Croatia Infrastructure Report 2016
BMI View: Croatia will gently move out of recession in 2015 with a paltry 0.1% real GDP growth,according to our projections, amid an environment of fiscal initiatives and public sector cuts aimed atreducing the yawning budget deficit, all ahead of an increasingly likely EU/IMF bailout in the near future.
The investment environment is being impacted by the poor economic scenario and the only real hope forinfrastructure is in the form of large funds available through EU facilities, of which, fortunately, there aremany. The railways and energy infrastructure sub-sectors are forecast to benefit in the near term fromextensive European integration and modernisation projects. However, the residential and non-residentialbuilding sub-sectors will continue to stagnate, as they miss out on EU focus and lose out to a lack of foreigndirect investment (FDI).
Latest Updates And Structural Trends
The recession has laid the construction industry low by limiting government investment and weakeningdomestic demand. FDI is being hampered by an uncompetitive business environment in need of structuralreforms aimed at lowering labour costs and shrinking bureaucracy. At the same time, Croatian banks willstruggle in the corporate loan market, with internal and external demand remaining low, as businesses putprojects on hold or seek alternative funding.
Croatian infrastructure will rely heavily on EU funding, with the country set to benefit from twoparticular project financing vehicles: the EUR64.3bn Cohesion Fund and EUR14.9bn Connecting EuropeFacility (CEF). These will support the funding of the TEN-T transport corridors and TEN-E energynetworks, which have a heavy weighting towards the less developed networks in Eastern and CentralEurope. The transport sector likely to benefit most from the CEF is railways, as the EU looks to developand modernise the Rhine-Danube, Orient-East Med and Baltic-Adriatic corridors to boost regionalbusiness and tourism ties.