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.

Tuesday, 19 July 2022

Croatian Poverty Risk Less, But 70% Only Just Making Ends Meet

July the 19th, 2022 - There is a generally lower Croatian poverty risk, but despite that, around 70% of the population is still only just managing to make ends meet.

As Poslovni Dnevnik/Josipa Ban writes, last year, every fifth person in the Republic of Croatia was at risk of poverty and social exclusion, or 20.9 percent of them, according to data from the Central Bureau of Statistics (CBS). This is a small improvement compared to back in 2019 and 2020.

The decline in terms of Croatian poverty risk is weak, especially when you take into account that the economic growth in 2021, as Prime Minister Andrej Plenkovic often points out, stood at a record 10.4 percent. The fact that the number of those at risk of poverty didn't really increase significantly back in 2020, a year when the country's GDP fell by around eight percent, can still be attributed to the government's rapidly introduced social measures.

Data from the CBS also shows that the Croatian poverty risk rate back in 2021 stood at 19.2 percent, which is almost one percentage point (0.9) more than in pandemic-dominated 2020. The poverty risk threshold in 2021 for a single-member household was 36,461 kuna per year, or slightly more than 3000 kuna per month. For a household with two adults and two children under the age of fourteen, it stood at 76,568 kuna per year, or 6,300 kuna per month.

If various social benefits were also excluded from overall income, the picture of those exposed to the Croatian poverty risk would be much worse. In such a case, the same 19.2 percent would even go up to 24.2 percent. Most people are at risk of poverty live in Pannonian Croatia - as much as 28.6 percent of them, followed by Adriatic Croatia (19.9 percent) and then in Northern Croatia (19.8 percent). The least number of people are at risk of poverty live in the City of Zagreb. The greatest risk group in all of Croatia last year was, as expected, elderly people aged 65 and over, among whom the risk of poverty rate is as high as 32.4 percent, with women at that age being at a much higher risk than men. For older men, this rate stood at 25.9 percent, and for women - 37 percent. Persons aged 25 to 54 are the least exposed to the Croatian poverty risk.

As expected, the unemployed live at the greatest risk of poverty, but it's also interesting to note that those who do work/are employed can also be exposed to the same Croatian poverty risk. Statistics show that four percent of employed people are still at risk of dealing with poverty. Living at risk of poverty certainly affects a person's overall quality of life. Thus, as many as 43 percent of such people are just managing to make ends meet, and with difficulties. It's very difficult for almost eight percent of people in that group to make ends meet, with almost 20 percent of them claiming that to be the case.

The Croatian poverty risk also brings with it many other adversities. Almost half of people (46.5 percent) whose income is 60 percent of the average income cannot meet any unexpected financial expenses, 16 percent are late in settling their financial obligations, and almost six percent (5.7) of them cannot afford adequate heating in the coldest of the winter months.

It's worth noting that back at the end of last year, the Croatian Government adopted the National Plan for the fight against poverty and social exclusion for the period from 2021 to 2027. In it, it set out some priorities and measures aimed at reducing poverty and social exclusion in Croatia.

The government's plan is to reduce the poverty risk rate down to 15 percent by the year 2027, and the percentage of those living at risk of poverty and social exclusion to 17.8 percent.

It will be implemented on the basis of the Action Plan, and includes measures such as increasing the adequacy of social benefits and increasing the coverage of supplementary health insurance for the most vulnerable groups in society.

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

Thursday, 2 June 2022

Month of May Sees Croatian Economic Expectations Drop

June the 2nd, 2022 - The Croatian economic expectations which were looking promising over the last few weeks have dropped since May this year owing to continuing inflation worries.

As Poslovni Dnevnik writes, Croatian economic expectations worsened during the month of May 2022 as a wave of pessimism among consumers in the face of high ongoing inflation outweighed improved retail sentiment, a European Commission (EC) report found.

The Economic Climate Index (ESI) in the Republic if Croatia fell by 0.8 points during the month of May compared to the revised value we could read about in April, amounting to 110.1 points.

