Macroeconomic Forecast Croatia

We believe exchange rate stability will prevail in 2012 but expect a steady depreciation of the kuna against the major currencies on the back of a weak economic growth outlook and wider risk aversion towards frontier market assets. Given the aforementioned high degree of external obligations in the economy, we believe the stability of the kuna, especially against the euro, will remain a key policy objective of the central bank. We target an average HRK7.43/EUR and HRK5.38/US$ in 2012.

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