CAVIRC.net - REPUBLIC OF CROATIA RATINGS

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<div><span class="htmla_titolo"><span class="htmla_paragrafo"><span class="htmla_titolo"><p align="center">REPUBLIC OF CROATIA</p><p align="center">COUNTRY RATINGS</p><p align="center" /></span></span></span><p align="center"><strong><span class="htmla_paragrafo"><strong>ASSETS</strong> </span></strong></p><ul><li><span><span></span></span>The start of accession negotiations with the European Union should spur efforts on reform and foster capital inflows. </li></ul></div><div><ul><li><span><span></span></span>The country has attained an advanced level of development compared to most other Balkan countries. </li></ul></div><div><ul><li><span><span></span></span>Croatia's tourism potential is substantial. </li></ul></div><div><ul><li>It has built up comfortable levels of foreign exchange reserves.</li></ul><p align="center"><strong><span class="htmla_paragrafo"><strong>WEAKNESSES</strong> </span></strong></p><ul><li><span align="left"><span></span></span>The persistence of large fiscal and current account deficits has remained the country's main weakness. </li></ul></div><div><ul><li><span><span></span></span>Those deficits have caused a substantial increase in the public sector and foreign debt burdens. </li></ul></div><div><ul><li><span><span></span></span>Progress on the negotiations with the European Union will remain dependent on implementation of politically sensitive reforms. </li></ul><p> </p></div><table bordercolor="#330066" cellspacing="1" cellpadding="2" border="1"><tbody><tr bgcolor="#ffffff"><td valign="top" width="208"><div align="center">(USD millions)</div></td><td valign="top" width="67"><div align="right"><strong>2001</strong></div></td><td valign="top" width="67"><div align="right"><strong>2002</strong></div></td><td valign="top" width="67"><div align="right"><strong>2003</strong></div></td><td valign="top" width="67"><div align="right"><strong>2004</strong></div></td><td valign="top" width="67"><div align="right"><strong>2005(e)</strong></div></td><td valign="top" width="102"><div align="right"><strong>2006(f)</strong></div></td></tr><tr bgcolor="#ffffff"><td valign="top" width="208"><div><strong>Economic growth (%)</strong></div></td><td valign="top" width="67"><div align="right">4.4</div></td><td valign="top" width="67"><div align="right">5.2</div></td><td valign="top" width="67"><div align="right">4.3</div></td><td valign="top" width="67"><div align="right">3.8</div></td><td valign="top" width="67"><div align="right">3.4</div></td><td valign="top" width="102"><div align="right">3.5</div></td></tr><tr bgcolor="#ffffff"><td valign="top" width="208"><div><strong>Inflation (%)</strong></div></td><td valign="top" width="67"><div align="right">4.6</div></td><td valign="top" width="67"><div align="right">1.7</div></td><td valign="top" width="67"><div align="right">1.8</div></td><td valign="top" width="67"><div align="right">2.1</div></td><td valign="top" width="67"><div align="right">3.3</div></td><td valign="top" width="102"><div align="right">3.7</div></td></tr><tr bgcolor="#ffffff"><td valign="top" width="208"><div><strong>Public sector balance (%GDP)</strong></div></td><td valign="top" width="67"><div align="right">-6.8</div></td><td valign="top" width="67"><div align="right">-5.0</div></td><td valign="top" width="67"><div align="right">-6.3</div></td><td valign="top" width="67"><div align="right">-4.9</div></td><td valign="top" width="67"><div align="right">-4.5</div></td><td valign="top" width="102"><div align="right">-4.3</div></td></tr><tr bgcolor="#ffffff"><td valign="top" width="208"><div><strong>Unemployment rate (%)</strong></div></td><td valign="top" width="67"><div align="right">22.0</div></td><td valign="top" width="67"><div align="right">22.3</div></td><td valign="top" width="67"><div align="right">19.2</div></td><td valign="top" width="67"><div align="right">18.5</div></td><td valign="top" width="67"><div align="right">n/a</div></td><td valign="top" width="102"><div