Croatia Country Report - March, 2015

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Croatia Country Report - March, 2015

This report reviews key macroeconomic data and microeconomic developments for Croatia published between March 7 and April 6, 2015.
The Zagreb Institute of Economic confirmed its 0.2% GDP growth projection for this year but slightly lowered its next year’s forecast to 0.8% from 0.9% projected in January. The institute said it expects exports to be the sole driver of growth this year, while private consumption is expected to stagnate.
Retail sales, which have been rising for several months, are expected to post a 0.5% increase this year, the Croatian Chamber of the Economy (HGK) said, adding that it expects the rise to be supported by real growth in net wages and continuation of positive trends in the tourism sector.
The report also provides details on the results of the early local elections and a possible date for the organisation of general elections and reveals the results of the latest opinion poll measuring the support for the country’s political parties. It mentions the latest plans of the government regarding the concession of Croatia’s motorways and the recapitalisation of state-owned power utility firm Hrvatska Elektroprivreda (HEP).


Key Points:


• CPI inflation slowed to 0.4% y/y in February from 0.9% y/y a month earlier. The working-day adjusted industrial output recovered in February (up 1.9% y/y) after contracting by 5% in January.

• The unemployment rate stayed flat on the month at 20.3% in February. The stagnation in the Croatian jobless rate comes after five months of consecutive growth. The average net monthly wage rose by real 2.8% y/y in January, following a 3.4% increase in December.
• January trade gap shrinks 29% y/y as both imports and exports declined.


Table of Contents

EXECUTIVE SUMMARY 4
MACROECONOMIC OVERVIEW 5
Croatia’s GDP to grow 0.2% in 2015, 0.8% in 2016 – Zagreb Institute of Economics 5
REAL SECTOR 5
1. GDP, Inflation 5
Croatia's CPI deflation narrows to 0.4% y/y in February 5
Croatia's PPI falls 4% y/y in February 6
2. Industry and Trade 7
Croatia's industrial output returns to growth in February 7
Croatia’s industrial sales contraction eases to 1.3% y/y in January 7
Croatia's retail sales growth slows in February 8
Croatian Chamber of Economy expects 0.5% rise in retail sales in 2015 8
3. Labour Market 9
Croatia’s unemployment rate flattens in February 9
Croatia’s unemployment rate rises to 18.3% in Q4 2014 – labour force survey 9
Croatia’s average net monthly salary rises by real 2.8% y/y in January 9
Labour costs in Croatia fall 0.5% y/y in Q4 10
4. Tourism 10
Croatia’s tourism revenues rise 2.8% to €7.4bn in 2014 10
Tourist arrivals in Croatia rise 17% y/y in January-February 10
FISCAL SECTOR, MONETARY POLICY 11
Croatia’s current account surplus narrows 20.2% in 2014 11
Croatia's M4 money supply up 3.9% y/y to €37.7bn at end-February 12
Croatian c-bank FX reserves up 2.4% y/y to €12.9bn at end-February 12
Croatia sells €145.2mn worth of kuna T-bills, yields flat 12
FINANCIAL INTERMEDIATION 12
Croatian Podravska Banka, Kreditna Banka Zagreb to merge 12
Croatians with Swiss franc denominated loans leave negotiations, announce mass protests 13
Net assets of Croatian open-end investment funds edge down 0.2% m/m in February 14
Croatian mandatory pension funds’ assets up 15% in February 14
Zagreb bourse’s turnover drops 47.4% m/m to €32.8mn in March 14
EXTERNAL SECTOR 15
Croatia’s gross foreign debt rises 0.5% m/m in December 15
Croatia's trade gap shrinks 29% in January 16
STRUCTURAL REFORMS 16
Croatia approves financing for Dubrovnik airport upgrade 16
Morgan Stantey, UniCredit, Sberbank reportedly to advise Croatia’s HEP on IPO plans 17
Croatia’s Podravka reportedly to pay up to €65mn for majority stake in Slovenia’s Zito 17
Croatia, MOL to resume negotiations in mid-April over Croatian oil firm INA 18
Croatian concern Agrokor signs €325mn financing agreements 19
Croatia may hold referendum on offshore hydrocarbons exploitation-PM 19
Croatia cancels motorway concession tender, to go for IPO 20
Croatian government endorses consumer bankruptcy bill 21
POLITICS 22
Detained Zagreb mayor establishes new party 22
Croatian culture minister resigns over misuse of funds 23
Croatia’s opposition HDZ Party keeps leading position with 30% backing - poll 24
Croatian general elections likely to be held in October or early 2016 24
Croatia sees balanced vote in early local elections runoff 25

Number of pages: 25
Release Date: Tue, 07 Apr 2015