The strongest deterioration last month was the general feeling and sentiments among the country's consumers, whose index fell 3.4 points from April, sliding below the long-term average of the past twenty years.

Croatian economic expectations in the service and construction sectors, whose indices fell by 1.4 and 0.6 points, were also somewhat dampened. Retail managers showed a certain degree of optimism, as was expressed in the jump of the index by as much as 6.4 points. Expectations in the industry, whose index rose by half a point, also improved slightly.

At the same time, business leaders are signaling a decrease in the demand for labour, which was reflected in the fall of the index by 3.3 points. According to their perception, the uncertainty was alleviated compared to the month of April, despite ongoing inflation, and the rise in energy prices and problems in supply chains, seeing the EUI index fall by 1.3 points.

At the European Union (EU) level, the economic climate index fell by half a point in May when compared to April, while in the Eurozone it remained almost unchanged.

This occurred despite the fact that the countries using the single European currency are all facing the exact same struggles as Croatia in regard to inflation, although the currency offers a form of safety net Croatia won't be able to enjoy until its own accession to the Eurozone in early 2023.

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

Thursday, 19 May 2022

Dalmatian Coast Particularly Vulnerable to Fluctuating Tourism Trends

May the 19th, 2022 - It's not exactly news that Croatia as a whole is heavily dependent on tourism, with the sector being this country's strongest economic branch. The Dalmatian coast, however, is the most vulnerable location of all in this country when it comes to tourist trend fluctuations.

As Morski writes, the Institute of Economics in Zagreb recently conducted the first comprehensive study called: "The vulnerability of local self-government units of the Republic of Croatia to tourism activities" which reveals interesting trends related to the exposure of the Croatian economy and local units to tourism activities and trends. The study was implemented as part of the Mastercard project Uplift, which is intended for the development of micro, small and medium enterprises with a focus on tourism.

The results of the study, made as a step in promoting sustainable tourism and integrating tourism into the broader context of the country's overall economic development, were presented at a panel discussion.

Croatian tourism and the country's GDP

Tourism is the most important Croatian economic sector. Back in pre-pandemic 2019, tourism activity in Croatia directly generated 11.8 percent of the country's total GDP. At the same time, the gross value added of tourism activities in that year amounted to a massive 82.8 billion kuna, which is 24.4 percent of the total gross value added that year. Croatia is also much more dependent on tourism revenues than its Mediterranean competitors are. As such, tourist revenues back in 2018 and 2019 amounted to as much as 18.3 and 21 percent of GDP, and in 2020 and 2021 were reduced to 8.9 and 15.8 percent of GDP due to the negative effects of the coronavirus pandemic on tourist and travel demand. Even such reduced revenues from tourism in the two pandemic-dominated years were still, when expressed as a share of GDP, by far the largest in the entire European Union (EU).

A study by the Institute of Economics in Zagreb further analysed the situation as it was from 2012 to 2021.

Some of the interesting data from the study shows that a comparison of the values ​​of the seasonality index in 2021 compared to 2012 suggests that the shortening of the tourist season was recorded by local units in the Dalmatian hinterland that have started to engage in tourism more intensively during the summer tourist season.

When the value of the index of vulnerability to the concentration and seasonality of Croatian tourism is observed, it grows across most local units in the analysed period. This is happening because the demand for Croatian tourist products is growing intensively, so the concentration of demand in a large part of local units is increasing. The most vulnerable are the local units of Zadar County, followed by Split-Dalmatia County, Dubrovnik-Neretva County, Sibenik-Knin County and Istria County. With only Istria County standing out, it's obvious that the Dalmatian coast is extremely vulnerable to any alterations when it comes to tourism.

In addition, the study shows that the share of private accommodation in terms of total accommodation capacities has increased significantly in the vast majority of local units, while the share of accommodation in hotels, hostels and camps is declining. The most unfavourable structure of accommodation capacities is recorded by Split-Dalmatia County, which has 87.8 percent of private accommodation capacities, and the most favourable is the City of Zagreb, with 52.7 percent of accommodation capacities in hotels, hostels and camps.

