2013-10-07 17:51:08 - New Transportation research report from Business Monitor International is now available from Fast Market Research
We have again reduced our economic forecast for Croatia. We now expect GDP to contract by 0.4% 2013, recovering with 1.1% expansion in 2014. In our last quarterly shipping report we had expected growth of only 0.1% in 2013 1.3% in 2014, so in effect we are saying that this year is going to be weaker, but that the recovery next year will be a little stronger. The good news is that after five years of negative growth in 2008-2013, we believe the economy is finally bottoming out. The most likely scenario is that modestly improving private consumption and strong tourism receipts will be the main positives, while fiscal austerity and low investment spending will continue to act as a
drag on growth. Croatia's accession to the EU on July 1 2013 will help build confidence in the economy, although there is continuing concern over domestic issues such as corruption, and a failure to tackle political reforms.
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Looking at the ports and shipping sector, we remain lukewarm on the outlook for bulk cargo, but significantly more positive about box traffic. In both cases, growth will be positive, despite the fall in GDP and domestic trade, at least in part because of the country's role as a regional gateway for transit trade. On the whole, we do not believe bulk tonnage handled at Croatia's main ports will exceed the record levels achieved back in 2007/08. On the container side, however, we see steady growth boosted by regional import demand.
Headline Industry Data
* In 2013 port of Rijeka tonnage volume will rise by 1.9% to 8.706mn tonnes after an estimated 9.0% contraction in 2012. Over the medium term to 2017, we project average annual growth of 2.2%.
* 2013 port of Rijeka container throughput forecast to grow 10.8% to 183,645 twenty-foot equivalent units (TEUs). Over the medium term, we project a good average annual increase of 8.3%, significantly ahead of GDP.
* 2013 total trade growth forecast at -0.9%, the second consecutive year of contraction.
Key Industry Trends
Luka Ploce Reports Flat Cargo, Falling Revenue In H113: Port operator Luka Ploce reported a 3.8% drop in revenue to HRK59.3mn (US$10.51mn) in the first half of 2013. Operating expenses fell, aided by savings achieved by the streamlining of operations. As a result EBITDA rose by 6% year-on-year (y-o-y) to reach HRK8.3mn. Total cargo handled was flat at 1.381mn tonnes. Dry bulk remained the largest cargo category, responsible for 64% of total throughput, and down 2% y-o-y, attributed to the end of a contract to tranship coal to a thermal power plant in Italy.
'What If?' Oil Spill Exercise Held With US Help: With the support of US naval and defence agencies a range of Croatian organisations took part in a two-day scenario-planning exercise dealing with a fictional oil spill cause by a collision between a passenger ferry and a cargo tanker some 25kms off the Dalmatian coast in the Adriatic. According to a US government press release the object of the exercise was to exchange ideas; build on past efforts; raise awareness on the national implications to tourism, economy and environmental preservation in the event of an off-shore oil spill; and increase preparedness, planning, response and recovery to environmental disasters in order to enhance coastal resiliency.
Adriatic Gate Container Terminal (AGCT) Receives New Equipment: AGCT has taken delivery of two post-Panamax large capacity ship-to-shore cranes, six rubber-tyred gantry cranes and two rail-mounted gantry cranes, all part of the upgrade to the Brajdica container terminal. The equipment, manufactured by China based ZPMC, was delivered in late May 2013, with a total estimated value of EUR24mn (US $30.9mn). In 2011 Philippines-based ICTSI and Luka Rijeka, Croatia's largest port operator and marine services and logistics provider, signed a 30-year strategic partnership for the management of AGCT, a Luka Rijeka unit and the concessionaire of the Brajdica container terminal
Risks To Outlook
One of the main downside risks for Croatia is the possibility of a downturn in tourism, which at present is making a very significant contribution to growth. If tourism receipts disappoint for whatever reason, there is likely to be an impact on household incomes and therefore on private consumption. This could result in a bigger GDP contraction in 2013, and, in the worst-case scenario, might eliminate the expected positive growth rate in 2014.
There is also a specific risk around Croatia's banking sector, which remains one of the weakest in the region. With Italian banks owning over 50% of its banking assets, and non-performing loans passing the 14% mark in 2012, the country remains highly exposed to regional credit risk. Deleveraging is limiting credit growth. Croatia's economic outlook would suffer if parent banks were to withdraw support for Central and Eastern European banks. This would have a knock-on effect on the local ports and shipping sector.
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