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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005
ZAGREB STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Politic and Economic Environment:
Croatia's location on the Adriatic links the
interior of eastern and southern Europe with
the Mediterranean. The country possesses
great tourist assets - notably a scenic
coastline rich in historically significant sites,
especially the old city of Dubrovnik. In terms
of sector distribution, services account for
nearly two-thirds of economic activity,
supplemented by substantial contributions
from agriculture (including forestry and
fishing) and industry.
Only in the last year has the economy begun
to show the kind of performance its people
and infrastructure should be able to deliver.
Privatization of state-owned banks, the oil
company and the electricity industry all
remain to be completed.
In February 2003, Croatia submitted its
formal application for membership in the
European Union. For its part, the European
Union was to issue a response to Croatia's
request to join the regional body over the
course of the next year.
Domestic politics dominated the landscape
in late 2003. On Oct. 17, 2003, the
Parliament (Sabor) was dissolved, thus
Key Information Contacts
Croatian Securities Commission www.crosec.hr
Ministry of Finance www.mfin.hr
Croatian Government www.vlada.hr
ECONOMIC RATIOS
Domestic
savings
PAGE 138
Croatia
Lower-middle-income group
Trade
Indebtedness
Investment
ending its four-year term and paving the way
for elections. Three days later on Oct. 20,
2003, President Stipe Mesic announced that
parliamentary elections would take place on
November 23. The main issues centering the
election included the economy, particularly
the shift from a centrally- planned economy
to a market system. The final results showed
that the opposition HDZ had secured a clear
victory with approximately 34% of the votes
and 66 out of 152 seats. Then, on Dec. 23,
2003, the parliament approved a minority
government headed by Prime Minister
Sanader. Apart from economic
reconstruction, the reform process, and
European Union accession, the other main
issue facing the new government included
Croatian cooperation with the United Nations
war crimes tribunal and the right of return for
thousands of Serb refugees.
Economic Performance:
In 2003, GDP recorded growth of
approximately 4.7%, after spurting to 5.2% in
2002 as weak export markets in Europe were
overcome by strong capital investment in
roadways. A tight monetary policy and
maintenance of high real interest rates
succeeded admirably in containing inflation
during the 1995-2002 period. Over the past
GROWTH OF INVESTMENT AND GDP
(%)
40
20
0
-20
97
GDI GDP
five years (1999-2003), consumer prices rose
by an average of just under 5%, but that
included energy price and restructuringrelated
increases in 2000 that were transitory.
In 2003, consumer price inflation was just
2%. The other side of this coin, however, is
the kuna's overvaluation on foreign exchange
markets, which has reduced Croatia’s export
competitiveness.
Government officials announced the
objective of raising Croatia's share of
Mediterranean-region tourist receipts from
the present 3% to 10% and expects to have
more than seven million tourist arrivals
annually over the next several years. The
banking crisis of 1998-1999 has been
overcome with higher capitalization and
improved public confidence reflected in
higher deposit rates. Monetary policy has
succeeded not only in keeping inflation
reasonably low, but also in stabilizing the
international value of the kuna. In 2002 and
2003, like most European currencies, the
kuna appreciated significantly against the
U.S. dollar. 1
1 Economic and Political Overview, County Watch
Incorporated, 2005
98 99 00 01 02 03
* World Bank reports