Compared to the competition, the demand for Croatia is stronger

Compared to 2012, the number of beds per capita increased by 38.3 percent, which is the largest increase in the concentration of accommodation facilities among Mediterranean countries. At the same time, the number of tourist overnight stays increased by 38.2 percent in the period from 2012 to 2019, reaching 7.05 million overnight stays in 2019.

"The good news is that, compared to the competition across the rest of the Mediterranean, Croatia is also recording a significant increase in demand for its tourism. If we analyse this increase in intensity by counties in more detail, we come to an interesting conclusion: the wave of interest in Croatia spilled over from the usual coastal destinations to the interior, to locations not so much engaged in tourism - such as units in Istria, Dalmatia, Lika and Gorski Kotar, and even in the continental part of the country,'' pointed out Maruska Vizek from the Institute of Economics in Zagreb.

"We're aware of the challenges in the structure of accommodation focused on private renters and the further development of tourism should go in the direction of building accommodation facilities of this type that will allow the extension of the tourist season and create additional value. In coastal areas, the emphasis should be on quality, while in areas that are becoming increasingly interesting for tourism, such as Baranja, Lika and Gorski Kotar, we need both quantity and high quality of accommodation,''said Slavko Steficar from the Ministry of Tourism and Sport.

For more, make sure to check out our travel section.

Monday, 16 May 2022

EC Projects Croatian GDP Growth at 3.4%, Inflation at 6.1%

ZAGREB, 16 May 2022 - This year the Croatian economy is expected to grow by 3.4%, the employment rate should increase by 1.5% and inflation might reach 6.1% due to increases in energy and food prices, the European Commission says in its Spring 2022 Economic Forecast, released on Monday.

"After a strong rebound of the economy in 2021, with a growth rate of 10.2%, GDP growth in 2022 is expected to be more modest but still solid at 3.4% as the direct exposure of the Croatian economy to the effects of Russia’s military aggression against Ukraine is limited," the Commission said in its report.

The Commission revised its growth projection for Croatia from 4.8% predicted in the Winter Forecast, released on 10 February. As for the growth forecast for next year, the Commission retained its previous growth projection of 3.0%.

Croatia's GDP is forecast to grow by 3.4% in 2022, mostly supported by domestic demand and as the labor market is expected to stay dynamic, with employment growing by around 1.5% this year. Inflation is projected to accelerate to 6.1% in 2022, driven by rising energy and food prices, before decreasing to 2.8% in 2023.

Before the Russian invasion of Ukraine, the Commission had forecast a long and strong recovery, but the war brought about new challenges at a time when the EU economy had recovered from the consequences of the COVID-19 pandemic. That's why the Commission revised its growth forecasts for EU economies and revised up its forecasts for inflation.

The Commission says that the fiscal package adopted by the Croatian government, including direct transfers to households and SMEs and cuts in indirect taxes, should cushion the effects of rising prices on disposable incomes and corporate profits. Despite this further fiscal support to the economy, the sustainability of the key fiscal figures is expected to continue improving, with the general government deficit narrowing toward 1.8% of GDP and public debt to around 73% of GDP by 2023. In 2023 GDP is expected to grow by 3.0%.

Private consumption is forecast to grow by 2.4%, lower than previously expected, due to rising consumer prices and uncertainty, which increases precautionary savings. On the other hand, the implementation of the National Recovery and Resilience Plan (RRP), and the acceleration of post-earthquake reconstruction should push investment growth to 6.5%, despite the drag induced by the rising costs of materials, supply bottlenecks, and increased uncertainty.

Government consumption should retain its positive contribution to economic growth, with a growth rate of around 2.5%.

Exports of goods are expected to be affected by weaker demand in main trading partners, but the growth rate should remain solid, at around 5%. The growth of exports of services should be mostly driven by tourist activity, which is expected to converge towards pre-crisis levels.

Imports are projected to increase in line with final demand.

