Monday, 28 November 2022

Croatian Economy Slowing Down, Recession Coming in 2023?

November the 28th, 2022 - The Croatian economy is slowing down, with a recession more than likely to come knocking at Croatia's door in 2023, at least according to some experts.

As Poslovni Dnevnik/Ana Blaskovic writes, forecasts that the Croatian economy will have its "handbrake" pulled as the end of the year approaches have begun to come true. After experiencing impressive growth of 7.8 percent in the first and 8.7 percent in the second quarter of this year, the annual domestic GDP growth rate in the third quarter stood at 5.2 percent. Although there have been strong quarterly dynamics, certainly among the better ones in Europe, the problem is sliding downwards. Seasonally adjusted data shows that compared to the previous quarter of 2022, growth slowed by 0.4%, suggesting that the Croatian economy entering a difficult and uncertain 2023.

The all important three months of summer show the positive contribution of all components, at least when it comes to the domestic component. As expected, personal consumption with +5.6 percent and investments with an increase of 8 percent lead the way, while the state's contribution was a slightly positive 1.3 percent. The negative contribution to growth came only from net exports, as imports with a 30.5 percent increase exceeded exports with a 30.5 percent increase, but this is nothing unusual when tourism demand is booming.

While the quarterly growth figures outline an excellent tourist season, some will note that real GDP expectations were even higher if the precision of inflation coverage is taken into account. In other words, if the real price rise is to be assumed to be higher than what government statistics manage to capture (given the changes in behaviour and consumption patterns that go hand in hand with a prolonged period of high inflation), the GDP growth rate could have been better.

This year, summertime optimism and tourist euros that place an alluring but perhaps not quite accurate shine on the Croatian economy's results, can't camouflage the echoes of the fall in industrial production, retail sales and construction at the quarterly level. This year, the Croatian economy will draw the line under that previously rather reassuring GDP growth of 5 to 6 percent.

At the same time, there is more and more irrefutable evidence that out-of-control inflation is dangerously eroding peoples' purchasing power, narrowing the room for maneuver for companies to amortise cost shocks and shut down orders, meaning that a real recession is increasingly likely to be knocking on Croatia's door in 2023 as well, even without the further escalation of the war in Ukraine and the spiralling energy crisis.

For more, make sure to check out our dedicated news section.

Saturday, 26 November 2022

Croatian-Chinese Economic Forum Returned After Three Years

November the 26th, 2022 - Following a three year break, most of which was dominated by the coronavirus pandemic, the Croatian-Chinese economic forum made a return to Zagreb recently.

As Marija Brnic/Poslovni Dnevnik writes, after being stricter than most of us here in Europe could ever even begin to imagine, China has announced new, slightly milder anti-epidemic measures, which due to the strict policy of "zero cases" have so far meant the absolute closure of the country to foreigners. Tourists still cannot enter China, but in order to mitigate the negative effects on the economy, China is opening up for representatives of multinational companies and of course - for foreign investors. At the same time, state banks will stand more strongly with local companies and China is once again starting a proactive campaign on numerous foreign markets.

As such, the Croatian-Chinese economic forum was successfully held recently here in the City of Zagreb, where about fifteen different Chinese companies conducted business B2B discussions with various Croatian companies. The last time such talks were held exactly three years ago, also here in Zagreb. Chinese companies' interest in doing business in Croatia has only grown after Croatia joined the EU back in summer 2013, and twenty Croatian companies have expressed interest in engaging in direct talks with Chinese businessmen. Mostly, on both sides, we're talking about companies from the agriculture and food industry, as well as those from the IT, energy, and tourism and real estate sector.

Some of the Chinese companies have chosen the Republic of Croatia as a location for their projects here in Europe, specifically Hainan Nanhai Blue Capacity Economic Development, a large economic system operating in various sectors from agriculture, electrical industry to high-tech manufacturing and shipbuilding. In Europe, namely, the company plans to start agricultural production in three countries - in the Czech Republic, Poland and here in Croatia, and the more specific goal is the production of animal feed, meat and meat products.

