Download Economic Highlights – Croatia November 2000 1

Economic Highlights – Croatia
November 2000
Private consumption and net exports were the
main contributors to GDP growth in the second quarter
of 2000. Preliminary estimates on GDP growth in 2000
have been revised upwards from 2.8 to 3.8 percent.
However, investments, which have been declining for
four consecutive quarters, still remain sluggish.
Although third quarter data look promising (the number
of tourists’ nights in the first eight months was 44.6
percent higher than last year, real retail trade grew by
14 percent, while industrial production grew by 2.7
percent by September), developments in the fiscal
sphere warrant concern.
Fiscal deficit of the consolidated central
government was above 4.9 percent of GDP in August.
The wage agreement with public sector unions has not
been signed yet, while the budget 2001 has to be sent to
Parliament by November 15. The unemployment rate
continued its upward trend and rose to 21.4 percent in
September from 20.8 percent in August. Inflation rate
reached 5.9 percent (y-o-y) in October.
REAL SECTOR DEVELOPMENTS
Growth of GDP and Industrial Production Continued
The preliminary GDP data for the second quarter
of 2000 show a third continuous quarterly growth of the
Croatian economy. While the first quarter of the current
year evidenced the GDP growth of 4.0 percent, the
second quarter continued the similar growth path,
featuring the 3.7 percent higher GDP than in the second
quarter of 1999.
Whereas the first quarter growth was mainly
driven by increased personal consumption, the key
underlining factors behind the second quarter growth are
increased exports, which grew in constant prices for the
fourth subsequent quarter, as well as equally growing
personal consumption.
1
higher as compared to the same month of 1999, while
August recorded a robust 7.6 percent growth.
September observed a new fall in the production of 0.9
percent. The cumulative data for the first nine months
of 2000 show that the industrial production was 2.7
percent higher than in 1999.
The 4.4 percent increase in the production of
intermediate goods (except energy), which has the
weight of 31.2% in the overall industrial production,
over the January-September period, is the main cause
of growth in industrial production. Almost the same
weight is held by non-durable consumer goods, the
production of which increased by 1.9 percent. At the
same time the production of capital and durable
consumer goods increased by 11.1 and 1.8 percent,
while production of energy declined 2.1 percent.
When looking at the NCEA classification of
economic activities, the manufacturing sector grew 4.2
percent in the first nine months (the cumulative sixmonths’ growth stood at 4.1 percent in June), mining
and quarrying increased by 1.5 percent, while the
production of electricity, gas and water supply fell by
4.6 percent. Stocks of finished industrial products was
in the same period 3.4 percent lower than in the
corresponding period of the last year.
Figure 2: Trend Cycle of Industrial Production
(1995=100)
119
117
%
115
113
111
Stocks of finished products
109
Industrial production
107
105
103
101
99
97
Figure 1: GDP Growth (constant 1997 prices)
6
95
Quarterly GDP At Constant Prices (1997=100), Change From
the Same Quarter Previous Year
Source: Central Bureau of Statistics
4
2
0
1Q/98
2Q/98
3Q/98
4Q/98
1Q/99
2Q/99
3Q/99
4Q/99
1Q/00
2Q/00
-2
-4
-6
Source: Central Bureau of Statistics
Following June’s strong 9.6 percent increase in
industrial production (when compared to the same
month last year), further three months recorded mixed
results. In July the industrial production was 1.5 percent
Exceptional Tourist Season
Preliminary anticipations of a strong tourist
season based on sound early bookings went beyond
the most optimistic expectations. In August official
statistics recorded 34 percent more tourist arrivals and
37 percent more tourist night-stays than in the same
month last year, while July’s increases were even
higher at 44 and 47 percent, respectively.
Cumulative data show that there were 33
million night-stays recorded in the first eight months,
or 44.6 percent more than in the same period last year.
While the number of foreign tourist night-stays soared
by 56 percent, which can be attributed to the last
year’s lower foreign tourist base due to the Kosovo
Economic Highlights – Croatia
November 2000
crisis, the number of domestic tourists was 3 percent
lower than in the same period of 1999.