"The balance of risks to the forecast is tilted to the downside, with key negative risks stemming from the rising global uncertainties and commodity price shocks, which could affect both domestic and external demand. On the upside, the envisaged euro adoption in 2023 could benefit investments and trade, while RRP-related investments and reforms, if swiftly implemented, could more rapidly increase the growth potential of the economy," the Commission said.

After peaking at 7.6% in 2021, the unemployment rate is projected to gradually decline below 6.5% by the end of 2023.

For more, check out our politics section.

Tuesday, 26 April 2022

Croatian Public Debt Falling, Placing Country at Top of EU

April the 26th, 2022 - Croatian public debt is continuing to fall, so much so that this decrease has placed the country at the very top of the list of European Union (EU) member states.

As Poslovni Dnevnik writes, the public debt across the European Union and within the Eurozone itself, expressed as a share of GDP, decreased in the fourth quarter of 2021 thanks to the recovery of the economy following the coronavirus crisis, and the Republic of Croatia is among the countries with the biggest decline, a Eurostat report showed last week. At the EU level, public debt as a share of GDP stood at 88.1 percent at the end of 2021.

When it comes to Croatian public debt, consolidated general government debt amounted to 343.6 billion kuna back at the end of December, which corresponded to 79.8 percent of the nation's overall GDP.

Back at the end of September 2021, Croatian public debt amounted to 345.3 billion kuna, which corresponded to 82.7 percent of domestic GDP. At the end of pandemic-dominated 2020, it amounted to 330.4 billion kuna, which corresponded to 87.3 percent of GDP. When it comes to other EU member states, Estonia had the lowest level of public debt at the end of last year, standing at a mere 18.1 percent.

In most European Union countries, public debt as a share of GDP was lower at the end of last year than it was back at the end of 2020, the first year of the global coronavirus pandemic, thanks to a recovery in the economy that was spurred by the easing of epidemiological measures in many countries.

Compared to the end of 2020, public debt decreased the most in Greece and Cyprus, by 13.1 and 11.4 percentage points, respectively. Those countries are followed by Portugal and Croatia, whose public debt as a share of GDP in the fourth quarter was lower by 7.8 and 7.5 percentage points, respectively.

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

Friday, 25 March 2022

Croatian National Bank Governor: Ukraine War to Slow Croatia's GDP Growth and Push up Inflation

ZAGREB, 25 March (2022) - The war in Ukraine will certainly lead to an economic slowdown in Croatia this year and push up inflation, largely due to increases in energy and cereal prices, Croatian National Bank (HNB) Governor Boris Vujčić said on Friday.

"The direct impact on our economy comes from the spillover of economic effects of the war in Ukraine. At this moment we do not have direct consequences of the war, but we can quite certainly expect that the war in Ukraine will slow our GDP growth this year and increase inflation, primarily because of increased prices of energy and cereals that are largely produced in Russia and Ukraine," Vujčić told a press conference.

He added that the scale of the impact would depend on developments in Ukraine, "which at this point are hard to predict."

Rush for euro

Asked to comment on "the rush for euro", after exchange offices have been reported by the media as saying that they sell all the euros they get, Vujčić said this was nothing of significance.

He said there had been an increased demand for euro since the second half of last year due to last year's much better tourist season and the nearing of the date of euro adoption by Croatia.

According to the central bank, there was a strong increase in foreign currency deposits with commercial banks in January, picking up from 2.2 to 6.6 per cent at an annual level.

"This trend shows a strong net inflow of foreign currency into the banking system," Vujčić said.

For more, check out our business section.

Monday, 21 March 2022

Minister Zdravko Maric Satisfied with S&P's Credit Rating for Croatia

March the 21st, 2022 - Croatian Finance Minister Zdravko Maric has expressed his satisfaction with Croatia's credit rating, as confirmed by the S&P rating agency recently, claiming that Croatia now looks good in the eyes of international financial circles.

As Gordana Grgas/Novac/Jutarnji writes, after the respected Standard & Poor's rating agency reaffirmed the Republic of Croatia's credit rating and its stable outlook on Friday, but also lowered its forecast for economic growth this year from 5 to 2.5 percent, and gave a higher estimate for inflation than the previous one, of about 6 percent, Minister Zdravko Maric appeared to be satisfied in his statement for the media.