The company Xi'an TianLong Science and Technology offers cooperation in the research, the development and production of instruments and in vitro diagnostic reagents in the field of genetic testing and molecular diagnostics, and the company BGI Genomics, which operates in an impressive 100 countries, wants to directly establish cooperation in Croatia with medical and scientific institutions for the placement of their technology and research related to genomic sequencing. COFCO International, as a global platform of the Chinese food industry, wants to achieve cooperation in agriculture, forestry and fishing in Croatia.

Anshan Xingong Construction is a Chinese company engaged in the production of building materials, and it is currently examining the possibility of cooperation, and the possibility of overseas transport of heavy cargo with Croatia is being sought by representatives of the Chinese-Polish Joint Stock Shipping Company. Cooperation in the energy industry is being offered by CHINT Noark Electric, which markets its advanced solutions in 140 countries around the world. Ningbo Sanxing Smart Electric also wants to enter the Croatian market with its highly advanced solutions for electricity distribution and use systems, from smart metres, transformers and substations to chargers for electric vehicles.

The Croatia-Chinese economic forum also included representatives of the very well known Huawei Croatia, who want to strengthen their cooperation in the ICT infrastructure industry, and the company Shaanxi Zhongtuo Mine Equipment, which specialises in the development and sale of equipment in the construction of bridges, highways and tunnels, is looking for partners and representatives for the Croatian market.

The largest manufacturer of ball bearings, Xibei Bearing, also wants to explore the Croatian market. Imports from China have been growing strongly this year (amounting to a massive 889 million euros in the first eight months of 2022 alone) and greatly exceed Croatian exports (which weigh in at 62 million euros), which are dominated by raw materials and less processed products such as wood (making up almost 40% of exports) and marble and limestone, as well as construction carpentry. As for Chinese investments in Croatia, they amounted to 179.5 million euros back at the end of 2021.

For more, check out our news section.

Wednesday, 23 November 2022

Meat Becoming Luxury Croatian Item - Here Are The Main Reasons

November the 23rd, 2022 - The price of meat has shot up across Croatia, and this Croatian item is edging closer and closer to becoming somewhat of a luxury product. Here are the main reasons why.

As Poslovni Dnevnik writes, the ongoing global crisis and bad domestic policy decisions led to a weakening of domestic production and less availability of meat products to Croatian customers. The result of this set of deeply unfavourable circumstances led to a significant increase in the price of meat, which could soon become a luxury Croatian item, reports DW.

The meat industry here in the Republic of Croatia is facing ever-increasing problems, and with it so are meat consumers, who are needing to fork out ever-higher prices to purchase meat. The cost of fattening cattle up in Croatia has doubled this year, meaning the cost of production in Croatia is at the very top of the European Union (EU). The situation is worse only in the Baltic countries of Latvia and Lithuania.

At the same time, Croatian imports of pork have more than doubled since the time before Croatia joined the EU back in July 2013. With regard to the entire production chain, the sector was also affected by the closure of the Petrokemija fertiliser factory in Kutina, according to Deutsche Welle.

The cause of this situation is not only the global crisis...

"Not only is it imported, but it's also encouraged by part of the support system in agriculture, already years ago. This endangers the development, but also the very survival of domestic animal husbandry, especially when it comes to pig and cattle breeding,'' says agricultural analyst and former producer in animal husbandry and dairying, Miroslav Kovac. He warned of the poor state of domestic cultivation, along with the establishment of the internal market and the disposal of important agricultural land.

"There's no state, no system, no people, nobody that is ready to withstand the pressure of lost values ​​like what has happened here in Croatia. The domestic population of pigs and cattle has been destroyed, in the long term, obviously, by bad political decisions, without a clear goal in space and with people, most often guided by "fireman's" logic. Dependence is increasing, and the price is increasing along with it. The biggest misfortune of all is the decimation of breeders and the obliteration of their logic of development," Kovac added.

"When will we stop sawing the branch we're sitting on?"

According to Kovac's beliefs, the public's attention shifted from the need for quick solutions here in the Republic of Croatia to the problems faced by importers. In the long run, this isn't at all good for the individual, nor for the Croatian economy as a whole: "How long will it take for us to understand the logic of the functioning of organised countries in this particular segment and stop sawing the branch we're sitting on?'' he asked.

"If we continue doing what we were doing before, the prices will rise across the entire supply chain, and even faster here, and the difference in price aside from business profits will melt away. Here, however, the current practice of emergency and partial interventions costing millions at the expense of the state and EU budgets will not help us, as it has never been the case before. I emphasise the logic of the development and preservation of the domestic economy, and now it's also in the wider context of the EU, and by no means is any of this only of individual interest,'' warned Kovac.

