Sovereign Risks:
- Economist Intelligence Unit expects the deficit to widen to 1.8% of GDP on average in 2017-2018
- Public debt is projected to fall to 81.0% of GDP in 2018
- Current high levels of both public and private debt has caused monetary tightening and increased volatility
- Sustained fiscal consolidation and competitiveness reforms are needed to reduce macroeconomic imbalance and protect the nascent recover
Currency Risks:
- Sustained fiscal consolidation and competitiveness reforms are needed to reduce macroeconomic imbalance and protect the nascent recover
- The Kuna appreciated against the Euro in 2015-2016 due to the tourism season and large current account surpluses. This is expected to continue through 2018.
- The Croatian National Bank has shown itself willing to intervene to support the currency.
Political Risks:
- A new coalition government has support from the Liberal Croatian People's Party, which has caused instability
- Croatia has cool and hostile relationships with Bosnia, Hercegovina, and Serbia
Economic Risks:
- The narrow, undeveloped merchandise export sector is benefiting from integration in the EU supply chains, and gradually becoming more competitive
- Economy remains highly dependent on seasonal tourism, and potential output is limited by high rates of emigration, low participation rates, and hefty public and private debt burdens