Boston, MA -- (SBWIRE) -- 04/10/2014 -- Croatia's retail sector holds promise for potential investors. The country's unemployment rate is to fall dramatically over BMI's forecast period (2014-2018), from 20% to 14%, with the percentage of households in the middle-income wage bracket of US$10,000+ to exceed 50%. However, economic growth continues to be sluggish, despite the country's accession to the EU in 2013, with real GDP growth of just 0.6% posited for 2014. All headline retail sector bar clothing & footwear will post growth over the forecast period.

Over the long term, Croatia has significant market growth potential. Luxury items are expected to become increasingly popular from a relatively low base, as consumers become more cash rich and time-poor due to longer working hours and the stresses of modern life. Customers will not necessarily spend more but we anticipate volume sales increasing as retailers strive to meet consumers' demands for high quality at low prices. Large, foreign retail names are becoming more and more frequent players in the country, bringing with them recognisable brands, a greater choice to the customer and all at low prices. The ever more vibrant tourism industry also provides a significant boost to retail as foreign visitors can account for up to 50% of all shoppers in many outlets, especially in the summer months. In general, investment levels in retail will rise as improvements are made to the domestic business environment as a result of EU convergence and in fact, the Croatian retail market provides plenty of growth opportunities for domestic and foreign players.

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Growth could be hindered, however, by the country's small, ageing and declining population, which is to decrease in size by 0.4% per annum over the forecast period. Household size is set to decrease from 2.8 to 2.7, with the labour force to also decrease, by 0.8% per annum. This will curtail the potential size of the retail market, although growth will be buoyed by rising incomes and a penchant for premium brands.

Recent Developments:

- In January 2014, it was reported that Agrokor is expected to close its deal with Mercator, completing the acquisition of the latter. The consortium of 12 shareholders that holds the majority stake in Mercator said that a compromise solution had been tabled.
- IKEA has begun construction on their first store in Croatia. Based just outside of Zagreb and due to open in the summer of 2014, the store represents the first step in a EUR100mn (US$133mn) investment in the country.
- In December 2013, it was reported that Agrokor's retail portfolio had acquired by Global and CPA:18 - Global, two real estate investment trusts owned by WP Carey. Three stores are in Zagreb and two stores are in Split and Zadar. The five stores are leased to Konzum.

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