BMI View: Activity at the main Croatian ports in 2015 will be mixed, with container traffic growing in a 3%-5% range, while bulk tonnage will fall at two ports, Rijeka and Sibenik, but will register a small improvement at Ploce. The reason for this disparate performance will be the weak state of the domestic economy and the country' s poor foreign trade showing. After estimated strong growth in 2014, we expect foreign trade to contract again in 2015.
We have downgraded our forecast for Croatian GDP growth in 2015 to 0.1%, down from +0.4% previously. In other words, the economy will be virtually at a standstill after six years of recession. This rather grim outlook reflects the lack of sustainable growth drivers, and the absence of structural reforms needed to tackle high labour costs and poor export competitiveness.
Devaluation would help, but a dollarised loan book means the central bank opposes such a course of action, and will keep the kuna in a managed float against the euro. As a result, economic adjustment will have to come through a slow and painful process of internal devaluation. In the meantime, domestic consumption is held back by high unemployment, while government spending is restrained by the high public debt load (debt represents over 80% of GDP). Exports are also struggling because of competitiveness issues. We forecast that growth will pick up weakly to 0.9% in 2016, and will average a disappointing 1.3% a year in the five years to 2019.
Headline Industry Data
In 2015 port of Rijeka tonnage volume will contract by 3.0% to 9.482mn tonnes, after 12.3% growth in 2014. Over the medium term to 2019 we project average annual growth of 0.7%.
Container throughput at Rijeka in 2015 forecast to grow 5.2% to 139,551 twenty-foot equivalent units (TEUs). Over the medium term we project a strong average annual increase of 7.0%, significantly ahead of GDP.
2015 total trade forecast to fall by 3.4% in real terms, following growth of 14.1% in 2014.