Our comprehensive assessment of Croatia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Croatia, as well as the latest industry developments that could impact Croatia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Croatia before your competitors.

Country Risk

Croatia Country Risk

BMI View:

Core Views

  • Croatia will remain amongst the worst performing economies in the EU in 2015 and 2016.

  • Competitiveness issues are at the root of Croatia's problems, due to high labour costs, an inflexible labour market, and a cumbersome bureaucracy.

  • Successive administrations lack of appetite for reform suggests progress implementing badly needed structural reforms will be sluggish at best.

  • The ruling Kukuriku coalition faces a struggle to remain in power beyond 2016. But whichever party governs Croatia over the next few years will face a plethora of potentially insurmountable challenges.

Key Risks To Outlook

  • Croatia could easily remain in negative real GDP growth...

To read the full article Register for Free or Login

Croatia Operational Risk Coverage (9)

Croatia Operational Risk

BMI View:

Croatia offers moderate risks to incoming investors with regards to the labour market. The main risks stem from the large informal economy, high minimum wage, strong trade unions and labour courts, and a rigid and overregulated Employment Protection Legislation. However, the labour force has a high level of basic skills and is making strong progress in terms of primary education service delivery. Croatia's overall score of 52.6 out of 100 for Labour Market Risk places the country in 21st position regionally out of 31, between Hungary and Armenia.

Education levels in Croatia are generally high. This is mainly due to the high percentage of Croatia's students entering primary school continuing their education to the secondary level (83.1%), and even the tertiary level (21.6%), with a lot of government spending allocated to higher levels of education. On a less positive note, learning is very rigid and facts-focused in Croatia,...

To read the full article Register for Free or Login

Croatia Crime & Security

BMI View:

Croatia is generally a safe place for foreign workers, expatriates and tourists, with only a residual threat of crime, and a virtually non-existent risk of terrorism and interstate conflict. In addition, security services in Croatia are well-trained and equipped, and respond effectively to call-outs. Nevertheless, standard precautions vis-a-vis personal safety should be observed throughout the country.

The greatest risks for investors and foreign businesses in our Crime and Security Index relate to criminal risks in Croatia. Overall crime rates are low with an average of 477 crimes per 100,000 inhabitants. Crime rates have been steadily decreasing in recent years, especially with regards to assault and murder, but business-related crime, such as (in order of prevalence) fraud by outsiders (16.7%), burglary (6.8%), vandalism (5.1%), extortion (0.7%) and motor vehicle theft (0.4%), is more prevalent in Croatia than the average in the Western...

To read the full article Register for Free or Login

Croatia Labour Market

BMI View:

Croatia's mediocre performance in BMI's Labour Market Risk Index is mainly due to the limited size of the labour force, high unemployment, low female participation rate, large informal economy, overqualification and skills mismatches of graduates for the job market, elevated labour costs due to a high minimum wage in the region, strong trade unions and labour courts, and a rigid and overregulated Employment Protection Legislation. Croatia's overall score of 55.1 out of 100 for Labour Market Risk places the country on 20th position regionally out of 30.

The Availability Of Labour in Croatia is below the regional average at 24 th position, with a score of 50.1 out of 100 in BMI's Labour Market Risk Index, because of the small size of the labour force (diminished during the 1990s war), the low female participation rate and urbanisation of the population and a large share of the informal...

To read the full article Register for Free or Login

Croatia Logistics

BMI View:

BMI View: Despite heavy damage to the transport sector during the civil war, Croatia offers one of the best transport networks in the Emerging Europe region. This is due to intensive investment, with the help of global financial institutions, in the country's road, rail, maritime port and airport infrastructure after the conflict. Croatia's performs strongly in our Logistics Risk Index with a score of 60.0 out of 100, placing 10th in the region, substantially above of neighbours Serbia and Bosnia.

...