align="right">n/a</div></td></tr><tr bgcolor="#ffffff"><td valign="top" width="208"><div><strong>Exports</strong></div></td><td valign="top" width="67"><div align="right">4,759</div></td><td valign="top" width="67"><div align="right">5,004</div></td><td valign="top" width="67"><div align="right">6,308</div></td><td valign="top" width="67"><div align="right">8,210</div></td><td valign="top" width="67"><div align="right">9,386</div></td><td valign="top" width="102"><div align="right">10,177</div></td></tr><tr bgcolor="#ffffff"><td valign="top" width="208"><div><strong>Imports</strong></div></td><td valign="top" width="67"><div align="right">8,860</div></td><td valign="top" width="67"><div align="right">10,652</div></td><td valign="top" width="67"><div align="right">14,216</div></td><td valign="top" width="67"><div align="right">16,560</div></td><td valign="top" width="67"><div align="right">18,790</div></td><td valign="top" width="102"><div align="right">20,553</div></td></tr><tr bgcolor="#ffffff"><td valign="top" width="208"><div><strong>Trade balance</strong></div></td><td valign="top" width="67"><div align="right">-4,101</div></td><td valign="top" width="67"><div align="right">-5,649</div></td><td valign="top" width="67"><div align="right">-7,908</div></td><td valign="top" width="67"><div align="right">-8,350</div></td><td valign="top" width="67"><div align="right">-9,404</div></td><td valign="top" width="102"><div align="right">-10,376</div></td></tr><tr bgcolor="#ffffff"><td valign="top" width="208"><div><strong>Current account balance</strong></div></td><td valign="top" width="67"><div align="right">-594</div></td><td valign="top" width="67"><div align="right">-1,473</div></td><td valign="top" width="67"><div align="right">-2,054</div></td><td valign="top" width="67"><div align="right">-1,867</div></td><td valign="top" width="67"><div align="right">-2,374</div></td><td valign="top" width="102"><div align="right">-3,046</div></td></tr><tr bgcolor="#ffffff"><td valign="top" width="208"><div><strong>Current account balance (%GDP)</strong></div></td><td valign="top" width="67"><div align="right">-3.0</div></td><td valign="top" width="67"><div align="right">-6.5</div></td><td valign="top" width="67"><div align="right">-7.1</div></td><td valign="top" width="67"><div align="right">-5.4</div></td><td valign="top" width="67"><div align="right">-6.4</div></td><td valign="top" width="102"><div align="right">-7.5</div></td></tr><tr bgcolor="#ffffff"><td valign="top" width="208"><div><strong>Foreign debt</strong></div></td><td valign="top" width="67"><div align="right">59.7</div></td><td valign="top" width="67"><div align="right">69.1</div></td><td valign="top" width="67"><div align="right">86.6</div></td><td valign="top" width="67"><div align="right">90.0</div></td><td valign="top" width="67"><div align="right">82.7</div></td><td valign="top" width="102"><div align="right">85.3</div></td></tr><tr bgcolor="#ffffff"><td valign="top" width="208"><div><strong>Debt service (%Exports) </strong></div></td><td valign="top" width="67"><div align="right">19.5</div></td><td valign="top" width="67"><div align="right">25.8</div></td><td valign="top" width="67"><div align="right">20.4</div></td><td valign="top" width="67"><div align="right">16.2</div></td><td valign="top" width="67"><div align="right">17.7</div></td><td valign="top" width="102"><div align="right">21.2</div></td></tr><tr bgcolor="#ffffff"><td valign="top" width="208"><div><strong>Foreign exchange reserves (import months)</strong></div></td><td valign="top" width="67"><div align="right">4.8</div></td><td valign="top" width="67"><div align="right">5.0</div></td><td valign="top" width="67"><div align="right">5.2</div></td><td valign="top" width="67"><div align="right">4.8</div></td><td valign="top" width="67"><div align="right">4.5</div></td><td valign="top" width="102"><div align="right">4.6</div></td></tr></tbody></table><div> </div><table bordercolor="#330066" cellspacing="1" cellpadding="2" width="595" bgcolor="#ffffff" border="1"><tbody><tr><td