Croatia Country Report - May, 2013

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Croatia Country Report - May, 2013

First-quarter figures for Croatia’s economic performance confirmed the country has entered another year of recession with GDP contracting 1.5% y/y in January to March. This is also the six consecutive quarter of negative growth as domestic consumption shrinks, while the recovery outlook in Croatia’s main trade partners in the EU remains bleak.

The World Bank said it sees the Croatian economy shrinking 0.4% this year and recovering in 2014 when the GDP might advance 1.5%.

As the country prepares to join the EU in July 2013, finance minister Slavko Linic predicts the budget deficit will hardly drop within the EU limit of 3% of GDP before 2016. Although the government targets a 3%/GDP budget gap this year, it will probably miss this goal as it is based on expectations the economy would grow 0.7% -while all international financial institutions predict a contraction.

Croatia’s consumer price inflation decelerated sharply to 1.6% in May 2013 from 3.3% in June, sinking to its lowest level since February 2012 mainly due to the lasting recession. Retail sales fell by a real 0.6% on the year in April after dropping 2.2% a month earlier. Industrial production shrank 0.5% on the year in April after increasing 4.1% in March.

The jobless rate dropped to 20.9% in April from 21.6% in March in the wake of the tourism season – but was still above the 19.1% one registered in March 2012. Labour productivity went up 7.2% on the year in the first four months of 2013 after dropping 0.5% in January to March alone.

The country's foreign trade deficit widened an annual 1.3% in January to April after dropping by 0.3% in the first quarter alone. It accounted to 5.2% of GDP versus 5.4% of GDP in January to April 2012.

Number of pages: 27
Release Date: Fri, 16 Aug 2013