Uncertainty clouds Croatian outlook
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Uncertainty clouds Croatian outlook

First economic downturn in decade; Prime minister’s shock resignation

Croatia underwent a dramatic change with the unexpected resignation of prime minister Ivo Sanader. In an interview with leading local daily Jutarnji List, Sanader said that his resignation was deliberately timed to shock Croatia and the rest of Europe. He claimed that Croatians needed to face up to reality and accept the need for further government spending cuts if the country was not to be faced with the prospect of having to seek a financial bailout from the IMF

Ivor Sanader: deliberately shocking Croatia and Europe

Government officials in Zagreb, the Croatian capital, are no doubt praying for a scorching August after the latest economic data from the Balkan state showed that the chill winds of recession were blowing strongly at the start of the year. Favourable weather could make all the difference between Croatia entering a shallow or a deep downturn, given that tourism accounts for about 20% of GDP and roughly 45% of foreign-currency earnings.

According to Crostat, the Croatian statistics agency, in the first quarter of 2009 GDP fell by 6.7% year on year in real terms – a figure that generated public dismay in a country that has enjoyed a decade of stable if unspectacular growth.

The grim statistics marked the first drop in GDP since the third quarter of 1999 and the sharpest fall since the end of 1993 – when Croatia was still mired in a bitter war with neighbouring Serbia.

"The message from the first-quarter GDP figures is not a good one and came as an unpleasant surprise for the Croatian public, if not for most analysts," says Alen Kovac, macroeconomist at Erste Bank in Zagreb.

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