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Croatia Country Report - May, 2016

  • July 2016
  • -
  • Emerging Markets Direct Media Holdings
  • -
  • 54 pages

EXECUTIVE SUMMARY



This report reviews key macroeconomic data and microeconomic developments for Croatia published between May 2 and May 31, 2016.

The European Commission cut its 2016 GDP growth forecast for Croatia to 1.8% in its latest Spring 2016 Economic Forecast from 2.1% in the Winter 2016 Economic Forecast, while it kept its 2017 GDP growth forecast constant at 2.1%.

The International Monetary Fund warned that domestic political conditions in Croatia remain challenging with possible adverse implications for reform implementation and the economic policy-making environment.

The report also provides details on EBRD's latest growth forecasts for Croatia, and the European Commission's warnings on budget deficit targets. It mentions latest developments in structural reforms. The report also reveals the latest investments in tourism sector, and the details on public borrowing.



Key Points:



o GDP growth in Croatia accelerated to 2.7% y/y in Q1 from 1.9% y/y in the last quarter of 2015.



o Croatia's consumer prices fell 1.8% y/y in April, deepening from a 1.7% annual decline the previous month.



o Croatia's working-day adjusted retail sales rose by a real 3.5% y/y in March, accelerating from an annual increase of 1.4% in the previous month.

o House prices in Croatia rose by 0.11% q/q on average in the last quarter of 2015, but declined by 2.13% y/y compared to Q4/2014.

Table Of Contents

Croatia Country Report - May, 2016
EXECUTIVE SUMMARY.................................................................................................. 4

MACROECONOMIC OVERVIEW .................................................................................. 5

European Commission cuts 2016 GDP growth forecast for Croatia to 1.8% ................. 5

IMF warns Croatia on importance of reform agenda ....................................................8

EBRD raises 2016 GDP growth forecast for Croatia to 1.5% ................................10

European Commission warns Croatian government on importance of budget deficit targets ....................................................................................................................... 11

REAL SECTOR ..............................................................................................................13

1. GDP, Inflation .............................................................................................................13

Annual deflation in Croatia deepens to 1.8% in May ....................................................13

Croatian central bank expects 0.9% CPI inflation on average this year .............. 14

Croatian GDP growth accelerates despite political uncertainties ..................... 16

Deflation in Croatian industrial producer prices deepens in March .................... 18

2. Industry and Trade .................................................................................................... 19

Croatia's Podrovka Group reports 0.4% y/y rise in Q1 consolidated net profit ............19

Croatia's adjusted retail sales growth recovers to 3.5% y/y in March ......................... 22

Croatia's Agrokor secures EUR350mn loan from Russia's Sberbank ...............................24 Croatia interested in Hungary's disputed Paks nuclear project .............................. 24

Albania, Montenegro, Bosnia and Croatia lobbying for IAP gas project ................... 27

Croatia's building permits up 13.5% y/y in Q1 .......................................................................................................... 27

Croatia's industrial output up 6.9% y/y in March ..................................................................................................... 29

Croatian new passenger car registrations rise 18% y/y in January-May ............................................................... 31

Croatia's Atlantic Grupa receives regulatory approval to issue EUR27mn bonds ...................................................... 31

3. Labour Market33

Unemployment rate in Croatia declines further to 15.9% in April33

Croatia's average net monthly salary declines by nominal 1.24% m/m in March35

4. Tourism35

Tourist arrivals in Croatia rise 7.5% y/y in January-April .......................................................................................... 35

FISCAL SECTOR, MONETARY POLICY36

Croatian central bank accepts all bids in weekly reverse repo auction36

Croatia to auction EUR40mn worth of 364-day kuna T-bills on June 28 37

FINANCIAL INTERMEDIATION39

EBRD considers providing EUR35mn loan to Croatia's Raiffeisen Leasing to support SMEs 39

Croatian insurers' premium income down 1.18% y/y in January-May ................................................................... 40

Croatian mandatory pension funds' assets up 1.28% m/m in May .40

EXTERNAL SECTOR42

Croatia's foreign trade gap widens 3% y/y in January-April .................................................................................... 42

STRUCTURAL REFORMS44

Slovenian GEN and Croatian HEP to extend lifespan of Krsko power plant to 204349

Croatian government bans rubber stamps 44

Croatian privatisation agency fails to sell 29.94% stake in Suncani Hvar in single package 45

Croatian government allocates EUR116mn for SMEs from EU funds 46

POLITICS47

Croatian ruling coalition fails again to gather absolute majority for legislation at parliament47

CEE support for EU-US trade deal is now falling like elsewhere in Europe 47

Croatia's senior ruling HDZ proposes Finance Minister Maric for prime minister 51

Croatia, Iran discuss several energy, transport projects .......................................................................................... 53

YUGOSLAVIA 25 YEARS ON: Croatia's old military bases to become tourist havens ........................................... 53

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