CROATIAN ECONOMY AT END OF 2001

ZAGREB, Dec 28 (Hina) - A stable macroeconomic framework and the strengthening of economic activity, yet a very strong continued problem of unemployment are the main characteristics of Croatian economy at the end of 2001 in which certain positive economic trends are being registered globally, although the majority of the population had not felt these improvements. This year expects to see a Gross Domestic Product increase by around four percent or higher. The GDP in the first half of 2001 increased by 4.5 percent as against the same period last year. All indicators point to the GDP being at the same level in the third trimester. At the same time, the inflation rate is lower than expected. Gauged by retail prices, the inflation rate in November was at the annual level (as against November 2000) reaching a mere 2.8 percent. Despite the accomplished economic growth, the registered unemployment rate in Croatia had not decreased, but its growing trend in 2001 has significantly weakened. In late November, 385,300 people were registered at the Employment Bureau, which is by 8,600 people or 2.3 percent more than in November 2000. In the first 10 months of 2001, employers sought for 177,000 employees, which resulted in the employment of 142,000 people or 32.3 percent more than in 2000. This indicates that new jobs are being created, but still not enough to neutralise the inflow of newly unemployed into the Employment Bureau. Unemployment thus remains the chief problem for Croatia, in which workers, according to data for the first nine months of 2001, had an average monthly net salary of 3,518 kuna. Among the favourable achievements this year are: the growth of industrial production (by 6% in the first 11 months), the revival of investments, a successful tourist season ( 10% increase of tourists). As regards foreign trade, the increase of export has been significantly lower than that of import. According to statistics, in the first nine months the export reached USD3.92 billion, which is by 5.6 percent higher than in 2000, while import grew by 18.9 percent to USD7.6 billion. Foreign trade deficit amounted to USD3.69 billion. Exports covered imports by only 51.5 percent. Industrial solvency is somewhat more favourable than in 2000. The decrease of outstanding debts of legal entities in the first nine months amounted to 1.5 billion kuna as against December 2000. High rate of solvency has been marked in the Croatian banking sector whose capital assets a share of foreign banks exceeded 90 percent. With the strong growth of fearing exchange deposits, stimulated by the exchange of currencies into the Euro, the banks' credit volumes have also been increasing. Croatian foreign debt in 2001 exceeded USD11 billion. While government representatives accentuate Croatia is not overindebted country and is capable of servicing foreign debts, certain economists and analysts warn about the degree of overburdening with foreign debts whose share in the GDP exceeded 50 percent, and about 29 percent of the value of export of goods and services are used for the payment of debts. It is thus important that the foreign resources, particularly those from the privatisation, are not used for the stimulation of the production but mostly for budgetary purposes. This makes the government's announcement that privatisation funds in 2002 will be used exclusively for development more significant. (hina) lml np sb