"Croatian agricultural policies are to blame"

Kovac has previously criticised Croatian agricultural policy due to the apparent stagnation of the sector. At the same time, neighbouring EU members Slovenia and Hungary are taking a number of quality steps forward, which have raised their production to quite an enviable level. Of course, there's also a jump in prices to take into consideration, but domestic production is in much better condition, with fewer imports and costs borne by local customers.

"Having run out of raw materials from domestic sources, problems with prices will spill over to consumers, who are the ultimate payers, including the value added tax that is charged on top of everything and isn't negligible for a long time,'' explained the analyst.

The news from the Croatian agricultural sector is somewhat dramatic: this autumn, according to Eurostat, the price of chicken in Croatia rose by 35.5 percent compared to the same period last year, while the EU average stood at 26.7 percent. It must be expressed that this refers to the placement of meat in sorted categories, while the Croatian Government capped the price of a whole chicken to just 24.99 kuna, along with products in some other meat categories.

Is Croatia condemned to imports?

Overall, the price of meat has risen significantly, seeing it become closer than ever to a luxury Croatian items. As a result, demand decreases, which in turn leads to further price increases. We can't even influence some factors, for example, the import of artificial fertilisers that came from Russia. Urea from Russia was sold in Croatia at a price three times higher than it was last year, when the Croatian market still had domestic products of this type of its own. Condemned to imported goods, Croatian farmers reduced their consumption of fertilisers, and consequently their yields. Because of this, some have already given up meat production and switched to arable farming or left the sector of agriculture altogether.

What do the manufacturers think about everything?

How the situation looks from that angle was explained by one of the largest producers in all of the Republic of Croatia - the Pivac Group. Today, too, they primarily point out that, due to market disturbances, their input production costs are constantly increasing. 

"Our production has risen in price by more than 30 percent this year alone, and due to inflation and the energy crisis, the increase in input prices will be a challenge in the future as well," the president of the group, Ivica Pivac, revealed. He emphasised that, when it comes to basic raw materials, their strategic focus on their own livestock production proved correct. However, the increase in animal feed prices by more than 80 percent influenced a significant increase in costs in this segment of production as well.

Uncertain market opportunities

"Although all of our input costs have increased, we constantly strive to minimise the impact of market disruptions on our end customers. However, unfortunately it wasn't possible to avoid price corrections. Otherwise, we'd be calling the sustainability of our production and supply into question," said Pivac.

Compared to last year's prices in Pivac stores, the current price of certain cuts of pork has increased by 18 percent, and when it comes to their most popular product, prosciutto, its price has increased by 20 percent. "Uncertain market conditions make it difficult to project price movements, however, we're going to continue to do everything we can so that the increase in input costs affects our customers as little as possible,'' assured Ivica Pivac, emphasising that for his company "when planning business, the focus remains on investments in self-sufficiency, production capacities and human resources,'' but it is still not known whether this will be enough to amortise the crisis stress for consumers and stop meat becoming a luxury Croatian item which is simply not affordable to some.

For more on inflation and increases in the cost of living in Croatia, keep up with our news section.

Monday, 14 November 2022

Every Fifth Croatian Resident on Edge of Poverty as Inflation Continues

November the 14th, 2022 - Every fifth Croatian resident is living on the very edge of poverty as inflation continues to spiral and prices stay firmly on their upward trajectory. 

As Poslovni Dnevnik writes, The World Day of the Poor was marked just yesterday, having initially been established by Pope Francis six years ago with the message - "We do not love with words, but with deeds". 

Here in this country, every fifth Croatian resident is at risk of falling below the poverty line, and the situation is further aggravated by growing inflation, which is why more and more people need help. On this occasion, Caritas organised a lunch and assistance for those most in need. The economic crisis and rising inflation has pushed many to the brink of poverty, and it's more than likely going to get worse before it gets better, writes HRT.

"We are also noticing an increase in the number of younger families in which one member of the household works, but they do not have enough funds to cover all their financial needs and obligations throughout the month," emphasised Jelena Loncar, the director of Caritas of the Zagreb Archdiocese.

