/y in January 9
Croatia’s industrial sales drop 2% y/y in December 9
Croatia's retail sales growth accelerates to 2.6% y/y in December - detailed data 10
3. Labour Market 11
Croatia’s unemployment rate rises to 20.3% in January 11
Croatia’s average net monthly salary ticks up by real 0.5% in 2014 11
4. Tourism 11
Tourist arrivals in Croatia rise 14.2% y/y in December – detailed data 11
FISCAL SECTOR, MONETARY POLICY 12
Croatia reportedly in talks with UAE for bn loan 12
Croatia sells €1.5bn in 10-year Eurobonds 12
Croatian central bank sells €172.7mn to support weakening kuna 13
Croatia sells €178.6mn worth of kuna T-bills, yields flat 13
FINANCIAL INTERMEDIATION 14
Croatia’s banking sector pre-tax profit jumps to €328.4mn in 2014 14
Croatians no longer able to pay Swiss franc mortgages might transfer property to state, banks 14
Share of bad loans in Croatian banking sector up to 16.95% in 2014 15
Fitch downgrades viability rating of Croatian lender ZABA 15
Erste rules out acquisitions as it reports record loss 16
Croatian govt, two banks to pay combined .5mn debt assumed after Yugoslavia breakup 17
Croatian insurers' premium income ticks up 0.6% y/y in January 17
Net assets of Croatian open-end investment funds rise 3.8% m/m in January 18
Croatian mandatory pension funds’ assets up 17% in January 18
Zagreb bourse’s turnover jumps 50.6% m/m to €62.2mn in February 18
Value of new contracts signed by Croatia’s leasing firms down 6.4% in 2014 19
EXTERNAL SECTOR 19
Croatia’s gross foreign debt rises 0.7% m/m in November 19
Croatia's trade gap shrinks 2.7% in 2014 19
STRUCTURAL REFORMS 20
Croatia’s HEP reportedly to seek consultant on recapitalisation soon 20
Croatian oil/gas firm INA expected to restart Sisak refinery in April 20
Croatia receives seven bids for onshore hydrocarbons exploration, exploitation 21
Croatian concern Agrokor divests 30 stores in order to comply with anti-trust regulations 22
Croatia reportedly seeking to adopt legislation to control MOL’s sale of stake in local oil firm INA 22
Croatia presents draft bill on consumer bankruptcy 23
POLITICS 23
Croatian president calls for PM’s resignation over country’s economic situation 23

Number of pages: 24
Release Date: Mon, 09 Mar 2015