He believes that Croatia has a good reputation and is looking better and better in the eyes of various international financial circles, and this is important because it is preparing an international bond issue, with the help of the latest S&P report. As the circumstances on the international markets aren't the most favourable at this moment in time, he said, the realisation will be timed "when the best moment comes".

S&P raised Croatia's investment rating (BBB- / A-3) back in March 2019 and hasn't changed it since. Its possible increase, they mentioned, could be influenced by joining the Eurozone, a major political move which is set to occur next year.

According to Minisrer Zdravko Maric, the government will publish its latest official macroeconomic projections for this year in April, and he said that inflation has become one of the most important and noticeable macroeconomic indicators of our times.

"Inflation stood at 5.7 percent in January and at 6.3 percent in February. We expect this trend of accelerating inflation to continue in the first half of the year due to the base effect, and then a lot will depend on all of the other factors influencing this inflation. First of all, these are the prices of energy and food, but also the circumstances related to geopolitical and geostrategic events," said Maric, noting that these same circumstances affect the current forecast of Croatian GDP growth.

He said he was very pleased that the S&P report "recognised the government's efforts to improve the absorption of European Union (EU) funds, both from the Multiannual Financial Framework and the EU's New Generation,'' as well as to mitigate negative demographic trends through various measures and tax policies.

Regarding the implementation of the NPOO, he assessed that it is going very well and that Croatia had fulfilled everything it needed to by the end of last year, and then sent a report for evaluation to Brussels and expects an additional tranche of 700 million euros to be paid out in June.

For more, check out our politics section.

Tuesday, 4 January 2022

Croatia 2021 Marked by Vaccines, Rimac, Tourism's Return and GDP Growth

January the 4th, 2022 - What made ''Croatia 2021'' be what it was? From the arrival of the long awaited coronavirus vaccines to Mate Rimac's continued business successes to the recovery of the tourism industry with an unexpectedly remarkable summer season, the list is extensive.

As Poslovni Dnevnik/Karlo Vajdic writes, as we draw the line under the previous twelve months, we need to look at both the good and the bad and make assessments and plans for the future. Let's go back in time to Croatia 2021 and try to highlight the events that stood out for the domestic economy, and also provide some sort of general assessment of the state of the Croatian economy last year.

Business is still less than free, it's true to say this is somewhat less than what experienced in 2020, but costs continued to rise in 2021, and there is no sector that isn't desperately craving a full recovery, although at least some of them are finding doing business easier than they did in 2020.

All this was reflected in the numbers. After the shocking events which dominated 2020, the domestic economy experienced a strong jump in the second and third quarters of last year. Gross domestic product (GDP) was more than promising. Back in mid-December 2021, the central bank published forecasts estimating that GDP growth in 2021 would total 10.8 percent.

The year before, in 2020, there was a decline of 8.1 percent, but for 2022, growth of around 4 percent is expected once again, so it seems that we will successfully return to our own average. The Crobex index jumped nearly 20 percent from the end of 2020, but turnover is lower. Throughout the whole of 2020, it amounted to 3.13 billion kuna, and last year, it totalled 2.54 billion.

In general, the question can be asked whether the economic year for Croatia 2021 should be compared with 2020 or with pre-pandemic 2019 in order to have a somewhat more realistic assessment of the state of the domestic economy? In the search for an answer to this question, let's recall some of the key events that marked the economic year of 2021.

In business, the most high-profile event of the year was undoubtedly the merger of Rimac automobili and the legendary luxury vehicle manufacturer - Bugatti. The Bugatti Rimac company is jointly owned by the Rimac Group (55%) and the German giant Porsche (45%), and the company is headed by Livno-born entrepreneur Mate Rimac. The transaction turned into a true spectacle, and the company was even visited by the President of the European Commission (EC) Ursula von der Leyen during her stay in Zagreb back in July.