Out of 28.7 million of foreigner night-stays, 6.3
million night-stays were recorded by tourists from
Germany (70 percent more than in the first 8 months of
last year), 4.5 from Slovenia (17 percent more), 4
million from Italy and Czech Republic each (72 and 63
percent more), 1.5 million from Poland (170 percent
more), 1.2 million from Hungary (70 percent more) and
1.1 million by tourists from Slovak Republic (70 percent
more).
Results of a strong tourist season is also reflected
on the retail turnover. In the first six months of 2000 the
real retail turnover was 11.3 percent higher than in the
first half of 1999, while July itself recorded 19.5 percent
higher real retail turnover than the same month last year.
Up to August, a cumulative increase of real retail
turnover was 14.1 percent.
Although results of tourists’ night-stays are
impressive, it is still unclear how much foreign currency
revenues have been collected out of the tourism
services’ exports. First half of the year shows only 4.4
percent increase as compared to 1999.
Rising Inflation
Producers’ prices in the January-September
period were 9.2 percent higher than in the first nine
months of 1999. Particularly strong was the increase in
producers’ prices of energy, which were 30.3 percent
higher than in the first nine months of 1999. In addition,
the Government allowed the Croatian Electricity
Company (HEP) in October to increase residential
electricity prices by 25.6 percent while decreasing its
rate for industry by 8 percent, what will result in an
additional average electricity price increase of 6.8
percent. The effect on the retail prices is estimated to be
around 1.5 percent.
2
goods (6 percent) were rising faster than the prices of
services, which grew by 4.9 percent.
Unemployment Remains High
The unemployment rate, which was as high as
21.3 percent in March, fell down to 20.5 percent in
June, and increased again to 21.4 percent in
September. The total number of employed persons was
growing from April (1,319,032 employed) to July,
when it reached 1,337,211, due mainly to seasonal
factors. The total employment has already decreased in
August, while the number of unemployed persons
went up to 350 thousands people. September observed
another rise in unemployment for additional 10,000
people or 10.2 percent more than in September 1999.
The average number of persons who were
unemployed due to business’ closures in JanuarySeptember (26.6 thousand) was 16.3 percent higher
than in the nine months of 1999 (September itself
recorded a 34.4 percent increase compared to
September 1999), while there were 6.6 percent more
workers who were seeking for the job the first time
(99.1 thousand). However, a total number of vacancies
was 12.3 percent higher in the observed period, while
23.7 percent more vacancies were filled than last year.
Figure 4: Unemployment Trends
360,000
UNEMPLOYMENT TRENDS
340,000
320,000
unemployed - original
unemployed - seasonally adjusted
300,000
280,000
260,000
240,000
220,000
Figure 3: Monthly Chain Indices of Prices
200,000
1991/1
1991/11 1992/9 1993/7 1994/5 1995/3 1996/1 1996/11 1997/9 1998/7 1999/5 2000/3
102.5
102.0
101.5
Source: Central Bureau of Statistics
101.0
100.5
Labor Productivity Exceeds Real Wage Growth
Nominal average net wage reached the highest
level in May (result of holiday bonuses payment),
when it amounted to HRK 3,367, while August
recorded the average net wage of HRK 3,369, which
was nominally 10.0 percent higher than in August
1999. In real terms, the average net wage for the first
eight months of the year was 4.1 percent higher than in
the same period last year. Even decreased August’s
public sector average net wage of HRK 3,988.7 as
compared to June value, came close to March value
i.e. prior to wage downsize adjustment. Average net
business sector wage is still 27 percent lower than of
the public sector, averaging at HRK 3,140 in August.
