IntelliNews - Croatia Country Report - March 2012

Rating agency S&P affirmed at the beginning of April its long- and short-term foreign and local currency ratings on Croatia at “BBB-/A-3” as well as their negative outlook. The ratings reflect the political stability in the country, the relative prosperity measured with per capita GDP of more than USD 13,000 and the moderate net general government debt burden. High euroization, sizable external debt burden and lack of substantial structural reforms, however, indicate weak growth prospects and S&P sees the Croatian economy shrinking 1% this year.

Most Croatian citizens also believe the economic situation in the country will deteriorate in the coming year, according to a public opinion survey. In 2011, the GDP contracted only marginally, by a real 0.04%, after shrinking 1.2% in 2010. The fourth-quarter GDP shrank by 0.4% after expanding by 0.7% in the previous quarter.

Croatia’s consumer price inflation accelerated to 2% in March from 1.3% in February. Retail sales rose by a real 1.1% on the year in February, slower than the 1.9% increase recorded a month earlier. Industrial production shrank an annual 5.2% in February after dropping 4.9% in the previous month.

The government revealed plans to stimulate employment in the country as registered unemployment rate reached 20.1% in February. Economy minister Radimir Cacic said the jobless rate will continue rising in April to reach a peak in early May and start declining by the end of the month and in June. Labour productivity went down by 0.7% on the year in the first two months of 2012 after dropping by 1.3% in January alone.

Croatia’s current account gap contracted 5.5% to EUR 446mn in 2011. FDI inflow jumped to over EUR 1bn last year from EUR 295mn in 2010 thanks to higher volume of net equity investment. The country's foreign trade deficit climbed by an annual 20.3% to EUR 564mn in February after rising 25.5% in January.