Political meddling with business didn't stop at mere courteous visits, but the decision to allow Rimac's company to build a new production and development campus in Sveta Nedelja on preferential terms raised a lot of hope for the public. This was followed by the allocation of 200 million euros from the European aid package for economic reconstruction to Rimac's plan for the development of an autonomous vehicle and taxi service in Zagreb by the year 2024. Last year, Rimac continued to be plastered all of the newspapers, hailed a hero.

Another high-profile event in the same category was the sale of Zagreb's Ledo frozen food factory and its subsidiaries. Fortenova (formerly Agrokor) announced in late September that the sale of Ledo to the British corporation Nomad Foods had been concluded, and the transaction itself was worth a massive 615 million euros. In addition to these two major transactions, last year was marked a number of smaller ones, including the sale of the Sunce hotel chain by entrepreneur Jako Andabak, who sold his 11 hotels to the Eagle Hills investment group. The sale of the Croatian manufacturer of glass pharmaceutical packaging, Piramida, to the Japanese conglomerate Nipro was also interesting.

The third high-profile event which marked last year came from the category of stock market listings, and that was the initial public offering of Span shares and their listing on the Zagreb Stock Exchange. The well-known domestic IT company eventually sold its shares at the maximum anticipated price, 175 kuna, and in the meantime their value jumped by an additional 33 percent.

Unlike Span's listing on the stock exchange, the delisting of shares of PBZ, Dukat and Magma, once very happy to trade on the domestic market, went in the opposite direction While Span's listing as a modern Croatian IT company is a laudable illustration of recent, much more digital times, Croatia 2021 didn't disappoint in terms of events related to companies such as the proverbial anchor wrapped around the legs of the Croatian economy and of the local political scene.

The agonies experienced by the enfeebled shipyards (3. Maj and Uljanik) continued, and the troubles faced by the Brodarski Institute in Zagreb ended with a political decision.

With a payment of 45 million euros, the Slovak Tatravagonka took over production in Zagreb's Gredelj and thus concluded the company's long-term bankruptcy proceedings. Just before the end of the year, Djuro Djakovic got another chance to survive when the European Commission (EC) approved Croatia to grant Djakovic, which was restructuring support in the amount of 57.4 million euros.

The planned recapitalisation of Jadroplov failed, the Turkish corporation Yildrim showed interest in the Kutina-based Petrokemija, and the financial restructuring and recapitalisation of Dalekovod became even more complicated.

On the other hand, there was some good news from the blossoming domestic IT sector, traditionally ignored in political debates and games, probably because the vultures in politics don't really understand it all that well. That's for the best, it seems.

Vodnjan's incredible Infobip announced their takeover of the American company Peerless Network and the Irish company Anam Technologies. That same Istrian company also announced its listing on the American stock exchange. At the end of the year, Konzum announced that it was starting to accept Bitcoin as a means of payment in its online stores, thus joining the Tifon fuel station chain, which enabled customers to do the same back at the beginning of the year.

Croatian enterprises and their leaders, despite the pandemic, haven't completely lost heart. Nasice's NEXE announced an investment of 123 million kuna in modernisation and new products, and BAT announced an investment of 200 million kuna in their factory in Rovinj. A similar amount of investments in capacity growth was announced by the Medjimurje-based packaging manufacturer Muraplast, and an investment of as much as 200 million euros in the construction of a laminate factory in Ogulin was also announced.

From last year's high-profile personnel transfers, it is worth mentioning the arrival of former Minister Martina Dalic to the helm of Podravka, a position to which she was appointed at the beginning of February. In the very same sector, and at about the same time, Nenad Klepac was appointed head of Vindija, succeeding the late long-time owner Dragutin Drko. The first man of the Croatian Chamber of Commerce (HGK), Luka Burilovic, also won a third term at that institution back in October.

Some important news related to the Chamber of Commerce itself, and that was the much anticipated passing of a law abolishing the mandatory payment of membership fees for small businesses. Also related to the Croatian Chamber of Commerce is some news from the margins of economics and politics published just before the end of the year, that former longtime head of the chamber Nadan Vidosevic was found guilty of withdrawing money from the Croatian Chamber of Commerce and was sentenced to eight years in prison with the obligation to return 35.5 million kuna to the Chamber.

