The D&B report, which was carried by Zagreb firm BonLine on Friday, says that the lower growth rate in 2004 was largely due to falls in construction activity and fixed investment.
Last year, investment growth fell to 4.4 per cent as foreign investment flows stagnated. At the same time, private and public spending remained stable, and net exports showed a marked improvement.
Exports of goods and services increased by 5.4 per cent, 1.9 percentage points faster than the growth in imports. This was the first time since 2000 that export growth had outpaced that of imports.
This, in part, reflected the drop in investment, which resulted in a decrease in capital imports, while at the same time the services surplus was boosted by an increase in tourist arrivals.
According to the latest information from the Croatian National Bank, this helped narrow the current account deficit to 4.6 per cent of GDP.
Based on this information, D&B analysts expect the economic growth rate to remain stable at about 3.7 per cent.
They also expect that exports will grow faster than imports, at least in the near term, as trade relations with the EU continue to be liberalised. In the longer term, growing exports should draw in imported capital and intermediary goods to fulfil orders.
The overall current account should continue to benefit from substantial surpluses on the services account as the tourism sector expands, which is expected to limit the current account deficit to around 4.0 per cent of GDP in 2005 before modestly rising to 4.2 per cent of GDP in 2006, mainly dues to an expected rise in capital imports.
Among the 25 rated countries, Croatia ranks 11th, the only country with the DB4d rating. In front of Croatia are Bulgaria and Romania with the rating of DB4c.
Slovenia occupies the top spot with the rating of DB2c as a country of small risk for investment, while the bottom of the list is occupied by six countries of a very high investment risk with the rating of DB6d, namely Albania, Belarus, Bosnia-Herzegovina, Tajikistan, Turkmenistan and Uzbekistan.