This report reviews key macroeconomic data and microeconomic developments for Croatia published between November 8 and December 8, 2014.

In the beginning of November, the IMF said it expects Croatia’s economy to shrink between 0.5% and 1% this year due to continued contraction of domestic demand. For next year, it said it sees the country’s GDP stagnating.

The IMF 2014 forecast is broadly in line with that of the Croatian Chamber of the Economy (HGK) which at the beginning of December projected a GDP contraction of 0.6%. For next year, HGK sees a small economic growth of just 0.2%-0.5%. Local economists are a bit more pessimistic regarding the economic development this year, projecting a 0.8% drop. They also expect Croatia’s GDP to contract next year, by 0.2%. The report also provides details on the latest development in the INA case between Croatia and Hungary's MOL. It mentions Croatia's worsened ranking in the latest Corruption Perceptions Index released by Transparency International. The report also reveals the country’s plans to launch a new Eurobond issue.

Key Points:

• Croatia's GDP dropped by a real 0.5% y/y in the third quarter of the year, continuing its decline for the 12th quarter in a row.

• Croatia's consumer prices rose 0.4% y/y in October, reversing an annual drop of 0.2% the month before. Croatia's working-day adjusted industrial output rose 2.7% y/y, following an annual growth of 3.8% in the previous month. The annual growth of the ten months of the year reached 0.8% y/y.

• The unemployment rate climbed to 18.7% in September from 17.7% in August. This is the second month the jobless rate rose after six straight months of decline due to seasonal hiring. The average net monthly wage rose by 0.5% y/y in September, following a 0.4% hike in August.

• January-September trade gap shrinks 2% y/y thanks to higher exports.