The following report covers key macroeconomic data relating to Croatia published from December 5, 2013 to January 3, 2014. It also includes corporate news for firms including HPB, Croatia Osiguranje, Hrvatske Ceste, and Croatia Airlines.

The period coincided not only with Passion week for Catholic Croatia but turned into a rather passionate month for the government after the EC proposed the opening of an excessive deficit procedure for the EU’s newest member state, telling the local authorities their 2014 budget bill is not enough to tame structural deficits. The EC also recommended an adjustment path that would lead the country out of the procedure by 2016. In response, the government started preparing new fiscal measures, saying it would revise the 2014 budget by end March.

The third-quarter GDP contraction was confirmed at 0.6% year on year, marking an eighth consecutive quarter of contraction. On a more positive note, most international lenders, banks and rating agencies believe Croatia will exit the five-year recession in 2014—although the anticipated recovery will hardly be significant and probably stay below 1%.

Key Points:

• In corporate news, the government turned down Erste Group’s offer for the purchase of local lender HPB, saying the single-arrived bid was too low. Still, the privatisation of the country’s largest insurer Croatia Osiguranje will probably be successfully wrapped up in 2014 with the buyer being local Adris Group.

• The Croatian government has given its consent to motorway operator Hrvatske Ceste to borrow EUR 56.5mn from four local lenders for the construction and maintenance of motorways and to cover its 2013 credit obligations.

• The government has also consented to allow state-owned flag carrier Croatia Airlines to borrow EUR 1.35mn from local lender Privredna Banka Zagreb (PBZ) to finance the airline’s restructuring process.