100.0
99.5
99.0
98.5
98
/9
98
/1
19 1
99
/
19 1
99
/3
19
99
/
19 5
99
/
19 7
99
19 /9
99
/1
20 1
00
/
20 1
00
/
20 3
00
/5
20
00
/
20 7
00
/9
19
19
98
/5
98
/7
19
98
/3
19
19
19
98
/1
98.0
CPI
PPI
Source: Central Bureau of Statistics
When measured by retail prices, the average
inflation rate over the first nine months is 5.7 percent,
whereas the retail prices in September were 7.1 percent
higher than in the same month last year. Retail prices of
Economic Highlights – Croatia
November 2000
The highest nominal increase in average net
wages was recorded in agriculture, hunting and forestry
sector (16.3 percent higher average net wage in JanuaryAugust 2000 than in the same period of 1999), health
and social work (14.5 percent higher), education (12.3
percent higher) and financial intermediation sector (11.6
percent higher). The average net wage paid out in the
financial intermediation in August was 40.3 higher than
the overall average net wage. The lowest average net
wage was recorded in the fishing sector, where it was
39.5 percent lower than the total average net wage.
The trend of the decreasing gap between
industrial productivity and real net earnings (which
grew three times faster than the productivity in industry
in 1999) continued throughout summer months. A 5.1
percent growth of the productivity in industry over the
first nine months has actually surpassed the 4.1 percent
growth of real average net wage.
The average gross wage also reached its peak of
HRK 4,935 in May, and decreased in June and July, but
due to bonus payments increased again in August to
HRK 4,916. Average gross wage for nine months was
7.7 percent higher than in the same period last year,
while the real gross wage grew by 2.9 percent.
Figure 5: Real Wages and Labor Productivity
The productivity of Croatian industry
(percentage change compared to the previous year)
50
40
30
20
10
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
-10
-20
Productivity
2000 (till
A ugust)
Net real average wage
-30
-40
-50
Source: Central Bureau of Statistics
The distribution of average net wages in July and
August shows that the percentage of workers who
receive between HRK 3,000 and 4,500 has remained
stable at around 43 percent, while the number of those
who receive less than HRK 1,700 went below 8.9
percent from 13.8 percent in May.
FISCAL DEVELOPMENTS
Rising Fiscal Deficit
Total current and capital revenues collected over
the January-September period in the amount of HRK
33.1 billion were 13.0 percent higher than the revenues
of the first nine months of 1999. Total expenditure and
net lending grew at slower pace: central government
spent HRK 36.8 billion in the same period, which is
3
10.8 percent more than the last year. The overall
central government deficit at the end of September
was HRK 3.7 billion, or 2.3 percent of GDP. If
privatization proceeds resulting from the sale of banks
(Privredna, Splitska and Rijecka banka) were taken as
a financing item, the deficit would reach HRK 6.5
billion or 4.1 percent of GDP. The postponement of
the second stage of the Telecom privatization forced
Government to take a large bridging loan in October at
the amount of USD 350 million.
Tax revenues were in the observed period only
4.1 percent higher than the last year. This is a rather
disappointing performance, taking into account the
renewed growth, strong tourist season and steady
growth in retail turnover. The biggest increase over the
period was recorded in excise tax collections, which
were 24.9 percent higher as a result of a multi-stage
excise tax increases in the second half of 1999 and the
first part of 2000. Although excises on oil products
collected 33 percent more revenues than in the first
nine months of 1999, this trend is, however, going to
lose the pace due to the recent government’s decision
to lower the excise fuel tax in order to protect the
current retail oil prices (higher share remains with oil
state company INA which suffers from the increased
price on the world market).
Although the VAT collections are 8.2 percent
higher than in January-September 1999, 15.5 billion of
proceeds still represents an underperforming result,
taking into consideration a 19 percent growth in
nominal retail turnover backed by a successful tourist
season. Underperforming is partially linked to broader
zero-rated group of products, plus speculations on
further VAT exemptions.
With regards to expenditures, even though
transfers and subsidies were lower in the first half of
the year than in the same period last year, the third
quarter recorded sharp increases in both items, which
caused the total for nine months to be 21 percent
higher than last year. The highest share of transfers
was received by Pension fund (HRK 5 billion, 53
percent in relative terms), while 20 percent of
transfers, in the amount of HRK 1.9 billion, went to
Health fund.
The wage bill for the third quarter grew 7.5
percent, and the cumulative wage bill for JanuarySeptember is 9.2 percent higher than in the first nine
months of 1999. According to the own estimate, the
budgeted wage bill of HRK 15 billion will be
exceeded and will need to be increased in the budget
revision in November.
