Croatia Country Report - July , 2015

Croatia Country Report - July , 2015

  • August 2015 •
  • 28 pages •
  • Report ID: 3307165 •
  • Format: PDF
This report reviews key macroeconomic data and microeconomic developments for Croatia published between July 6 and August 4, 2015.

Both Fitch and Standard and Poor's lowered in July Croatia's outlook to negative from stable. Fitch said it sees Croatia's budget deficit expanding to 5.5% of GDP this year, compared to previously projected 4.5%. Standard and Poor's warned that general government debt is expected to increase to over 90% of GDP in 2016.

Earlier in July, Croatia's central bank raised this year's forecast to 0.5% from 0.4%, adding that the GDP should expand by 0.9% in 2016. The growth will be supported by rising exports, while domestic demand will have a bigger contribution to the growth only next year.

The report provides details on the latest developments regarding the country's plans to build a LNG terminal on the island of Krk and presents the decision of the consortium made up of U.S. Marathon Oil and Austria's OMV not sign the license contract with Croatia for hydrocarbons exploration and exploitation in the Adriatic.

It also contains information on Croatia's decision to withdraw from the border arbitration with Slovenia and the Constitutional Court's decision to annul the final verdict in two corruption cases against former Prime Minister Ivo Sanader sentenced to prison for bribe taking and ordered a retrial.

Key Points:

o Croatia's consumer prices stayed flat on the year in June, the same as in the previous month. The working-day adjusted industrial output rose 1.6%, slowing from 4.4% in May. The annual growth of the first six months of the year reached 1.4% y/y.

o Croatia's government debt-to-GDP ratio rose to 87.7% in the first quarter of the year from 85.1%

o The unemployment rate fell to 16.1% in June from 17.1% in May. This was the fourth consecutive month of decrease. The average net monthly wage rose 3.3% in May, slowing from a 3.4% hike in April.

o January-May trade gap narrowed 4.1% y/y as exports rose at a faster pace than imports.