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Croatia Country Report - November, 2015

Croatia Country Report - November, 2015

This report reviews key macroeconomic data and microeconomic developments for Croatia published between November 7 and December 4, 2015.

In the beginning of November, the Croatian central bank confirmed the economy expanded by a real 2.8% y/y in the third quarter of the year, registering the fourth quarter of consecutive growth. This is the strongest performance since the third quarter of 2008.
Croatia's economy is expected to expand 0.9% this year and in 2016, according to a forecast of the Croatian banking association HUB issued in November.

The report also reveals the results of the general elections held on November 8 and the outcome of the negotiations between the main parties and coalitions.

It also shows Croatia’s latest decisions regarding the migrants entering its territory and mentions Croatia’s ranking in the latest Paying Taxes study by global consultancy PwC and the World Bank Group.

The report provides details on INA’s plans regarding its filling stations network business and names the possible air carriers interested in the privatisation process of Croatian flag carrier Croatia Airlines.

Key Points:

Croatia's consumer prices fell 0.9% y/y in October, slightly deepening from the 0.8% decline in the previous month.The working-day adjusted industrial output rose 6.4% y/y in October, accelerating from a 5.4% annual hike in the previous month.
The unemployment increased to 17.2% in October from 16.2% in September. The average net monthly wage rose 4.4% in September, accelerating from a 4.2% hike in August.
January-September trade gap narrowed 1.6% y/y as exports rose at a faster pace than imports.


EXECUTIVE SUMMARY 4
MACROECONOMIC OVERVIEW 5
Banks see Croatian economy 0.9% up in 2015 5
REAL SECTOR 5
1. GDP, Inflation 5
Croatia's GDP growth confirmed at 2.8% y/y in third quarter 5
Croatia's agricultural producer prices fall 0.8 % y/y in Q3 6
Croatia's consumer prices fall 0.9% y/y in October 6
CEE sentiment improves in November 7
Decline in Croatian producer prices eases in October 8
2. Industry and Trade 8
Croatia's industrial output growth speeds up in October 8
Croatia's retail sales growth accelerates in October 9
Croatia’s industrial sales rise in September 9
3. Labour Market 10
Croatia’s unemployment rate rises to 17.2% in October 10
Croatia’s average net monthly salary rises by real 4.4% y/y in September 10
4. Tourism 11
Tourist arrivals to Croatia rise 3% y/y in October 11
FISCAL SECTOR, MONETARY POLICY 11
Croatia sells €112mn worth of kuna, euro T-bills, beats target 11
Croatia's M4 money supply up 5.1% y/y to €37.7bn at end-October 12
FINANCIAL INTERMEDIATION 12
Croatia banking sector turns to pre-tax loss in January-September 12
Share of bad loans in Croatian banking sector down to 17% in January-September 13
Croatian central bank accepts all bids in weekly reverse repo auction 13
Croatian insurers' premium income rises 1.8% y/y in January-October 13
EBRD signs agreement to participate in Zagreb Stock Exchange’s recapitalisation 14
Zagreb bourse’s turnover falls 31% m/m in November 15
Value of new contracts signed by Croatia’s leasing firms down 11% y/y in January-September 15
Croatian mandatory pension funds’ assets up 13% y/y in October 16
Bank deleveraging in most of CEE has finally ended, Vienna Initiative report says 16
Banks fear another bashing in Central Europe 17
RBI forecasts 2015 profit after restructuring delay 22
EXTERNAL SECTOR 24
Croatia's trade gap narrows 1.6% y/y in January-September 24
Croatia’s gross foreign debt falls 3% m/m in August 25
Croatian c-bank foreign reserves up 12.6% y/y to €14.2bn 26
STRUCTURAL REFORMS 26
Croatia’s Petrokemija invites investors to start due diligence 26
Croatia’s Podravka increases stake in Slovenia’s Zito to 86.8% 26
Croatia’s INA signs $300mn revolving credit facility agreement 27
Lufthansa, Aegean and Turkish Airlines reportedly interested in Croatia Airlines 27
Croatia’s INA to spin off filling stations network 28
Croatia drops two places in Paying Taxes 2016 survey 28
Hungary’s MOL might seek to increase stake in Croatia’s INA 29
POLITICS 30
Croatian new parliament fails to elect speaker 30
Former Croatian PM Sanader released from custody 31
Biden calls on Western Balkans to improve cross-border cooperation 32
Croatian parliamentary negotiations complicated by formation of new party within Most 33
Croatia to accept only refugees coming from war zones 34
Ruling SDP loses Croatia election but opposition HDZ fails to win it 34

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