Croatia 

Croatia country policy

Policy established 12 November 2009

• ILC, bank guarantee or central public guarantee (unconditional)
• The country ceiling is 1000 mln euro
• Early warning signal 500 mln euro
• - of which was used as at 2012-02-29 0 mln euro

Country class: 5

Croatia country facts

Atradius Dutch State Business Economic Research
Country Report last updated :  10 September 2011 
Country :  CROATIA 

Political Situation
Rather Stable

Head of state
President Ivo Josipovic.

Form of government
Centre-right coalition of the Croatian Democratic Union (HDZ), Croatian Peasants’ Party (HSS) and the Social Liberal party (HSLS), headed by p.m. Jadranka Kosor.

Internal Economic Situation
Shallow Recovery From Recession

General situation
The economy is struggling to overcome the recession of 2009/’10: the 2011H1 performance continued to be weak, eventually leading to a real annual GDP-growth of 1% or even less. The poor macro environment is mainly caused by depressed domestic demand due to weak labour and housing markets and subdued lending by banks. Net exports are performing better. The economic structure of Croatia has remained weak as well despite some privatisations: too many state-owned firms are lossmaking and need to be privatised urgently, incl. sectors such as textiles, steel and even tourism. Some rise of inflation to 2.2% 2011Q1. Despite progress Croatia is still underperforming on the TI-corruption index (62nd   of 178); black market activities are only partly disguising the high unemployment rate (18%).
 
External Economic Situation :  Very High External Indebtedness

Main sources of foreign exchange
Tourism, private transfers, industrial products: textiles, chemicals, transports.

Main foreign markets
EU (62%): Italy 19%, Germany 10%; Bosnia (14%).

Main expenses of foreign exchange
Machinery and transport equipment (32%).

Balance of payments 
After years of constantly widening trade and current account gaps, improved external finance since 2009 because imports dropped faster than exports. Less FDI are not covering these declined deficits, urging Croatia to tap the capital markets regularly with the issue of eurobonds. Although no official pegging, HNB is regularly intervening in the market to keep the kuna stable vs euro.