Caritas employees and volunteers are ready to help those who need it with full hands and open hearts. Those who take care of the poor every day prepared a hot meal in Rijeka as well. The "Ruže sv. Franje" homeless shelter shockingly has almost has no free beds, and knocks on the door of the social self-service centre are becoming more and more frequent.

"We have very good support from our fellow citizens, they respond to all our actions. We manage to fill our shelves and that's actually all the joy of sharing and giving," emphasised Nela Pujic, a volunteer of the social supermarket and at the aforementioned homeless shelter.

As stated, every fifth Croatian resident is now at real risk of falling below the poverty line, and there is an extremely fine line between that and homelessness.

For more, make sure to keep up with our dedicated news section.

Saturday, 12 November 2022

Croatian Schengen Entry Provides Room for Domestic Economic Boost

November the 12th, 2022 - Croatian Schengen entry which is set to take place on the same date as Eurozone accession (on the 1st of January, 2023) was given the green light by the European Parliament very recently. It is set to give the domestic economy a much needed boost.

As Poslovni Dnevnik/Ana Blaskovic writes with the convincing support of the European Parliament, Croatian Schengen entry is now another significant step closer, and the final green light for the complete abolition of border crossings between Croatia and the rest of the European Union should be given by the Council of the EU at the beginning of December.

If it achieves this goal along with Eurozone accession, Croatia will further deepen its integration into the bloc and facilitate business and trade with European Union markets at the beginning of next year. It also all represents a very strong political message from the powers that be in Brussels.

At the plenary session of the European Parliament in Brussels on Thursday, Croatian Schengen entry was formally supported by a large majority. Of the 612 parliamentarians who voted for the draft decision of the EU Council, 534 voted for, 53 against, with 25 abstentions.

"Schengen has been waiting for Croatia. The Croatian people have been waiting for Schengen and now that moment has finally arrived," said the Parliament's reporter for Croatia's entry into Schengen, Paolo Rangel.

"Combined with the entry into the monetary union, this is going to represent a positive shock for the economy. The monetary union is not just a replacement of a country's currency, as is unfortunately often emphasised in the Government's own campaign, but an entry into a new institutional framework that gives investors a clear signal that we're now part of a unique space, significantly more complex than it was in previous crises. The differences between Croatia, Austria and Slovenia will be based on other factors in the future, such as logistical ones, and Croatian Schengen entry removes logistical obstacles," explained economist Damir Novotny, adding that, for example, a potential investor can now weigh up their investments, counting on the fact that there will be no more waiting at the border and related costs.

The report of the European Parliament, which previously passed the committees so that the final vote can actually be a formality, stated that all of the criteria have now been met and that there are no obstacles to Croatia becoming a full member of the Schengen area which is totally devoid of internal (passport) controls.

It is important to note that the role of the European Parliament regarding the issue of Schengen expansion is advisory in nature and not binding, but it is an indispensable step of the procedure that requires EU member states to request the opinion of the Parliament.

After meeting the technical conditions and the recommendation of the EP, the final decision is political and will be made by the 22 EU member states that make up the Schengen area, which is expected to happen at the session on December the 9th, 2022.

The fact that the ticket to the club of member states of the European Union without borders comes despite criticism of the behaviour of the Croatian police at the borders towards migrants and illegal "push backs", and illustrates the strength of political support for Europe in the face of the war in Ukraine.

Videos brought to light by the journalist organisation Lighthouse have showcased beatings and mistreatment of migrants on the border between Croatia and Bosnia and Herzegovina by Croatian police. This and similar reports apparently caused consternation, but the Schengen accession process was not seriously shaken by any of it.

For more, make sure to check out our dedicated lifestyle section.

Monday, 17 October 2022

IMF Predictions Not Fantastic, What Awaits Croatian Economy?

October the 17th, 2022 - The International Monetary Fund (IMF) has released its predictions amid ongoing inflation, the Ukraine-Russia war and spiralling energy prices during the post-pandemic period. What precisely awaits the Croatian economy according to their predictions?

As Poslovni Dnevnik writes, the main problem that is currently being experienced on a huge scale is that this current economic slowdown is very widespread. A third of the global economy could end up having to record a "technical recession", which is equal to two consecutive quarters of contraction of economic activity,'' Croatian economist Matej Bule from the Croatian National Bank told the Croatian Radio network.

