ZAGREB, 6 July, 2021 - The main Zagreb Stock Exchange (ZSE) indices finished in negative territory on Tuesday for the seventh consecutive trading day, with a considerably higher turnover than in the previous days. 

The Crobex shed 0.35% to end the day at 1,960 points, while the Crobex10 shrank by 0.39% to 1,210 points.

Turnover at the close of the trading session was HRK 9.8 million, which is 6.3 million higher than on Monday.

The highest turnover, of HRK 4.78 million, was generated by the Končar Electrical Industry stock. Its price remained stable at HRK 750.

The only other stock to pass the turnover mark of one million kuna was that of plastic car parts manufacturer AD Plastik, turning over HRK 1.3 million. The price of its share fell by 0.26% to HRK 193.

A total of 33 stocks traded today, with 9 of them registering price increases, 18 recording price decreases and 6 remaining stable in price.

(€1 = HRK 7.484635)

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ZAGREB, 6 July, 2021 - The Croatian Pension Insurance Institute (HZMO) said on Tuesday that the number of pension insurance contributions had been on the rise for five months in a row, and the number of insurees was higher by 3.54% at the end of this June compared to June 2020.

At the end of this June, the contributions were paid by 1,596,112 insurees, or by 54,499 people more than the year before.

Broken down by sector, the highest number of pension insurees was registered in the processing industry (more than 246,000 people covered by insurance contributions).

The rise in the number of insurees has been registered in several sectors, for instance, in construction, IT, the hospitality industry and so on.

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ZAGREB, 6 July, 2021 - Investment in private equity in Croatia stands at 0.3% of GDP, whereby it lags behind the most successful countries in that segment, the Croatian Bank for Reconstruction and Development (HBOR) CEO said on Tuesday, adding that the HBOR would participate in launching a €40 billion technology transfer fund.

Tamara Perko was speaking at the Bestinvest.hr conference organised by the Croatian Private Equity and Venture Capital Association, at which awards for the best private equity and venture capital investment were presented.

Perko said the HBOR contributed significantly to the development of private equity and venture capital in the past two years.

She said that together with the European Investment Fund (EIF) and private investors, the HBOR invested in  €46 million worth FIL Rouge Capital, the first venture capital fund investing only in Croatia.

Last year the HBOR, together with the EIF, established three more equity funds in Croatia, the Prosperus Growth Fund, the Adriatic Structured Equity Fund, and the Croatian Mezzanine Debt Fund, investing over €80 million.

Perko said that together with the EIF and the Slovenian development bank, the HBOR planned to invest in a fifth fund, the Transfer Technology Fund. In terms of patents, Croatia is within the EU average, but is near the bottom when it comes to their applicability in the economy, she added.

The purpose of the Transfer Technology Fund is to commercialise science and finance societies that will be established in science and research institutions and work together with the economic sector by providing the necessary products, services and processes, Perko said.

She said that Estonia invested 1.3% in private equity and was among the countries investing the most in that segment, adding that Croatia, with only 0.3%, "must run four times faster to catch up with the best."

Minister underlines importance of industries based on new technologies

Economy and Sustainable Development Minister Tomislav Ćorić underlined the importance of technology transfer and new technologies for the Croatian economy whose development, he said, must be based on those industries.

He said the venture and private equity scene in Croatia developed in a good direction over the past ten, 15 years. The fact that classic financing sources often are not enough additionally underlines the importance of the fund industry, he added.

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ZAGREB, 30 June, 2021 - The main Zagreb Stock Exchange indices dived significantly on Wednesday, slipping for the third day in a row, however they managed to end June in the green and doubled their increase since the start of the year.

The Crobex dropped by 0.78% to 1,980 points while the Crobex10 fell by 0.67% to 1,218 points. Both indices closed in the red for three days running now.

This however, is the fourth week that indices have increased and they have ended the month in the green. The Crobex is 2.5% stronger month on month and the Crobex10 is 1.8% stronger.

