This report reviews key macroeconomic data and microeconomic developments for Croatia published between August 5 and September 3, 2015.
Croatia’s economy expanded by 1.2% y/y in the second quarter of the year, beating all expectations. The market was expecting GDP growth of 0.7%. The Q2 expansion was supported both by domestic and foreign demand.
The government announced plans to convert loans denominated in Swiss francs into euro with part of the principal being written off and all the costs being borne by the bank. A number of foreign banks reacted saying the measure would breach EU legislation. Earlier data released by the central bank in August showed that the banking system's pretax profit fell to HRK1.48bn (€195.9mn) in the first six months of the year from HRK1.57bn a year before, while the share of bad loans rose to 17.3%.
The report provides details on the tender for the implementation of Kupari I tourism project, which has an estimated value of €100mn, and other measures planned by the Adriatic country to support the sector. It also contains information on the expected date general elections will be organised.

Key Points:

• Croatia's consumer prices fell 0.4% y/y in July, after staying flat the previous month. The working-day adjusted industrial output rose 3.9%, speeding from 1.6% in June. The annual growth of the first six months of the year reached 1.8% y/y.
• The unemployment rate fell to 15.9% in July from 16.1% in June. This was the fifth consecutive month of decrease. The average net monthly wage rose 4.5% in June, slowing from a 3.3% hike in May.
• January-June trade gap narrowed 3.9% y/y as exports rose at a faster pace than imports.