From the same marginal economic and political position, it is impossible not to mention the death of Milan Bandic, the former mayor and long-time master of Zagreb's local economy, which accounts for a third of Croatia's GDP. Bandic died prematurely and suddenly from what was then cited as a massive heart attack, although many questions surrounding his death remain, even from his widow, Vesna.

The new mayor, Tomislav Tomasevic of Mozemo! (We can!), and the new Zagreb administration have inherited the fight against Bandic's legacy with that they claim to be a ''devastating situation'' in terms of the capital's finances. These issues were only heightened by the earthquake of March 2020.

The post-earthquake reconstruction of Zagreb and Banovina, which is still ongoing and moving at a shameful snail's pace, is the subject of a story about the role of Croatian politics in the domestic economy, which has been repeated for the third consecutive decade. The fiasco with the reconstruction of Zagreb and Banovina is reminiscent of the reconstruction of almost the whole of Croatia after the war in the 1990s.

While back then, issues were due to bad politics and politicians, the opportunity was missed to rebuild the Croatian economy at the same time from the remnants of socialism and the remnants of war, now a similar story is being repeated, only with an indiscriminate natural disaster at play.

The difference is that two and a half decades ago, politicians were unable to create a framework in which to exploit Croatia's potential, then expressed in the number of unemployed people that occasionally approached the level of 400,000, while today politicians are unable to create a framework in which to used the potential of financial assistance provided by the European Union. That said, Prime Minister Andrej Plenkovic and the rest of the political elite have repeatedly tried to gild the role of the Government in Croatia's economic rust over the past year. Among them, we can single out two moments for this occasion.

The first is the development of the famous National Recovery and Resilience Plan. A comprehensive document of more than 1,200 pages was drafted by the government as a justification for withdrawing money from the EU's Recovery and Resilience Mechanism. This is a document that acts as if no one has even ever read it in its entirety and is quickly being seen as just another pile of projects, wishes and empty phrases like countless other unimplemented strategies and plans written and shelved over the last twenty years.

The second bright moment for Croatian politics came back in mid-November when the credit rating agency Fitch Ratings announced that it had raised Croatia's rating to BBB. Prime Minister Plenkovic and Minister of Finance Zdravko Maric hurried to welcome the good news in front of the public, which included the euphoric remark that this is the highest rating for Croatia in history.

What was left out of these celebrations was the fact that that rating was only one level higher than the BBB- rating that Croatia had when it first received a rating way back in 1997 - just two years after the Homeland War secured the nation its independence and saw the collapse of Yugoslavia. At this rate, we'll reach the highest AAA category in a mere 192 years!

Is that why everything is still bleak and everyone is still busy lining cafes and complaining over three hour long coffees? No, Croatia 2021 also gave us some excellent news. For a start, the tourist season was more or less successful, unexpectedly and quite remarkably. Data from the Central Bureau of Statistics shows that from the beginning of July to the end of September last year there were 9.36 million tourist arrivals and that guests realised 57.3 million overnight stays. The arrival of the coronavirus vaccine had a lot to do with this, and visitors saw Croatia as an epidemiologically safe country, especially when compared with its Mediterranean competition.

Compared to the pre-pandemic year of 2019, this is a ten percent lower number of overnight stays and 16.5 percent fewer guests. For yet another pandemic-dominated year, Croatia 2021 did very, very well in this regard.

Export results for Croatia 2021 are even better. In the first ten months of last year, merchandise exports exceeded 15.1 billion euros. There is no doubt that by the end of the year that amount was exceeded and if there is one thing that can make us happy, it is the success of the exporters who suffered terribly as a result of the pandemic. These are mostly small and medium-sized companies that aren't very widely heard about, but which, despite their policies, continue to invest in their capacities and modernisation in order to take full advantage of what it means to have EU membership.

