Macroeconomic Forecast Croatia

August 2005 | Macroeconomic Forecasts

Croatia's trade deficit widened in Q205, according to the Central Bureau of Statistics. Despite imports and exports growing at the same rate (14.4% in US dollar terms), the higher base for imports meant an overall deterioration in the foreign trade balance to US$4.8bn in H105. We currently expect the deficit to reach US$8.7bn at the end of 2005, rising slightly further over the forecast period. Sluggish demand in Croatia's main trading partner, the EU, has prevented a faster growth in exports, whilst high global energy prices ensure imports continue to expand. Whilst a trade deficit does not necessarily represent a major risk in itself, the 33% fall in FDI in Q105 reported by the national bank increases concerns that an external shortfall will not be covered by incoming investment.

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