The following report covers key macroeconomic data relating to Croatia published from November 5 to December 5, 2013. It also includes news on privatization developments involving the firms Croatia Osiguranje, HPB, Croatia Airlines, and Hungary’s MOL.

In this one-month period, most international institutions issued revised forecasts on Croatia’s GDP growth for this year, signaling the country will close a fifth year of recession with the economy seen shrinking between 0.7% and 1.0%. The government, however, still believes it might clinch a modest growth of 0.2%, revising downward its previous 0.7% growth forecast in the second budget revision for this year. Foreign and domestic projections for 2014, however, agree the economy is set to end the lasting recession and turn to growth. In the meantime, the EC has confirmed it decided to recommend opening an excessive deficit procedure for Croatia as Eurostat data revealed the budget deficit hit 5.0% of GDP in 2012. The state of fiscal health will improve neither this year nor next, with consolidated budget gaps set at 5.5% for both years.

Shrinking consumption will remain the major growth challenge next year, as high unemployment and stagnating wages hamper personal spending. Flash data showed that third-quarter GDP fell by a real 0.6% year on year, marking an eighth consecutive quarter of contraction. The switch in retail sales to a drop in September and October, coupled with dwindling industrial output, already signal the fourth-quarter results will remain gloomy.

Key Points:

• In privatization news, Croatia has extended the bidding deadlines in the privatization of insurer Croatia Osiguranje and lender Hrvatska Postanska Banka (HPB). Zagreb has received no bids in its tender for a 49% stake in national carrier Croatia Airlines. And Hungary's MOL has offered its 49.1% stake in Croatian oil and gas company INA to the government in Zagreb.

• Croatia’s annual consumer price inflation again eased to 0.2% in October from 1.1% in September. Industrial production declined for a seventh month in a row in October, shrinking 3.4% y/y with manufacturing production continuing to be the worst performer, negatively affecting the country’s overall economy.

• The jobless rate rose to 20.3% in October from 19.1% in September with the end of the summer tourism season, which typically supplies many seasonal jobs. It was also 0.7pps higher compared to October 2012.