BMI View: Croatia will gently move out of recession in 2015 with a paltry 0.1% real GDP growth , according to our projections, amid an environment of fiscal initiatives and public sector cuts aimed at reducing the yawning budget deficit, all ahead of an increasingly likely EU/IMF bailout in the near future. The investment environment is being impacted by the poor economic scenario and the only real hope for infrastructure is in the form of large funds available through EU facilities, of which, fortunately, there are many. The railways and energy infrastructure sub - sectors are forecast to benefit in the near term from extensive European integration and modernisation projects. However, the residential and non-residential building sub - sectors will continue to stagnate, as they miss out on EU focus and lose out to a lack of foreign direct investment (FDI).
Latest Updates And Structural Trends
The recession has laid the construction industry low by limiting government investment and weakening domestic demand. FDI is being hampered by an uncompetitive business environment in need of structural reforms aimed at lowering labour costs and shrinking bureaucracy. At the same time, Croatian banks will struggle in the corporate loan market, with internal and external demand remaining low, as businesses put projects on hold or seek alternative funding.
Croatian infrastructure will rely heavily on EU funding, with the country set to benefit from two particular project financing vehicles: the EUR64.3bn Cohesion Fund and EUR14.9bn Connecting Europe Facility (CEF). These will support the funding of the TEN-T transport corridors and TEN-E energy networks, which have a heavy weighting towards the less developed networks in Eastern and Central Europe. The transport sector likely to benefit most from the CEF is railways, as the EU looks to develop and modernise the Rhine-Danube, Orient-East Med and Baltic-Adriatic corridors to boost regional business and tourism ties.
Providing downside risk to our forecasts, the intended privatisation of 1,024km of motorway network was cancelled by Croatia's Prime Minister Zoran Milanovic on March 13, 2015 (IJGlobal, 2015).
Croatian economy saw a cumulative 13.4% contraction over 2009-2014, but the recession came to an end in 2015, according to our calculations. We forecast a real GDP growth of 0.1% y-o-y in 2015, as a result of a better-than-expected tourist season, stronger external demand and lower oil prices. Despite a certain enhancement in business environment, investment is expected to remain weak, pointing to remaining structural weaknesses. We expect a relatively low real GDP growth of 1.0% y-o-y in 2016, due to strong pressure for fiscal adjustment aimed at reducing the country's yawning budget deficit (Our Country Risk team predicts an EU/IMF bailout will be needed to plug funding gaps) and the slow implementation of reforms aimed at improving the business environment.
|Croatian Bureau of Statistics|
|Construction industry value, HRKbn||13.70||14.07||14.63||15.32||16.15||17.02||17.75|
|Construction Industry Value, Real Growth, % y-o-y||-1.55||1.72||2.35||2.02||2.43||2.42||1.27|
|Construction Industry Value, % of GDP||4.3||4.3||4.4||4.4||4.4||4.5||4.5|
Croatia scores 51.6 on our Infrastructure Risk/Reward Index, significantly lower than the regional average of 60.2.
The poor Industry Rewards score of just 35.0 out of 100.0 reflects the small scale industry value and the limited projects pipeline in Croatia.
External risk continues to dominate as recovery in the entire region remains fragile. However, the progress in reforming its institutions and liberalising the market in accordance with EU rules and regulations is illustrated by Croatia's relatively high score in relation to many of its peers. The Industry Risks score is 60.0 out of 100.0, when the regional average is 66.4.
|Risk/Reward Index||Rewards||Industry Rewards||Country Rewards||Risks||Industry Risks||Country Risks|
The Croatia Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.
BMI's Croatia Infrastructure Report provides industry professionals and strategists, sector analysts, investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Croatian infrastructure and construction industry.
- Benchmark BMI's independent infrastructure industry forecasts for Croatia to test other views - a key input for successful budgetary and planning in the Croatian infrastructure market.
- Target business opportunities and risks in the Croatian infrastructure sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Croatia.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering infrastructure and construction, regulatory changes, major investments and projects and significant national and multinational company developments. These are broken down into construction (social, commercial and residential), transport (roads, railways, ports, airports, etc), and energy & utilities (powerplants, pipelines and so on).
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the infrastructure and construction sectors and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (up to 2012) and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key developments in the market and risks to the main forecasts. Indicators include:
Construction: Industry value (USDbn); contribution to GDP (%); total capital investment (USDbn); real growth (%).
Construction industry real growth forecasts (%) and industry value (USDbn) forecasts for industry sectors are split into Residential and Non-residential and Infrastructure sectors. Where the data is available for particular countries the infrastructure is further broken down into indicators for the transport subsectors of roads, railways, airports and ports and the energy and utilities sub-sectors of power plants and transmission grids, oil & gas pipelines and water infrastructure. This dataset is unique to the market.
The reports also include analysis of latest projects across the infrastructure sectors (transport, utilities, commercial construction).
BMI’s Infrastructure Risk Reward Index
BMI’s Risk Reward Index provides investors (construction companies, suppliers and partners) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points. These provide indices of highest to lowest appeal to investors, with each position explained.
An assessment of the competitive landscape and key challenges to entering the market. Details of the largest companies active in the sector across the sub-segments of the industry, including the key financial figures from some of the largest players in the sector.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Infrastructure reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.