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Croatia Business Forecast Report Q4 2008Published by: Business Monitor International Published: Jul. 28, 2008 - 53 Pages Table of Contents
AbstractGrowth To Slow In 2008, But Inflation Concerns To RemainThe Croatian economy appears to have got off to a good start in 008, with real GDP expandingby . % y-o-y in Q108. This owes largely to the strength of domestic demand, which has shelteredthe economy from the deterioration in the external environment. That said, we hold to our view thateconomic growth will slow significantly during H208 owing to both domestic and external factors.On the domestic front, demand will cool as the economy passes the peak of its economic cycle andeconomic activity unwinds as the excesses built up over previous years are worked off. Meanwhile,the expected eurozone slowdown (with growth forecast to come in at a meagre 1.6% in 008) aswell as the continued tightening in global liquidity, will begin filtering through to domestic economicactivity. As a result of these dynamics playing out, we forecast economic growth to slow to . %in 008, following 007’s peak outturn of .6%. Thus far this year, the government has made renewed efforts to meet its self-appointed 009deadline for the conclusion of EU membership negotiations. It has opened four new policy areasunder the EU’s acquis communautaire for negotiation, bringing the total number of chapters underdiscussion to 18 of 35(two have been concluded). According to Prime Minister Ivo Sanader andthe EU commission, the intention is for the remaining 1 acquis chapters to be opened within thesecond half of 008, with the majority being concluded during the same period. Major policy actionplans are expected to be submitted to the European Commission by the end of July, with implementationto take place in the 008- 009 period, thus setting the stage for formal membership by010. Though appearing to have peaked at 6. % y-o-y in January and subsequently moderating duringFebruary-April, Croatian inflation has since spiked higher to 6.4% y-o-y in May. The renewed surgein inflation has been driven by food price inflation, which continues to besiege emerging economiesacross the board throughout central and south-eastern Europe. We caution that while inflationwill moderate in H208, the risks of second round inflation effects emerging are growing. Indeed,with headline inflation remaining well above the 10-year average (3.5%), expectations of a higherinflationary environment over the medium term are forming. As such, future wage negotiations mayincreasingly factor in the lower purchasing power of consumers. In turn, a potentially damagingwage-price spiral may unwind, sending inflation higher. Croatian agribusiness firm Granolio has partnered with financial firm Cautio Nasice to acquirea 99.97% stake in the dairy company Zdenka in a deal worth US$1 . mn and approved by theCroatian Privatization Fund. Under the terms of the agreement, Granolio and Cautio have agreedto keep the dairy producer’s 235 employees over the next two years, while also creating 0 jobsover the coming five years. Zdenka will maintain the core collection, processing and distributionnetworks and plans to invest US$30.6mn in the company over the coming five years, as Croatia’sdairy sector continues to modernise. Get Full Details About This Report >> |
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