Regular turnover on Wednesday amounted to a modest HRK 4 million or about 1.8 million less than on Tuesday.

Not one stock crossed the million kuna mark.

The most liquid stock was the HT telecommunications company with a turnover of HRK 807,000. The price of its share increased by 0.54% to HRK 187.50.

 A total of 30 stocks traded today, with 3 of them recording share price increases, 19 registering share price decreases and 8 remaining unchanged in price.

(€1 = HRK 7.491244)

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ZAGREB, 30 June, 2021 - The current account of the balance of payments ran a deficit of €1.36 billion in the first quarter of 2021, thus narrowing the gap by €23.3 million or 1.7% from the same period of 2020, according to figures the Croatian National Bank (HNB) released on Wednesday.

A surplus on the capital account increased by 20.9% or €45 million in Q1 to €260 million.

As a result, the balance of payments of the current and capital accounts in Q1 generated a deficit of €1.1 billion, which is €100 million less than in the corresponding period in 2020.

"That improvement is exclusively the result of the surplus in the secondary income and capital transaction accounts due to a marked increase in net income from transactions with the EU budget. The favourable trend of absorbing EU budget funds, however, on the most part were annulled by a pronounced deterioration of balance of primary income accounts and, to a lesser extent, by the decreased net export of services," according to HNB analysts.

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ZAGREB, 29 June, 2021 - The main Zagreb Stock Exchange indices slipped mildly on Tuesday, falling for the second day in a row, with investors focusing on the Adris tourism and insurance group's stock.

The Crobex decreased by 0.28% to 1,996 points and the Crobex10 fell by 0.24% to 1,226 points.

Regular turnover amounted to HRK 5.8 million, about 2 million less than on Monday.

An additional HRK 5.4 million was generated in block transactions, with the HT telecommunications company generating a turnover of HRK 3.34 million and the Končar Electrical Industry generating HRK 2.04 million. HT shares closed at HRK 186.5 while the Končar shares closed at HRK 755.

The highest turnover in regular trading was generated by the preferred shares of the Adris tourism and insurance group, with a turnover of HRK 1.9 million. Its shares dropped by 1.57% in price to HRK 440.

Adris ordinary shares generated a turnover of HRK 1 million, with their price remaining at HRK 488.

A total of 34 stocks traded today, with 11 of them recording share price increases, 15 registering share price decreases and 8 remaining unchanged in price.

(€1 = HRK 7.492921)

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ZAGREB, 29 June, 2021 - Croatia's economy will grow by 6% in 2021, the European Reconstruction and Development Bank (EBRD) says in its forecast on Tuesday, almost doubling its previous estimate in anticipation of vaccination against COVID-19 and tourism recovery.

In October 2020 the EBRD forecast that Croatia's economy would grow by 3.5% in 2021.

In 2020, marked by the coronavirus pandemic, Croatia's GDP dropped by 8.4%, slightly less than the EBRD had forecast last autumn.

The latest forecast shows that by the end of 2021 the economy will contract by 2.9% compared to the pre-pandemic year 2019.

In 2022 the growth of economic activity is expected to slow down to 4.5%.

Tourism and European fund

The COVID-19 pandemic inflicted significant damage on the Croatian economy in 2020, and a key channel for disruption was tourism, which normally accounts for around 20 per cent of GDP, says the EBRD.

Nevertheless, the economy inched closer to prepandemic levels in the first quarter of 2021, with GDP growth at -0.7 per cent year-on-year (5.8 per cent quarter-on-quarter) on the back of robust exports of goods, investments in construction and a partial recovery in private consumption.

The strong momentum of the economy will likely be maintained in the remaining quarters of 2021 as the vaccination campaign progresses and tourism picks up, the EBRD says.

If tourism invoices reach 70 per cent of 2019 levels, as expected, GDP could expand by 6 per cent in 2021, it says.