valign="top" width="283"><div align="center"><strong>Indicators</strong></div></td><td valign="top" width="87"><div align="right"><strong>Croatia</strong></div></td><td valign="top" width="83"><div align="right"><strong>regional average</strong></div></td><td valign="top" width="99"><div align="right"><strong>emerging countries average</strong></div></td></tr><tr><td valign="top" width="283"><div>GNP per capita (PPP dollars)</div></td><td valign="top" width="87"><div align="right">8930</div></td><td valign="top" width="83"><div align="right">8420</div></td><td valign="top" width="99"><div align="right">6778</div></td></tr><tr><td valign="top" width="283"><div>GNP per capita</div></td><td valign="top" width="87"><div align="right">4550</div></td><td valign="top" width="83"><div align="right">3544</div></td><td valign="top" width="99"><div align="right">3568</div></td></tr><tr><td valign="top" width="283"><div>Human development index</div></td><td valign="top" width="87"><div align="right">0.818</div></td><td valign="top" width="83"><div align="right">0.810</div></td><td valign="top" width="99"><div align="right">0.708</div></td></tr><tr><td valign="top" width="283"><div>Wealthiest 10% share of national income (%)</div></td><td valign="top" width="87"><div align="right">25</div></td><td valign="top" width="83"><div align="right">25%</div></td><td valign="top" width="99"><div align="right">33%</div></td></tr><tr><td valign="top" width="283"><div>Urban population percentage</div></td><td valign="top" width="87"><div align="right">58%</div></td><td valign="top" width="83"><div align="right">61%</div></td><td valign="top" width="99"><div align="right">60%</div></td></tr><tr><td valign="top" width="283"><div>Percentage under 15 years old</div></td><td valign="top" width="87"><div align="right">17</div></td><td valign="top" width="83"><div align="right">19%</div></td><td valign="top" width="99"><div align="right">31%</div></td></tr><tr><td valign="top" width="283"><div>Number of telephones per 1,000 inhabitants</div></td><td valign="top" width="87"><div align="right">365</div></td><td valign="top" width="83"><div align="right">280</div></td><td valign="top" width="99"><div align="right">157</div></td></tr><tr><td valign="top" width="283"><div>Number of computers per 1,000 inhabitants</div></td><td valign="top" width="87"><div align="right">86</div></td><td valign="top" width="83"><div align="right">101</div></td><td valign="top" width="99"><div align="right">66</div></td></tr></tbody></table><div> </div><p align="center"><strong><span class="htmla_paragrafo"><strong>RISK ASSESSMENT</strong> </span></strong></p><p>Growth benefited from the steadiness of domestic demand in 2005, buoyed by a stock replenishment process. Economic activity should continue at the same pace in 2006, driven more firmly by consumption, which should benefit from payment of pension arrears. Although the public sector deficit has remained large, authorities have, for the first time, established a medium-term budgetary framework.<br />After shrinking in 2004, the current account deficit has begun to widen again fuelled by rising prices for imported raw materials and by increased repatriation of earnings by foreign investors. Large tourism revenues (nearly 20% of GDP) have nonetheless been limiting the size of that deficit. The worsening of that imbalance has moreover been accompanied by a sharp increase in capital inflows, notably as direct investments and repatriation of funds by local banks. That has been slowing the growth of foreign debt, which has reached high levels.<br />In October 2005, the European Union decided to begin accession negotiations with Croatia, which had been held in abeyance pending Zagreb's full cooperation with the International Criminal Tribunal for ex-Yugoslavia. Major reforms remain necessary, notably in the areas of government aid, state-owned-company restructuring, health and the business environment.</p></PRE>

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