''An additional problem is that that same economic slowdown is simultaneously being accompanied by very strong inflationary pressures,'' he pointed out, adding that the Republic of Croatia is currently handling it better than some other comparable countries, which might come as a surprise to those who feel that their pockets and bank accounts are taking hit after expensive hit.

 "Everything is currently heading in the direction of normalising these inflationary pressures"

"We had double-digit growth back in 2021, in 2022, growth of 5.6 percent is expected for the Croatian economy, but for 2023, all relevant institutions expect a strong slowdown for the economy," he said, adding that growth of a mere 1 percent is expected next year.

He also stated that the movement of inflation will depend on a number of factors, and one of the most important things is that we'll have to keep a close eye on the movement of the prices of raw materials on the global market.

For more on the Croatian economy and ongoing inflation, make sure to keep up with our dedicated news section.

Sunday, 16 October 2022

CNB Governor Boris Vujcic: Croatia Still to Have a Very Good Year

October 16, 2022 - After two and a half years of exceptional challenges due to the pandemic, the world is facing new crises. The road ahead will probably be just as difficult, if not more, Fund Director Kristalina Georgieva said at the end of the annual meeting of the IMF and the World Bank. The IMF's strategic committee called on Russia to stop its invasion of Ukraine. The Governor of the Croatian National Bank, Boris Vujcic, commented on the forecast for the Croatian economy.

As HRT reports, the war worsened the economic crisis, slowed growth, and created inflation and energy and food insecurity. The fight against inflation and protecting the most vulnerable categories of citizens remains the main priority. This was the conclusion of financial experts.

CNB Governor Boris Vujcic commented on the forecasts for the global and Croatian economy for HTV in Washington.

"It is obvious that the economy, both globally and European, and now according to the latest high-frequency data, the Croatian economy has started to slow down. At the global level, this slowdown has been visible for some time in Europe as well; in Croatia, it is very recent, and we have practically started seeing it from September onwards. Croatia will still have a very good year. We expect growth from 5.5 percent to 5.8 percent, which is very good after 10.2 percent last year. However, next year we expect that this slowdown that we are seeing now will be fully reflected in a much lower growth rate where the economy could grow by only one percent", he said.

IMF estimates

IMF estimates are that the economy of the Eurozone could only grow by half a percent and that some countries, primarily our main foreign trade partners such as Germany and Italy, would be in recession, which would mean having negative growth rates. As for Croatia, the primary projection is that we will have a low growth rate and not a recession. However, when the practical prospects are continuously deteriorating in this situation, he said it would not be surprising if we also entered at least a technical recession, meaning two consecutive quarters of negative growth.

"Of course, inflation is the biggest problem everywhere; central banks have to tighten their monetary policies, which means raising interest rates, but also to reduce their balance sheets, which have grown a lot since the great financial crisis and represent another, I usually call it fertile ground for the growth of the inflation. Central banks will continue to do so. As of next year, we will be a member of the eurozone, so this is primarily a concern of the European Central Bank, where I will co-create that policy. And as for the governments, this winter, they are mainly limiting the prices of electricity, thermal energy, and natural gas. Next year, we will see how things will develop, he said.

Entry into the eurozone

"Everyone congratulates us; they think it is very good for Croatia and will help Croatia significantly in this crisis. And we can already see that. We see that Croatia is doing better in this crisis than other EU countries that are not on the way to become members of the eurozone or existing members. Our rating is growing; we don't have to spend reserves on intervention in the foreign exchange market, which we had to do in the spring of 2020." He concluded that our interest rates are significantly lower.

For more, make sure to check out our dedicated Politics section.

Friday, 30 September 2022

ERBD's Prognosis for Croatian GDP Growth Considerably Improved

September the 30th, 2022 - The European Bank for Reconstruction and Development (EBRD) has given its improved prognosis for Croatian GDP growth.

The global coronavirus pandemic which halted tourism and created unprecedented circumstances across the board had tremendously negative effects on the domestic economy. Tourism, being the strongest economic branch this country has, making up 20 percent of Croatian GDP, took a hit like no other as planes stopped arriving. Things, however, seem to be on the up despite ongoing spiralling inflation and the horrific situation still unfolding in Ukraine following Russian invasion earlier this year.