This, in addition to the promising domestic IT sector, is making an apparently clean break from at least one part of the domestic economy, which is the tradition of inefficient, lethargic, economic mastodons who are lost in time and space, giving hope for a brighter future as we walk into 2022 and beyond.

For more, check out our dedicated lifestyle and business sections.

Saturday, 13 November 2021

Brussels Expects Enviable Croatian GDP Growth, Though Risks Remain

November the 13th, 2021 - Croatian GDP growth has been a topic on the lips of many ever since the coronavirus pandemic struck and caused untold and unprecedented negative trends on a global scale. Predictions and expectations have been shared by many and have been varied, but Brussels has some encouraging expectations indeed, with only two EU member states ahead of Croatia in this regard.

As Ana Blaskovic/Poslovni Dnevnik writes, the European Commission's (EC) recent forecasts for economic developments for the Republic of Croatia have brought growth expectations closer to most local expectations. Brussels expects 8.1 percent Croatian GDP growth this year (their expectation previously stood at 5.6 percent), which is close to the Croatian National Bank's expectations of 8.5 percent, but still more cautious than the Croatian Government's 9 percent. This prediction, if it materialises, would also make Croatian GDP growth the third fastest in the entire bloc.

The European Commission's autumn forecasts generally predict a faster pace of recovery from the coronavirus crisis than the spring one did, after all, corrections leaning towards higher percentages as the year draws to a close were also given by numerous Croatian experts. The European leader with the highest GDP in 2021 will be Ireland with a projected 14.6 percent, followed by Estonia with 9 percent.

The ranking next year, of course if there is no correction, could look even better with growth of 5.6 percent, just behind Malta. "The recovery of the Croatian economy continued in 2021, mostly thanks to strong private consumption and better-than-expected results in the tourism sector. Favourable economic trends have spilled over into the labour market, which is experiencing strong employment dynamics,'' they said from the EC. A good outlook for the economy is expected in the next two years, and essentially, there are no major surprises in Brussels' latest autumn forecasts.

The engine of growth remains domestic demand driven by a good labour market situation. During the coronavirus crisis, the accumulated savings and the growth of consumer lending will give their momentum to the economic momentum. A positive contribution will also come from the direction of public spending, but its momentum will slow down due to the targeting of the deficit and public debt within the introduction of the euro in Croatia at the beginning of 2023, if all goes as planned.

Investment momentum should accelerate on the wings of European Union money as part of the National Recovery and Resilience Plan in addition to the regular EU budget and as payments from the Earthquake Solidarity Fund begin to be paid out. The European Commission expects that over time, these funds will encourage additional private investment in Croatia, which will further facilitate favourable financing conditions.

Finally, NPOO reforms (on which future generous payments depend) should support business confidence, according to the EC.

Exports are an item of GDP that should grow in line with the improving situation in major trading partners. After this year's surprising jump in the export of services, primarily tourism, the continuation of solid trends is expected, the preconditions for which are favourable conditions in emitting markets and the final total normalisation of travel.

Although the Croatian economy is projected to grow strongly in terms of exports of goods, its import dependence will result in a gradual deterioration of the trade balance, a picture that essentially reflects the vulnerabilities and competitive weaknesses of the domestic economy. Finally, an unavoidable factor in the uncertainty of these forecasts is the low vaccination rate of only 44.9 percent of all residents of Croatia. Such figures "could lead to tougher measures to combat the pandemic and delay in post-earthquake recovery."

Positive ''risks'' are Croatia's possible entry into the Schengen area and the Eurozone. Inflation is expected to accelerate due to rising energy and food prices, reaching 2.2 percent this year, after which it should then gradually stabilise. The budget deficit should drop down to 4.1 percent of GDP in 2021, and to 2.9 percent next year, and a downward trajectory is also projected for public debt; from 82.3 percent this year to 79.2 percent next year. Employment should return to pre-crisis levels this year, and the unemployment rate should drop to a record low of 5.8 percent in 2023.

For more information on Croatian GDP growth and much more, check out our politics section.

Page 1 of 2