To read the full article Register for Free or Login

Croatia Trade & Investment

BMI View:

BMI View: Businesses and investors stand to benefit from the high level of openness to foreign direct investment in Croatia, due to pro-investment reforms of the regulatory framework which aims to treat foreign and domestic investors equally. There are however some concerns surrounding indirect discrimination against foreign investors due to corruption in the judicial system. Croatia's financial markets are more developed than in other countries in the region, such as Bosnia, although Croatia's capital markets are suffering from a lack of liquidity. Somewhat offsetting this, Croatia has excellent access to international markets, thus offering an alternative market place for trading...

To read the full article Register for Free or Login

Croatia Industry Coverage (17)

Autos

Croatia Autos

BMI View:

2014 has proved a very positive year for new passenger car sales within Croatia. Indeed, it has marked the first year since the financial crisis when a long period of pent-up demand for new vehicles within Croatia finally resulted in a strong sales performance by the local market. As such, this strong demand created in the automotive sector over the course of 2010 to 2013 - when sales remained at less than half their 2008 levels - outweighed our previous view that Croatia's passenger car market still had room to fall alongside falling private consumption and a sluggish macroeconomic backdrop.

Over the first 10 months of the year, passenger car (PC) sales were up by 24.4% year-on-year (y-o-y), at 30,064 units, according to figures from the European Auto Manufacturers Association (ACEA).

Commercial vehicle (CV) sales have also been powering ahead. 9M14 figures from ACEA show a total of 4,181 light commercial vehicles (...

To read the full article Register for Free or Login

Commercial Banking

Croatia Commercial Banking

BMI View:

...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

To read the full article Register for Free or Login

Consumer Electronics

Croatia Consumer Electronics

BMI View:

BMI View: A weak economic environment continues to weigh heavy on the Croatian consumer electronics market as 2014 marks the sixth consecutive year of GDP contraction. Declining consumption, high unemployment, currency depreciation and fiscal austerity continue to squeeze demand for devices, countering the positive impact of some technology trends such as adoption of smartphones, tablets and smart TVs. BMI believes big-ticket items such as TVs and PCs remain hardest hit by the economic challenges facing Croatia, leaving the handset market as the outperforming sub-segment. The economy will face slow recovery, which should start filtering from 2016; declining average selling prices in several key product categories and comparatively low penetration rates should drive...

To read the full article Register for Free or Login

Defence & Security

Croatia Defence & Security

BMI View:

BMI View: Croatia is one of the major nations comprising the former Yugoslavia. The country witnessed significant destruction during the Balkans Wars of the 1990s, at the same time, Croatia was also one of the conflict's major belligerents. One of the consequences of the country's participation in the Balkans Wars was that it developed a high level of competency as regards the research, design, development and production of platforms and subsystems for land forces. This was a direct result of the country's pressing need to ensure that its armed forces were equipped during these conflicts, as a result of a United Nations-led embargo in place on all of the belligerents involved in the conflict.

As a consequence of its self-sufficiency in the provision of land armaments, Croatia emerged from the conflict with a significant land armaments industry capable of not only...

To read the full article Register for Free or Login

Food & Drink

Croatia Food & Drink

BMI View:

BMI View: Croatia will remain among the worst performing economies in the EU in 2015 and 2016. Competitiveness issues are at the root of Croatia's problems, due to high labour costs, an inflexible labour market and a cumbersome bureaucracy. We remain sceptical that any recovery in private consumption will be robust. Unemployment (around 18%) remains high, wage growth is sluggish and households have made limited progress on deleveraging. These factors will weigh on food consumption growth, with both nominal and per capita spending remaining subdued.

Headline Industry Data (local currency)

  • Total food consumption growth in 2015: +0.2%; compound annual growth rate (CAGR) 2014 to 2019: +1.2%.

    ...

To read the full article Register for Free or Login

Freight Transport

Croatia Freight Transport

BMI View:

Following a year in which BMI believes saw mixed growth dynamics across Croatia's freight transport sector, 2015 will signal improving freight volumes in line with the macroeconomic outlook for the country and the region.

Total trade is projected to pick up with our Country Risk desk forecasting a year-on-year (y-o-y) increase of 1.36% in 2015 following an estimated growth of 1.12% in 2014.

