Macroeconomic Forecast Croatia

As a result of the deterioration in trade dynamics, unwinding of domestic demand, and contraction in external credit availability, the Croatian economy only mustered up growth of 1.6% y-o-y during Q308, down from 3.4% the previous quarter. Given the severity of the slowdown in the third quarter, and our belief that both domestic and external demand conditions will get worse before they get better, we have revised down our economic growth forecasts for 2009 and 2010. Specifically, whereas we were previously targeting growth of 2.1% in 2009, we now expect to see a contraction of 1.5%, coinciding with the deepening of the eurozone recession (with growth of -1.6% currently pencilled in).

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