This report reviews key macroeconomic data and microeconomic developments for Croatia published between February 6 and March 5, 2014. The report also includes corporate news for firms such as HZ Infrastruktura, Agrokor, and Mercator.

During this period, the IMF significantly downgraded its 2014 GDP forecast for Croatia, saying it now expects the country will most likely plunge into a sixth consecutive year of recession. At the same time, the government revised this year's budget, reducing the deficit in order to align with the EC's excessive deficit procedure, which Croatia entered in January. Although reducing the economic growth estimate, the government still hopes for a modest increase of 0.2% this year with the rebalanced budget. The statistics office issued a flash estimate for 2013 GDP, confirming the economy continued to tumble, shrinking by 1% on lower manufacturing output and exports and subdued domestic demand.

On the financial front, central bank data showed half of the banks operating in the country ended last year in loss. On the other hand, two Croat businessmen succeeded in raising the capital of Karlovacka Banka, while the competition watchdog approved the acquisition of the largest insurer Croatia Osiguranje by local Adris Grupa.

The report also provides details on state tenders for oil and gas exploration, and motorway concessions. It contains the latest developments on the two hottest corporate sagas in Croatia and the region: the dispute between the government in Zagreb and Hungary's MOL over the management and ownership of energy firm INA, and the ongoing takeover of Slovenian retailer Mercator by privately held Croatian group Agrokor.

Key Points:

• Hungary’s MOL has asked oil and gas company INA to help it prepare the sale of its stake. Croatia's Agrokor and the consortium of Mercator sellers agreed to a lower sales price and to extend the deal wrap-up deadline. Railway operator HZ Infrastruktura has secured state guarantees for a EUR 40mn EBRD loan.

• GDP contracted by 1.2% year on year in Q4 2013. CPI inflation slowed to 0.1% year on year in January 2014 from 0.3% year on year a month earlier. The working-day adjusted industrial output recovered in January (up 2.2% year on year) after contracting nine months in a row on an annual level.

• The unemployment rate climbed to 22.4% in January from 21.6% in December 2013, according to a flash estimate. The average net monthly wage fell 1.5% in 2013, even though it rose by a real 1.0% year on year in December alone.

• The report also contains the latest EC forecasts on Croatia and Fitch's downgrade of the country's outlook to negative on prolonged fiscal deterioration.