Road freight is to continue to dominate the sector and is projected to grow by 4% in 2015. The sector did not manage to defy the downturn, with volumes plummeting in 2009-2012, and is struggling to recover.

Headline Industry Data

  • 2015 Air freight tonnage is expected to grow by 1.1%

  • 2015 Rail freight is forecast to grow by 1.6%

  • 2015 Port of Rijeka throughput is...

To read the full article Register for Free or Login

Information Technology

Croatia Information Technology

BMI View:

BMI View: Croatia's entrance into the EU was completed in July 2013, and this should be a key driver of ICT growth, facilitating increased trade between European markets. Over the next five years, the process of EU convergence, which still has far to go, will drive spending on IT projects. Funds such as the EU Cohesion fund are already providing funding for IT projects related to modernisation initiatives in both public and business segments. However, private consumption levels in Croatia are expected to remain weak in 2014 and 2015, with fiscal consolidation and weak investment spending set to weigh on headline growth at just 0...

To read the full article Register for Free or Login

Infrastructure

Croatia Infrastructure

BMI View:

BMI View: Croatia will gently move out of recession in 2015 with a paltry 0.4% real GDP growth amid an environment of fiscal initiatives and public sector cuts aimed at reducing 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 for infrastructure is in the form of large funds available through EU facilities, of which, fortunately, there are many. The railways and energy infrastructure sub-sectors are forecast to benefit in the near term from extensive European integration and modernisation projects. However, the residential and non-residential building subsectors will continue to stagnate, as they miss out on EU focus and lose out to a...

To read the full article Register for Free or Login

Insurance

Croatia Insurance

BMI View:

BMI View: Through H115, nothing has happened to change our view that Croatia remains a low growth insurance market. Premiums in the important motor vehicle sub-sector of the non-life segment may have stabilised: however, competitive pressures will contain future growth in premiums. In the life segment, the continuation of strong sales of unit-linked and single premium products has surprised us. We remain of the view that growth in life premiums (including renewal premiums) will be fairly slow over the course of the forecast period. This is because of structural constraints such as the low incomes of some households (who are basically unable to save) and preferences for other channels of organised savings. We would not be surprised if consolidation of the insurance sector continues.

In many ways, Croatia is an archetypal Central and Eastern European market for insurance. It is dominated by non-...

To read the full article Register for Free or Login

Medical Devices

Croatia Medical Devices

BMI View:

BMI Industry View: The Croatian medical device market is expected to increase by a CAGR of 3.0% in US dollar terms over the 2013-2018 period. Growth will be driven by EU accession, which took place in July 2013. No major changes are expected to take place in the domestic medical device industry in the short term, so the heavy reliance on imports will continue.

Headline Industry Forecasts

  • In 2013, the Croatian medical device market was estimated at USD214.3mn, or USD50 per capita. This market size is comparable to Bulgaria; in per capita terms, the market is similar to Russia. The 2008-2013 CAGR was estimated at -2.1% in US dollar terms, but the market is...

To read the full article Register for Free or Login

Oil & Gas

Croatia Oil & Gas

BMI View:

BMI View: Contested maritime borders have emerged as major source of uncertainty for Croatia's nascent offshore oil and gas sector. Tensions over borders and weak global prices, will weigh on the outlook for investment in Croatia's prospective but unproven offshore acreage. A positive investment decision on the proposed Krk liquefied natural gas (LNG) import terminal could boost demand for gas and see Croatia develop into regional supply hub.

Headline Forecasts (Croatia 2013-2019)
2013 2014 2015f ...

To read the full article Register for Free or Login

Pharmaceuticals & Healthcare

Croatia Pharmaceuticals & Healthcare

BMI View:

BMI View: The Croatian Health Insurance Fund (HZZO)'s independence will enable it to further rationalise its healthcare expenditure without political interference. We see the HZZO utilising its purchasing power to drive down drug prices from pharmaceutical companies in return for wider reimbursement coverage. As a result, pharmaceutical sales growth in Croatia will be moderated over the medium-term, with negative implications for multinational drugmakers.