In 2022, incoming EU funds and post-earthquake reconstruction will boost investment, and together with expanding private consumption and recovering tourism, will continue the high-growth momentum at around 4.5 per cent.

The main risk to the outlook remains the pandemic evolution, as new variants and insufficient vaccination could lead to other infection waves, the EBRD notes.

The EBRD also significantly increased its growth estimate for 2021 for the region of Europe and the Baltics, which includes Croatia, by 1.3 percentage points to 4.8%. It expects a similar growth rate in 2022.

In the entire region where the EBRD operates, economic activity is expected to grow in 2021 by 4.2%, 0.6 percentage points more than forecast last autumn.

In 2022, economic activity in the EBRD region is expected to slow down to 3.9%.

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ZAGREB, 23 June, 2021 - Despite the considerable setback dealt by the pandemic, Croatia has a rare opportunity in the next five years to restore its economy to health and to ramp up the public investments necessary for appreciably higher growth rates with the help of EU funds, an IMF mission says in a Concluding Statement.

"Following a painful contraction of 8 percent in 2020, the economy looks set for growth between 5 and 6 percent in 2021 driven by a rebound in the services sector and investment - provided the pandemic does not provide further unwelcome surprises," the mission says the statement published on Wednesday after visiting Croatia as part of regular consultations with member states.

"With sufficient luck regarding tourism outcomes, and a successful vaccination drive within the next months, growth could even exceed 6 percent this year. Assuming the pandemic fades by the end of this year, growth could remain high over the next few years, if the country makes full and timely use of the potentially sizable forthcoming inflow of EU funds," according to the statement.

"Since the first quarter, the recovery has picked up noticeably with areas like construction and manufacturing already reaching activity levels higher than in 2019. Overall, the number of registered unemployed persons has fallen by nearly 13 percent since a year ago. However, tourism and directly related sectors are yet to fully recover. This process is likely to take another year or two."

Swift measures by the authorities

"Between the pandemic and two large earthquakes, Croatia has been severely tested, and the country’s resilience has come through. The economic contraction in 2020 - painful as it has been -was not as severe as those experienced by many other economies with a strong tourism component. This is mainly due to the swift measures enacted by the authorities," the IMF staff said.

"Support measures must remain in place until the health of the population and the economy have been fully restored. As conditions improve, support measures need to rotate toward preparing the workforce for the post-pandemic world, and facilitating balance sheet repair of viable businesses. Thereafter, the challenge of once again reducing deficits and the public debt whilst shifting growth into a new high gear must be taken on. The generous funding from the EU represents a historic opportunity, to help meet these challenges successfully - an opportunity that must be fully utilized, in a timely fashion," the IMF mission said.

Not the right time to further cut taxes

Noting the government's support measures, the mission said, "Just as these support measures were essential during the worst of the crisis, they must now be better targeted to lagging sectors of the economy - and they must remain in place till the economy has more fully recovered."

"It is paramount that a vaccination drive be as successful and widespread as possible, that extra healthcare costs are fully met and arrears in the healthcare system are reduced to the maximum possible extent," according to the statement.

"Complementing the use of funds such as the European Social Fund, fiscal resources saved this year due to improving conditions can also be usefully redeployed to train more workers in sectors like greening and digitalization."

"In sum, in the view of IMF staff, the most important fiscal goal in 2021 is to focus on spending available resources wisely to restore the economy to health. If this is successfully accomplished this year, it will more firmly ground the efforts to reduce the deficit and debt over the next few years," said staff said in the Concluding Statement.

"Regarding revenues, the authorities need to conserve all available resources to meet any unexpected expenditures into 2022, and well beyond. This is one clear lesson from this completely unforeseen shock the world has suffered. We hold that this is not the right time for any further tax cuts or weakening of the tax base. Current conditions are still far too fragile for the country to afford them," they said. 