As Poslovni Dnevnik writes, the European Bank for Reconstruction and Development (EBRD) announced in its September 2022 report on regional economic forecasts that Croatian GDP growth this year will amount to 6.5 percent, while next year it will slow down to 2 percent.

Compared to the report which was issued back in May this year, this is a doubling of Croatian GDP growth for this year, while the forecast for 2023 has worsened, given that the EBRD expected an increase of 3.5 percent.

In the 38 countries in which the EBRD operates, economic growth will amount to 3 percent next year. This is a significant reduction when it comes to initial expectations, considering the fact that back in the May report, economic growth of 4.7 percent was expected.

As for this year, the bank expects Croatia's immediate region to grow economically by 2.3 percent, which is a significant improvement. Back in May, the EBRD expected a growth of a mere 1.2 percent.

For more, make sure to check out our dedicated politics section.

Monday, 19 September 2022

Croatian Postal Market Income Reaches 523 Million Kuna

September the 19th, 2022 - The Croatian postal market has managed to earn an income of 523 million kuna thanks to positive developments throughout this year's second quarter.

As Poslovni Dnevnik writes, positive developments on the Croatian postal market continued throughout the second quarter of 2022, and the total revenue amounted to 523 million kuna, the Croatian Regulatory Agency for Network Activities (HAKOM) announced recently. When compared to the previous quarter, revenues on the Croatian postal market increased by 6.3 percent, while compared to the same period of the previous year, they grew by 10.2 percent.

The result was primarily contributed to by services with greater, more added value, as the total number of postal services being carried out actually decreased. As such, in the second quarter, 8.2 million packages were transferred, which is 5.5 percent more than in the previous quarter and 12.6 percent more than last year.

In contrast to parcels and packages of a larger volume, a decline was recorded in letter shipments with one of the lowest recorded shares in the total number of services performed, which amounted to 79 percent in the middle of the year. With the reduction in the number of letters sent and delivered, the share of universal service fell below 50 percent for the first time. When it comes to the Croatian postal market and wider, more specifically international traffic, the number of services was higher by 11 percent.

The number of postal service providers across the Republic of Croatia didn't change, and in the middle of the year there were still 24 of them. The largest provider was of course Croatian Post (Hrvatska posta) with a share of 87 percent in the number of services performed and 58.3 percent in total revenues.

For more on the Croatian economy, make sure to check out our dedicated business section.

Saturday, 10 September 2022

Croatian National Association of Caterers Welcomes Government Measures

September the 10th, 2022 - The Croatian National Association of Caterers has welcomed the package of economic measures the government has introduced to battle inflation and spiralling energy bills.

As Morski writes, on Thursday, the Croatian National Association of Caterers welcomed the package of measures introduced by the Croatian Government following drastic energy bill increases which, over recent months, have posed a huge amount of danger to the survival of enterprises already exhausted by the dire effects of the global coronavirus pandemic.

This is especially true with those operating within the catering, hospitality and tourism sector, which are mostly micro, small and medium-sized businesses and companies, the aforementioned association's press release notes.

From the government's package of measures, the Croatian National Association of Caterers have singled out the measure of capping the cost of electricity and the measure which seeks to increase the amount of tax-free payments to employees, which, as they pointed out, will enable the continuation of the work of catering and hospitality establishments this winter, as well as contribute to the preservation of jobs.

They have assessed that by limiting the cost of electricity for half-yearly consumption by companies up to 250,000 kWh to 0.53/kWh kuna, which ensures a price 12 times cheaper than the stock exchange price, the Ministry of Economy and Sustainable Development has showcased "a previously unheard of level of understanding and support for micro, small and medium-sized companies which experience the most difficult moments when doing business, and at the same time forms the backbone of the domestic economy."

The Croatian National Association of Caterers has also said that they hope for successful negotiations and equal treatment when it comes to the limiting of the price of gas, which, along with electricity, is an essential energy source in the hospitality industry, especially in the area of ​​continental Croatia in the winter period of the year.

Considering the wide scale and long-term nature of this ongoing and unfolding crisis and limited resources, they're also calling for the implementation of savings measures and the rationalisation of energy consumption in the business and private spheres, as reported by HRT.

For more, make sure to check out our dedicated business section.

Page 1 of 26

Search