Boston, MA -- (ReleaseWire) -- 04/15/2014 -- Economy Set To Remain Flat In 2014
We remain somewhat pessimistic about the economic outlook for Croatia in 2014. Since our last quarterly shipping report, we have trimmed back our predicted GDP growth further, to only 0.4% (previously 0.6%), coming after an estimated contraction of 0.6% in 2013. The problem as we see it is that the country is making slow progress tackling its heavy overhang of debt, and remains stuck in the early stages of a deleveraging process.
Private consumption is likely to be the most significant drag on real GDP growth in 2014, as rising unemployment (currently at 17.6%), stagnant wage growth, and weak lending from banks continues to weigh on spending. Despite some progress in reducing private sector debt, the country's external debt burden has actually increased because of government spending. With the fiscal deficit calculated at 5.6% of GDP in 2013, the EU has imposed its Excessive Deficit Procedure (EDP) on Croatia increasing pressure to control spending. Tourism receipts are looking strong, but the export picture remains weak. The net result is that growth will be low this year and for a number of years to come: our long-term outlook over the next 10 years project a paltry average annual growth rate of 1.9%.
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Looking at the ports and shipping sector, we believe annual bulk cargo percentage growth will remain in the low single digits, in line with the slow and painful recovery process and a continuing weak trade performance. The largely import and transit-led box traffic outlook is more encouraging, with growth in the higher single digits (between 5% and 10% per annum). This, at least in part, reflects the country's role as a regional gateway for transit trade. On the whole, we do not believe bulk tonnage handled at Croatia's main ports will exceed the record levels achieved back in 2007/08. On the container side, however, we see steady growth boosted by regional import demand.
Headline Industry Data
- In 2014, port of Rijeka tonnage volume will rise by 1.9% to 8.871mn tonnes, after 1.9% growth in 2013. Over the medium term to 2018, we project average annual growth of 2.5%.
- 2014 port of Rijeka container throughput forecast to grow 8.3% to 198,887 twenty-foot equivalent units (TEUs). Over the medium term, we project a good average annual increase of 7.7%, significantly ahead of GDP.
- 2014 total trade growth forecast at zero, following a contraction of 1.1% in 2013 and 1.6% in 2012.
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