Boston, MA -- (SBWIRE) -- 11/17/2014 -- Core Views

- Croatia's economy will continue along a low growth trajectory over the next few quarters, and may even remain in recession for a seventh consecutive year in 2015.
- We believe Croatia will eventually need an EU/IMF loan arrangement to help cover its budget deficit and implement much needed structural reforms. However, this is unlikely to happen until at least 2016.
- Croatia's trade deficit will begin expanding amidst weak exports and a slight recovery in domestic demand. This will ensure that the current account surplus begins shrinking over the coming years.
- Inflationary pressures will remain weak in Croatia. The central bank will remain focused on kuna stability to anchor inflation expectations and protect the country's large FX loan liability.
- Croatia's dire domestic economy will continue eroding support for the ruling Kukuriku coalition. The economy would need to post a remarkable turnaround for the coalition to have any chance of winning re-election in the 2015 parliamentary elections.

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Major Forecast Changes

- We have revised down our forecasts for the kuna to average HRK7.6400/EUR in 2014, from HRK7.6700/EUR previously, on the back of robust tourism receipts in the first half of the year.

Key Risks To Outlook

- We believe the main risks to our real GDP growth forecasts are weighted to the downside. We believe the country could remain in recession in 2015 if domestic demand picks up even more slowly than we currently anticipate.
- We still believe the country could potentially 'muddle through' and avoid an EU/IMF bailout, but this would require the government to demonstrate a sudden and significant commitment to fiscal austerity over the next few years. A failure to agree deal could allow the government to shy away from implementing structural reforms, which would end up restricting the country's growth potential further down the line.

The Croatia Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Croatia and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Croatia's economic, political and financial prospects through end-2018, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

- Forecast the pace and stability of Croatia's economic and industry growth through end-2018.
- Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
- Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
- Contextualise Croatia's country risks against regional peers using BMI's country comparative Risk Rankings system.
- Evaluate external threats to doing business in Croatia, including currency volatility, the commodity price boom and protectionist policies.

The Croatia Business Forecast Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Business Environment and Key Sector Outlook.

Economic Outlook:

How will the Croatia economic policy-making and performance impact on corporate profitability over 2014-2018?

BMI provides our fully independent 5-year forecasts for Croatia through end-2018 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Croatia Business Forecast Report features BMI's forecasts with supporting analysis for 2014 through to end-2018, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

- Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
- BMI's comprehensive Risk Rankings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

- Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
- Balance of Payments - trade and investment, current and capital account.
- Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
- Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.

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