RBA FORECASTS 2.7 PERCENT GDP INCREASE IN CROATIA THIS YEAR

ZAGREB, Feb 6 (Hina) - A 0.7 percent increase of Gross Domestic Product in the European Monetary Union this year will have a negative effect on economic growth in Croatia, which could amount to 2.7 percent, Raiffeisenbank Austria (RBA) analysts estimate. The low economic growth, i.e. the virtually stagnating EU economy, Croatia's principal foreign trade partner, will diminish the positive movements in Croatia expected this year, the RBA says in its January analysis. Personal spending in Croatia will continue to grow, albeit at a declining rate which will slow down growth in retail trade from 12 percent in 2001 to a mere two percent this year. The better potential of banks and expected decline of interest rates will result in positive growth rates. The interest rates, which reached a historic low last year, will continue decreasing due to stronger competition on the domestic banking market and a considerable influx of foreign deposits. It is expected most of these deposits will stay on bank accounts, which will enable the resumption of credit activities and investing in capital, which is necessary for the continuation of the investment cycle and this year's growth of Gross Domestic Product. Forecasts for movements on the labour market are also optimistic. Although the official unemployment rate increased in last year's second half, according to International Labour Organisation methodology it actually dropped from 17 percent recorded in the last six months of 2000 to 15.3 percent in the last half of 2001. The reported need for labour in 2001 was 37 percent higher than the year before, which the RBA analysts see as encouraging, although they maintain the reduction of the official unemployment rate depends on the equating of the number of laid-off and newly employed workers, an occurrence expected this year. (hina) ha