Purchases of other goods and service also
increased (21 percent), therefore the more significant
escalation of central government expenditures was
prevented by 22.1 percent cut in capital expenditures,
which amounted to HRK 4.0 billion over the first nine
months. However, there should be a reserve with
Economic Highlights – Croatia
November 2000
regards to capital expenditure figure before the
accumulated arrears are calculated.
Until September, the government paid a total of
HRK4.1 billion of arrears of budget beneficiaries
accumulated in previous years, as well as issued
additional 1.7 billion bonds and bills of exchange to
cover for the arrears of the health sector.
Table 1: Outturn of Central Government Budget
Central Government
(millions of HRK)
Total revenue and grants
As % of GDP*
1999
2000
2000/ I-IX/00 I-IX/00 –
Outturn Budget 99 Out Outturn I-IX/99
46,356.7 47,030.1
1.5% 33,090.6
13.0%
32.3
30.0
Current revenue
40,045.9
38,563.5
-3.7%
30,052.5
3.3%
Tax revenue
38,317.6
37,123.9
-3.1%
28,979.0
4.1%
3,368.4 -26.3%
3,072.8
-6.2%
Tax on income
Tax on profits
VAT
4,571.1
2,366.0
2,015.3 -14.8%
1,323.5
-27.4%
15,456.3
8.2%
13.1%
5,613.3
24.9%
-9.0%
2,957.1
-5.5%
1,728.2
1,439.6 -16.6%
1,073.5
-14.1%
6,310.9
8,466.6
3,038.1 1461.0%
19,830.0
19,934.5
0.5%
Excises
6,011.3
6,798.5
Taxes on International Trade
4,437.3
4039.5
Nontax revenue
Capital revenue
Grants
Total expenditure and net lending
As % of GDP*
0.0
0.0
48,878.8
48,300.0
34.2%
0.0
-1.2%
36,756.1
10.8%
8.5%
31,734.9
17.0%
4
cover higher than expected deficits in health and
pension funds, and to present lower privatization
revenues due to postponed privatization of Telecom. A
cash deficit of the central budget is thus increased to
HRK6.6 billion, or 4.2 percent of GDP. Consolidated
central government cash deficit is revised upward to
HRK7.4 billion or 4.7 percent of GDP. By November
15, Government is obliged to send the budget for 2001
to Parliament, for which a ceiling has been set within
the Government three-year fiscal framework at the
level of 50.855 billion kuna, which will hopefully lead
to a real decline of the public consumption.
Table 2: Outturn
Government
(millions of HRK)
Outturn
1999
of
Consolidated
Plan
2000
As % of
GDP*
1999 2000
Central
Outturn I-VII/00 I-VII/00 I/VII 99
Total revenue and 67,540.96
grants
Budgetary central
46,355.46
government
Extrabudgetary funds
21,185.50
71,243.19 47.07 45.38 38,315.46
12.3%
47,030.11 32.30 29.96 25,633.69
16.0%
24,213.08 14.76 15.42 12,681.77
5.4%
- Pension fund
10,799.81
12,906.98
7.53
8.22
6,511.82
5.2%
8,686.40
9,518.55
6.05
6.06
5,196.21
4.9%
33.9
30.8
Current expenditure
38,476.1
41,763.1
Wages and contributions
14,695.0
15,127.6
2.9%
11,656.1
9.2%
- Employment fund
760.62
823.05
0.53
0.52
468.53
5.0%
Other goods and services
7,395.8
9,786.1
32.3%
6,064.6
21.0%
- Child benefit fund
9.08
1.5
0.01
0.00
4.62
-25.7%
2,099.1
2,510.2
19.6%
2,096.8
32.0%
0.65
0.61
500.59
15.7%
14,339.2
0.4%
11,917.4
21.0%
- Public water
929.60
management fund
Total expenditure and 70343.02
net lending
Budgetary central
35,979.08
government
Extrabudgetary funds
34,363.94
963.00
14,286.1
73,643.38 49.02 46.91 42,440.13
11.4%
37,192.03 25.07 23.69 20,700.79
9.0%
36,451.35 23.95 23.22 21,739.34
13.9%
20,726.68 13.24 13.20 11,587.50
6.3%
Interest payments
Subsidies and transfers
