Croatia Information Technology Report 2013

BMI View: Croatian IT spending is estimated by BMI at around US$1.0bn in 2012, with low single-digitgrowth from US$1.0bn in 2011, when the IT market remained affected by the economic situation. EUentry in 2013 should provide a boost to IT investments, and although IT spending will remain constrainedin H113 due to economic headwinds, an improvement is expected in the second half of the year. Themarket is forecast to offer areas of opportunity in 2013, particularly related to EAS software and EUfundedmodernisation projects, and growth should be faster after 2014 as the economy recovers.

However, with Croatia's economy struggling to lift itself from recession, pre-crisis 2008 IT spendinglevels are not expected to be regained until towards the end of our five-year forecast period.

Headline Expenditure Projections

Computer hardware sales: US$531mn in 2012 to US$542n in 2013, -2% in US dollar terms. Forecastin US dollar terms downwardly revised due to macroeconomic factors and strong tablet sales haveconstrained sales of traditional notebooks.

Software sales: US$173mn in 2012 to US$181mn in 2013, +5% in US dollar terms. Forecast in USdollar terms downwardly revised due to macroeconomic factors but the SME market for EAS softwarerepresents an opportunity.

IT services sales: US$306mn in 2012 to US$319mn in 2013, +4% in US dollar terms. Forecast in USdollar terms downwardly revised due to macroeconomic factors but EU entry should drive IT servicesspending, particularly from government.

Risk/Reward Ratings: Croatia scored 51.8out of 100.0. Croatia has risen one place to ssixth in our latestEurope RRR table, behind Russia, but ahead of Serbia, Hungary and Turkey.

Key Trends & Developments

The government is expected to be the fastest-growing Croatian IT spending vertical over the2013-2017 period, due largely to EU-driven modernisation projects, which could see thegovernment's IT spend double by 2015. The combined government sector also remains thelargest spender on IT products and services, unsurprising bearing in mind that the state still ownsa wide range of companies across sectors like transport, telecoms, oil and gas, media andinsurance.

Communications is another of the largest IT-spending verticals in Croatia, accounting for around25% of total ICT spending. Telecoms companies such as Vipnet are rolling out LTEmobile services, which will continue to drive IT spending on both the Capex and Opex sides. ITspending accounts typically for around 20% of total Croatian bank Capex/Opex spending. In2013, spending on IT will be driven by support of new services and customer acquisition andkey trends will include mobile banking.

Tablets should also receive a boost from the roll-out of high-speed mobile networks in thecountry. BMI estimates that tablets will capture around 20% of the Croatian PC market in 2013in terms of volume, although this will depend in large part upon pricing. Tablets have alreadyemerged from their early-adopter phase and while they are not yet mainstream devices, take-upwill grow as more services tailored to tablets are introduced in Croatia