ZAGREB, July 17 (Hina) - Croatia's real Gross Domestic Product (GDP) in the first quarter of 2002 increased by 4.6 percent on the inter-annual level. These trends will slow down slightly towards the end of the year, and the GDP rate
will remain at a level between 3.5 and 4 percent, economists from the Croatian Employers' Association (HUP) Economy Council said in the latest issue of the HUP's Economic Monitor quarterly.
ZAGREB, July 17 (Hina) - Croatia's real Gross Domestic Product
(GDP) in the first quarter of 2002 increased by 4.6 percent on the
inter-annual level. These trends will slow down slightly towards
the end of the year, and the GDP rate will remain at a level between
3.5 and 4 percent, economists from the Croatian Employers'
Association (HUP) Economy Council said in the latest issue of the
HUP's Economic Monitor quarterly. #L#
On the whole, the dynamics of the growth is good, however, its
quality is questionable, the experts say. The significant increase
in GDP in the first three months is attributed to an intense growth
in personal spending (loans) and an increase in infrastructure
investments, which is why only a medium-term evaluation of their
effects will be possible, depending on the increase of the public
debt and related guarantees.
The experts also warn about unfavourable developments in
international trade, with imports increasing and exports
stagnating. This, they say, points to a very serious problem of
competitiveness and the slow reform and growth of some leading
systems.
The trends from the first quarter are expected to continue until the
end of the year, with a somewhat more dynamic growth in the export of
services, and the slowing down of personal spending. This means
that growth rates will slightly decrease towards the end of the
year, with the GDP rate staying at between 3.5 and 4 percent.
Analysing the main economic developments, the experts point to a
strong growth in retail trade and construction (which could have an
annual growth rate of 15 percent), the slowing down of industrial
production, and good tourist results in the first five months. It is
estimated that the influx of the euro could increase by as many as 15
percent.
Positive changes can also be seen on the labour market, due to
seasonal factors, as well as with regard to the granting of loans.
The loan budget granted to citizens in the first three months
increased by 2.5 billion kuna, and by another 1.2 billion in April.
Loans to companies increased as well, although at a slower rate than
those granted to citizens. HUP experts warn though that the
monetary and loan expansion increases the possibility of granting
"bad" loans, which could have negative consequences for the
stability of the banking system.
They remind that the value of the kuna has been continually growing
in relation to the euro in the past several months - between early
February and early July, it increased by 2.4 percent, and in the
last six months it appreciated by almost 15 percent in relation to
the US dollar. The Croatian National Bank (HNB) has intervened by
purchasing around 650 million euros between February and June, thus
increasing foreign currency reserves, as well as the kuna liquidity
of the banking sector. The experts expect the further appreciation
of the kuna, as well as efforts by the monetary authorities to keep
the exchange rate as stable as possible. However, in case of a
greater influx of foreign currency, further appreciation will be
impossible to avoid, they say.
One of the most critical points is the growth of the deficit in other
parts of the public sector, as the state budget deficit is held
under control. Seeking more loans implies the growth of the debt and
potential problems in their payment. It also implies the issue of
the reaction of financial markets to the worsened indebtedness
indicators, especially in case of some other negative trends on the
international market, the experts say.
(hina) rml