Capital expenditure
8,903.5
5,942.1 -33.3%
4,019.5
-22.1%
Net lending
1,499.2
594.8 -60.3%
1,001.6
12.9%
Current account surplus/deficit
1,569.8
-3,199.6
1.1
-2.0
-1.1
-2,522.0
-1,269.9
-3,665.5
-1.8
-0.8
-2.3
As % of GDP*
Overall deficit/surplus
-1,682.5 -186.0%
- Health insurance fund
- Pension fund
-5.9%
18,998.53
11,992.15
8.31
7.64
8,266.71
28.5%
- Employment fund
824.91
1,124.44
0.57
0.72
586.62
36.7%
- Child benefit fund
1,136.16
1,133.50
0.79
0.72
683.70
4.3%
* GDP 2000 estimated by WB staff - 158 billion of kuna
Source: Ministry of Finance
- Public water
1,484.78
management fund
Overall deficit/surplus -2,802.06
1,474.60
1.03
0.94
614.81
-9.6%
-2,400.19
-1.95
-1.53 -4,124.67
4.1%
Consolidated Central Government
Cash deficit of consolidated central government
soared over the last three months from HRK 0.5 billion
to HRK 4.8 billion in January-August period, or 3
percent of GDP. After excluding privatization receipts
from revenues, a deficit is 7.7 billion or 4.9 percent of
GDP. This is due to an increase in the extrabudgetary
funds’ deficits: while the funds recorded HRK 14.5
billion of revenues in the observed period, the
expenditures were as high as HRK 25.8 billion. A
consolidated surplus of the central government was
HRK 5.4 billion and was 4.8 billion short to cover
funds’ deficit.
The central government share in the overall
consolidated central government expenditures is 49
percent, while extrabudgetary funds are taking the rest.
The Croatian Government sent to Parliament a
revised 50.663 billion kuna (USD 5.84 billion) state
budget for this year, compared with the initial 48.3
billion kuna plan. The revision was done in order to
Total financing
2,400.19
1.95
As % of GDP*
Promissory notes, outstanding
Stock of arrears
1,300.0
5,700.0
- Health insurance fund 11,919.55
Abroad
Domestic
2,802.06
1.53
4,124.67
4.1%
2,996.74
-23.1%
4,579.52
5,190.05
3.19
3.31
-1,777.47
-2,789.86
-1.24
-1.78
1,127.92 1588.7%
* GDP 2000 estimated by WB staff - 158 billions of kuna
Source: Ministry of Finance
MONETARY DEVELOPMENTS
The main developments in the monetary sector
over the last six months was a rapid growth of all
monetary aggregates, and anemic growth of bank
credits. Anecdotal evidence suggests that this arises
from banks’ reluctance to lend, particularly to
companies. Foreign currency deposits surged by HRK
6.4 billion since the beginning of the year, or 17.3
percent, while the money supply increased even
stronger, 28.7 percent in the same period to HRK 17.8
billion in August. Reserve money, as well as broadest
money M4 also recorded strong growths – reserve
money increased 13 percent, topping at HRK 11.7
Economic Highlights – Croatia
November 2000
billion, whereas the M4 reached the year’s highest of
HRK 57.5 billion.
Improved Liquidity, Domestic Credits on Hold
On the other hand, domestic credit continued a
very slow pace of growth, only a little better than
stagnating, recording a stronger growth only in July,
when it grew by HRK 0.9 billion. Even such a modest
growth in loans can only be attributed to the increase in
loans to households, which grew by 9.3 percent over the
first eight months, while loans to enterprises have
actually decreased. Therefore it is still unclear when the
very liquid banking system will start releasing the
excess liquidity in economic projects.