Recovery and Resilience Fund provides unique opportunity for economic development

They said that there were few doubts that a post-pandemic "will be more digitalized in the most basic aspects of our lives, and that it should be greener. In these two areas, Croatia has great strides to take, from which there will be a sizable return on investment, for decades to come."

The IMF reiterated that "our most important recommendation was to raise public investment, for the sake of future growth. Now, that conviction has only deepened, as it is important to acknowledge a singular aspect in which Croatia is actually better off than it was before the pandemic."

That is "the generous allocation of EU Funds, including from the Recovery and Resilience Fund (RRF). The RRF resources amount to 10.6 percent of GDP in grants to be utilized by 2026."

"These funds reflect a truly unique opportunity along the path of economic development, which many countries in the world are not fortunate enough to have. It is important for all stakeholders in Croatia to fully understand the significance of this opportunity. These funds are available, but they need to be absorbed efficiently, and in a timely manner. They must also be accompanied by needed reforms," the IMF said.

"Thanks to the influx of these EU funds beginning towards the end of this year, Croatia can significantly upgrade its public capital stock, decarbonize its economy, catch up with digitalization, and improve its maritime and rail transport systems. If the projected investments go according to plan, we currently assess that the funds from the RRF alone could add as much as 2.9 percentage points to real GDP over the next twenty years."

Opportunity to reduce income gap in relation to EU

"When the effects of the planned reforms, as well as the other EU structural funds are put together, Croatia now has its best chance since independence to significantly narrow the current 35% gap in per capita income with respect to the EU average," the mission said.

It added that "the prospect of living in a vibrant society with prosperity rapidly converging to EU levels could cause the young to fundamentally re-evaluate their future, thereby further stemming the tide of outward migration. That, in turn, would have the positive effect of reducing risks to the sustainability of the healthcare and pensions systems. It is very much possible now, and unlike ever before, to start a virtuous cycle - and to definitively escape past vicious circles."

The authorities have requested a Public Investment Management Assessment from the IMF, to take place in August 2021, the statement noted. "This assessment will help prepare an action plan to help make sure investment spending is effective, is sensitive to climate change related considerations and supports sustainable long-term growth."

The authorities’ National Recovery and Resilience Plan "has laid out major complementary reform commitments across five components: green and digital economy, public administration and judiciary, education, science and research, labor market and social protection, and healthcare. These are essential for the flexibility Croatia needs to operate its economy smoothly, once inside the eurozone."

Reforms needed for stronger public finance

Within the reform areas where the strength of public finances is the focus, IMF staff re-emphasizes the importance of support, from all stakeholders, for civil service and administrative reforms, "including a modernization of the public salary system, as well as improving the territorial organization of sub-national governments."

Support is also called for ending "stop-gap measures to take care of healthcare arrears, through an overhaul of its cost structure" and "exploring a more sustainable revenue base, to preserve healthcare quality standards."

The IMF also recommends the development and implementation of a full-fledged strategy for state-owned enterprises (SOEs), "including the separation of core from non-core businesses, and a strengthened oversight system for the former to ensure that they contribute their fair share to the budget by remaining financially durable after their public service obligations are met. The authorities’ commitments to sell some non-core SOEs over the next few years is a promising start." 

Also recommended is ensuring the long-term sustainability of the pension system, given population aging.

In addition to these areas, constantly improving the competitiveness of the Croatian economy through active dialogue with the private sector, remains essential.

"For the forthcoming increase in public investment to have maximum effect on the economy’s growth rate, it must be complemented by increases in private investment, as well. Reforms to the framework of debt restructuring, insolvency, and efforts to further improve predictability and efficiency in legal procedures remain central to unlocking more resources from investors, as it allows them to invest with greater confidence."

Banking system liquid and sufficiently capitalized

"Monetary policy remains highly expansionary, within the exchange rate anchor in place since 1993. This stance is appropriate given the need to nurse the economy fully back to health," the IMF staff said.