Headline Expenditure Projections

  • Pharmaceuticals: HRK6.83bn (USD1.20bn) in 2014 to...

To read the full article Register for Free or Login

Real Estate

Croatia Real Estate

BMI View:

BMI View:  The dire macroeconomic situation, rising public debt levels, falling consumption levels and low investor confidence are all factors hinting towards a bleak 2015 for the commercial real estate market. Continuously falling demand, despite few new developments in the pipeline, is expected to lead to stagnating rents in all commercial sub-sectors in two of our three monitored cities over the next 24 months. Net yields will decline across the sub-sectors.in two of our three cities, with only Zadar expected to post positive movement.

Rising public debt...

To read the full article Register for Free or Login

Retail

Croatia Retail

BMI View:

BMI View: The Croatian economy will continue to stagnate over the remainder of 2015, with real GDP growing only 0.1% this year. Net household income will post only modest gains over the forecast period, providing limited growth opportunities for retailers. However, the debt write-off for the poorest households as well the growth of inbound tourism will help the country's retail sector to stay afloat.

Croatia continues to suffer from chronic economic problems. The newest EU member is projected to have the first year of real GDP growth this year since 2008; however, public finances and employment remain major issues in the country. Estimated at 5.6% of GDP, Croatia will have the largest budget deficit among the EU countries this year. With poor management of public finances,...

To read the full article Register for Free or Login

Shipping

Croatia Shipping

BMI View:

Weak recovery on the cards

Croatia's main maritime hub, the Port of Rijeka, will see low bulk tonnage growth this year, with a slightly stronger expansion of container traffic. Performance at the ports of Ploce and Sibenik will be mixed, with container throughout at the latter falling. The reason for this disparate performance will be the weak state of the domestic economy and the country's poor foreign trade showing. After estimated strong growth in 2014, we expect foreign trade expansion to ease back again in 2015.

We have edged up our growth forecast for the Croatian economy this year, but it remains a stand-still scenario. Consistent with a run of year-on-year contractions since 2009, GDP again fell by 0.4% in 2014. For 2015 we now predict growth of 0.3% (up from 0.1% previously), with the pace of expansion rising marginally to 1.0% in 2016. Positives include the effect of...

To read the full article Register for Free or Login

Telecommunications

Croatia Telecommunications

BMI View:

BMI View: The Croatian telecoms market is now quite mature but continues to be focused around low-cost prepaid services. Mobile businesses are striving to upsell low-value prepaid customers to more lucrative postpaid plans, but their efforts are being undermined by regulator-imposed cuts to key revenue streams and more aggressive pricing of new products and services. Multiplay strategies offer a degree of respite, but bundling multiple services on dwindling numbers of accounts is ARPU-dilutive and does not show off the potential of convergence-led strategies in the best light. Economic headwinds continue to persist and - other than in content and smart device applications - there are scant opportunities for infrastructure-focused new investors.

Key Data

  • ...

To read the full article Register for Free or Login

Tourism

Croatia Tourism

BMI View:

BMI Vi ew: Croatia's tourism sector continues to be overly reliant on tourism from European countries and therefore vulnerable to regional crises. Its accommodation infrastructure remains inadequate, with the vast majority of tourists preferring privately owned accommodation to the largely low-quality hotels. The Tourism Development Plan for 2014-2020 outlines a strategy that will facilitate external investment in infrastructure through the softening of legislation. The plan will also seek to attract more tourism outside of the peak summer season through a rebranding of the...

To read the full article Register for Free or Login

Latest Croatia Articles

  • Oil prices will remain anchored until 2018. The return of Iranian oil to ma...

  • China's equity crash is far from over, and is likely to expose the weak und...

  • Three major global events have occurred more or less simultaneously in July...

Latest Croatia Podcasts

  • Having cut their teeth in Africa, China's mammoth state-backed infrast...

  • The operating environment for energy firms in the European Union is ex...