Out of two main components of money supply,
demand deposits and currency in circulation, the main
reason behind the sound M1 growth is the strong
increase in demand deposits, which rose by almost HRK
3.4 billion (42.7 percent) since the beginning of the year
(currency in circulation increased by only HRK 0.6
billion). Demand deposits of households grew at slower
rate than demand deposits of enterprises, which grew 47
percent (HRK 2.2 billion), reaching HRK 6.9 billion.
This is an extremely important sign because demand
deposits of companies slashed the most during the last
recession.
One can recognize three factors contributing to
the strong money supply growth in June-August period a seasonal factor of a very strong tourist season, the
settlement of the government’s arrears (supported by the
proceeds from the yen-denominated samurai bonds and
bonds issued by the health fund) and a continuing
growth of the economy.
5
International Reserves
International reserves of the Croatian National
Bank continued to grow in the second quarter,
particularly in July, when they increased from June’s
USD 3.2 billion to USD 3.5 billion, before going down
to USD 3.4 billion in September. The July’s strong
increase, which is also seasonal, due to high foreign
exchange inflow from tourism, was additionally
backed by the purchase of USD 131 million from the
Ministry of Finance (samurai bonds proceeds). On a
year on year basis, the reserves have increased by
USD 0.6 billion (20 percent).
There was no need for the CNB to intervene in
August, despite a large foreign exchange inflow
(thanks to the high banking sector liquidity). In August
international reserves recorded the first decrease in
seven months, while September recorded another mild
decline (cumulative two-month decrease was USD 133
million.
The M4 to foreign reserves ratio (the central
bank’s ability to cover the liabilities of the banking
sector and defend the exchange rate) continued to
improvr in the second quarter of 2000. It fell down to
below 2.3, for the first time since late 1995.
Figure 7: Ratio of M4 to International Reserves
3.60
3.40
3.20
3.00
2.80
2.60
2.40
Figure 6: Domestic Credit
2.20
50,000
00/4
99/6
99/11
99/1
98/8
98/3
97/10
97/5
96/12
96/7
96/2
95/9
95/4
94/6
60,000
94/11
2.00
70,000
Source: Croatian National Bank
40,000
30,000
20,000
10,000
0
Domestic Credit
Claims on households
Claims on enterprises
Source: Croatian National Bank
The CNB Board decided in October to unify
obligatory reserve requirement rates on kuna and
foreign exchange deposits at 23.5 percent, down from
28.5 percent on kuna and 55 percent on foreign
exchange deposits payable within three months, starting
from November. This is expected to inject additional
liquidity of some HRK900 million.
Exchange Rate Stable
Period average kuna exchange rate appreciated
against Euro and DM, while the exchange rate of US
dollar increased in the May-September period.
March’s highest DM exchange rate of 3.95 was
brought down to 3.85 in September, meaning that the
DM (as well as Euro) exchange rate of kuna has
appreciated by 2.6 percent in the six month period. In
the same time kuna has depreciated against USD by
7.9 percent (19.1 percent in comparison to the same
month last year).
The real effective exchange rate appreciated by
1.3 percent in June-August period (in May it recorded
a strong 2.0 percent depreciation in comparison to the
previous month) when deflated by producers prices,
while the rate of depreciation since August last year is
2.3 percent. When retail prices are used as the deflator
Economic Highlights – Croatia
November 2000
the exchange rate appreciated by 3.3 percent in the JuneAugust period.
Real Interest Rates Almost Turning to Negative
The money market interest rate on daily market,
which remained stable between 12 and 13 percent
throughout the second part of 1999 and the first quarter
of 2000, decreased in the second quarter and July to the
8 percent levels, and to as low as 6.6 percent in August.
That was a result of the improved liquidity of the
financial system. Money market interest rates on
overnight transactions more than halved comparing to
the beginning of the year, reaching only 3.8 percent in
July.
The same pattern of decreasing interest rates in
the second quarter of 2000 was recorded by CNB bills
on voluntary basis. The 35 days bills fell from 10.5
percent in the first quarter to 7.84 in July and 6.85 in
August, the 91 days bills declined from 11.5 to 7.81
percent, while 182 days bills went down to 9.12 percent
from first quarter’s 12.5 percent.