The recent pick-up in inflation is more likely than not to be transitory in nature, but should inflationary pressures prove more persistent than in the euro area, the central bank "may consider reducing excess liquidity in the banking system, while maintaining exchange rate stability."

"The banking system has remained liquid and is on average well capitalized," the mission said, adding that there was more than enough money to meet the demand for corporate loans.

Housing lending remains strong, while uninsured household cash loans have decreased, which the IMF said was positive.

Although the ratio of non-performing loans to total loans has remained stable, the so-called stage II loans, a forward-looking indicator of future asset quality problems, has risen - particularly for non-financial corporations. This development warrants continued close monitoring."

"The pandemic has not affected the upward trend in house prices in Zagreb and coastal areas. To the extent that housing purchases are not driven by excessive household borrowing, they do not constitute an immediate financial stability risk," the IMF said.

However, this also requires continued monitoring by the central bank, If circumstances require it, the central bank "might wish to consider putting in place more formal macro-prudential measures (than the current implicit debt-service-to-income ratio included in the Foreclosure Act)."

"Despite the considerable setback dealt by the pandemic, Croatia has a rare opportunity, over the next five years, to restore its people and economy to health. It can ramp up the public investments necessary for appreciably higher growth rates, with the help of EU funds. Such opportunities should not be taken for granted. The onus of efforts is not exclusively on the authorities. All stakeholders in society must offer them the support for vital reforms, while doing their parts to re-energize private investment, and innovation. Adopting the euro will help remove some existing economic frictions by removing exchange rate risk. Yet, reaping the full benefits of the currency union requires strong focus and preparation. A brighter future is very much within reach. The time to act is now," according to the Concluding Statement.

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ZAGREB, 23 June, 2021 - The main Zagreb Stock Exchange (ZSE) indices went up on Wednesday, the Crobex by 0.37% to 1,988.49 points and the Crobex 10 by 0.05% to 1,220.39 points.

Regular turnover amounted to just HRK 3.3 million or about HRK 400,000 less than on Monday.

An additional HRK 29 million was generated in block trading with HT telecom's stock at HRK 185 per share.

The HT telecom's stock also generated the highest turnover, of HRK 687,400, in the regular session, closing at HRK 184 per share.

(€1 = HRK 7.493222)

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ZAGREB, 23 June, 2021 - Total household loans in Croatia reached HRK 137.5 billion at the end of April 2021, increasing by HRK 3.6 billion from April 2020, Raiffeisen Bank (RBA) said in its recent analysis of data provided by the Croatian National Bank (HNB).

The annual nominal household loan growth rate was 2.7%, picking up from 1.6% in March 2021.

The share of kuna-denominated loans in total loans was 55%, and the nominal amount of loans was affected by the euro-kuna exchange rate, which was 0.4% lower on an annual level and 0.1% lower on a monthly level.

Compared with December 2020, household credit claims in April 2021 increased by 1% or HRK 1.35 billion as a result of a rise in the nominal value of housing loans and the impact of housing subsidy schemes on them.

Housing loans accounted for 46.4% of total household loans, reaching HRK 63.8 billion, up by 1.61 billion from the end of 2020. The annual growth rate picked up from 8.3% in March to 9% in April.

On the other hand, general-purpose cash loans, despite a slight monthly rise of 0.2% to HRK 52.5 billion, were 1.4% lower than in April 2020, while increasing by 0.5% compared with the end of 2020.

RBA analysts expect that the rise in household loans will continue this year on the back of subsidised housing loans and the need for funding for the reconstruction of housing damaged in last year's earthquakes.

With the easing of COVID-19 restrictions and the acceleration of economic activity, there will be an increase in demand for cash loans, but this year it will be more modest than two-digit growth rates seen between mid-2018 and the outbreak of the coronavirus pandemic, RBA said.

(€1 = HRK 7.5)

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