On the other hand, interest rates on CNB bills on
voluntary basis in foreign currency increased in May –
August period. The 63 days bills were traded at 6.0
percent in July (comparing to March’s 4.99 percent),
whereas the interest rate on bills due in 91 days was
5.05 percent (4.27 in March). As a result of high
liquidity, purchases of CNB bills have increased in the
observed period. The total stock of CNB bills in kuna
and foreign currency reached HRK 4.4 billion at the end
of August.
Figure 8:Interest Rates on CNB Bills and Money
Market
6
break in early July at 11 percent, ending at 10.5
percent at the end of August.
As it was the case with CNB bills, the amount
of T-bills sold, and, consequently, the T-bill’s
outstanding debt increased sharply. Indeed, the T-bill’s
outstanding debt has more than doubled in MayAugust period, amounting to around HRK 2.2 billion
at the end of August. The share of banks in the
structure of T-bills buyers has increased from May’s
57 to 72 percent in late August, therefore non-bank
investors currently hold only 28 percent of issued Tbills.
CAPITAL MARKET
Bonds issued by Croatian Institute for Health
Insurance (CIHI) were included in the official listing
of the Zagreb Stock Exchange (ZSE) on July 21, and
the trading started several days later. This event has
completely changed the stock-market picture in
Croatia, both in terms of turnover and volume. Only in
the last two days of July, the bond turnover amounted
to HRK 18.1 million, or 36 percent of the total ZSE
turnover for that month. In August and September the
bond turnover surpassed the share turnover (out of
HRK 232 million of total turnover in September,
bonds accounted for HRK 131 million). The picture
gets even more radical when the trading volume is
analyzed: out of 11,873,972 securities traded in
August, 93 percent traded securities were bonds, while
in September this share reached 98.7 percent.
However, the reason for such a high bond share in the
total trading volume is a low CIHI bond nominal value
of 1 EUR.
18.00
Figure 9: CROBEX Stock Market Index,
(12/1997=100)
16.00
14.00
110
12.00
100
10.00
Russian Crisis
90
8.00
80
6.00
19 /7
98
/1
0
19
99
/1
19
99
/4
19
99
/7
19
99
/1
20 0
00
/0
20 1
00
/0
20 4
00
/0
7
/4
60
Money Market Interest Rate on Daily Market
91-Day CNB Bills
35-Day CNB Bills
50
19
98
19
98
19
98
/1
70
Source: Croatian National Bank
Interest rate on 42-day T-Bills remained stable at
11 percent until early June, when it initially decreased to
10.5 percent, followed by even stronger cuts in July and
August, thereby ending at 9 percent in late August.
Similarly, interest rate on 91-day T-Bills declined from
May’s 12.25 to late August’s 9.5 percent, while the 182
days T-Bills resumed trading after a 16 months long
40
Source: Zagreb Stock Exchange
CROBEX Stock Market Index has been
hovering in the 760-860 range in July-September
period. Strong seasonal effect during the summer was
obvious: CROBEX went down from 860 to 792 points
in July, turnover decreased to only 37 percent of
Economic Highlights – Croatia
November 2000
June’s value and the number of trades halved from
June’s 1635 to 845 in July. Index started recovering in
the second half of August, ending at 829 points, while in
September it fluctuated in 810-860 range. October was
more or less equal to the trading in September, ending at
859 points.
There were 32 active securities traded in
September and 1,029 trades, while on average there
were 49 transaction daily. The prices of two Croatian
blue-chips, Zagrebacka banka and Pliva stagnated in the
observed period.
EXTERNAL SECTOR
Trade Deficit (January-September 2000)
Constant backward revision of trade statistics
throughout the whole 2000 is increasing doubts in the
quality of analysis. However, the cumulative data show
that exports increased in nine months of 2000 by 3.7
percent compared to the same period last year. Imports,
on the other hand, increased by a modest 1.7 percent in
the observed period, therefore the trade deficit for the
nine months (amounting to USD 2.4 billion) decreased
by only 1 percent compared to the same period in 1999,
while the coverage of imports by exports increased by 1
percent to 57.6 percent.
Due to weak August and September’s
performance, exports of manufacturing sector are only 3
percent higher than in the same period last year (in July
this cumulative stood at 5.6 percent). Within
manufacturing sector, exports of chemical products
increased by 15.4 percent, coke and petroleum products
grew 40.7 percent, machinery and equipment 15.6
percent, while exports of wearing apparel (Croatian
traditional export industry) decreased by 17.8 percent.
In the same time, imports of chemicals increased by
12.3 percent, wearing apparel more than 44.6 percent,
and textiles by 36.6 percent. Exports of ships declined
by 2.1 percent as compared to the last year.
Exports to EU continued with growing trend, and
in nine months are 20.4 percent higher in comparison
with the same period last year. An the same time
imports from EU dropped by 1.3 percent. As a
consequence, the trade deficit with EU narrowed down
by 20.7 percent to USD 1,35 billion. At the same time
the share of Croatian exports to EU in the overall
Croatian exports has kept stable at around 57 percent, as
well as imports from EU, which are constant at around
56 percent.
Further improvement in the trade with EU will
have EU policy of asymmetric trade liberalization for
Southeast European goods, including Croatian goods.
Balance of Payments
Second phase of revision of the balance of
payments data for the first half of 2000 shows that the
current account deficit decreased by 37.7 percent in
comparison with the first half of 1999. The underlying
7
reason behind this decrease is equally divided between
the period’s increased exports (9.8 percent) and
stagnating imports (0.6 percent) on one hand, and
increased current transfers into the country, which
grew by 48.3 percent, on the other hand. The financial
account surplus (excluding reserves) in the amount of
USD 466.3 million, partially covered the current
account deficit of USD 710.6 million.
Table 3: Balance of Payments
(Millions of USD)
1999
CURRENT ACCOUNT
-1 522.6
2000
2000(I-VI)/
(I-VI)
1999(I-VI)
-710.6
-37.7%
Goods
-3 298.6
-1 410.6
-11.3%
- Exports
4,394.7
2 233.3
9.8%
- Imports
-7 693.3
-3 643.9
0.6%
1 625.2
515.0
29.4%
- Credit
3 723.0
1 378.9
-3.0%
- Debit
-2 097.8
-863.9
-15.6%
Income
- 349.5
-185.8
-6.3%
500.3
370.9
48.3%
1 413.5
185.0
-81.2%
Services
Current transfers
CAPITAL AND FINANCIAL
ACCOUNT
Capital account
Financial account, excluding
reserves
Direct investment
24.9
11.7
3.0%
1 817.1
454.6
-51.6%
1 373.9
593.3
106.6%
- 34.1
11.1
-196.1%
1 408.0
582.2
94.9%
Abroad
In Croatia
Portfolio investment
574.0
434.2
39.3%
Other investment
- 130.8
-572.9
-268.3%
Reserve Assets
-428.5
-281.3
-1004.1%
109.1
525.6
230.6%
NET ERRORS AND OMISSIONS
*(preliminary data upon the 2nd phase of revision)
Source: Croatian National Bank
Surprisingly, revenues from exports of services
are even 3 percent lower in dollar terms than in first
half of 1999. Tourism receipts were only 4.4 percent
higher in the same period.
External Debt
Total external debt in July was USD 260 million
lower than in December 1999, amounting to 9,693.3
billion. Public sector external debt was 41.5 percent of
total, while private sector owes 32.9 percent of the
total. Short-term debt to long-term debt ratio fell
below 6 percent (to 5.6%), while external debt to GDP
ratio came closer to 50 percent boundary, reaching
48.8 percent in July.
Table 4: Debt Indicators
(%)
Short-term debt/ Total
external debt
External debt/GDP
Debt Service/
Exports of GNFS
1996
1997
1998
1999
2000(VII)
7.7
7.2
6.9
6.5
5.6
26.7
37.1
44.1
48.8
48.8
9.1
9.8
13.6
21.1
22.2 (VI)
Source: Croatian National Bank