2013-02-01 18:11:20 - Recently published research from Business Monitor International, "Croatia Shipping Report Q1 2013", is now available at Fast Market Research
2013 Will See Modest Recovery
BMI is now estimating that Croatian GDP will fall by 1.7% in 2012 (steeper than our earlier forecast of a 1.5% contraction) and recover moderately in 2013, with growth of 1.0%. Data releases for the first half of 2012 have convinced us that the downturn is sharper than we had expected. The main reasons for this are the government's fiscal austerity programme, high unemployment and low business confidence reflecting the wider eurozone sovereign debt crisis. There are some bright spots (such as a strong showing by the tourism industry); we think these will be boosted next year by Croatia's expected accession to the European Union and, towards the end of 2013, a recovery in the regional
and global economy.
Looking at the ports and shipping sector, we are lukewarm on the outlook for bulk cargo, but significantly more positive about box traffic. On the whole, we don't think that 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.
Full Report Details at
Headline Industry Data
* In 2013 Port of Rijeka tonnage volume will rise by 1.9% to reach 8.705mn tonnes, after an estimated 9.0% contraction in 2012. Over the medium term to 2017 we project average annual growth of 1.7%.
* 2013 Port of Rijeka container throughput forecast to grow 6.8% to 177,015 twenty-foot equivalent units (TEUs). Over the medium term we project a good average annual increase of 5.7%, ahead of GDP.
* 2013 total trade growth forecast at -2.8%, the second consecutive year of contraction.
Key Industry Trends
Port Of Rijeka Doing Well In A Bad Year
Despite the domestic recession and slumping trade, the president of Croatia's Rijeka Port, Vedran Devcic, said that the total volume of cargo handled in the first nine months of 2012 increased by 3% year-on-year (y-o-y). Also in the first nine months of the year, Rijeka Port pre-tax profit reached HRK1.90mn (US$326,395). Income and outgoings were HRK139mn and HRK137mn respectively. Sales abroad grew by 26% y-o-y, while sales in the country went up by 6%. Business incomes rose by 5% y-o-y. Two new Liebherr coastal lifting cranes, worth EUR5mn (US$6.49mn), were due to be delivered and installed by March 2013.
ICTSI A Plus Factor for Adriatic Gate
ICTSI's latest coup at the Adriatic Gate Container Terminal (AGCT) is to gain the backing of the facility's workforce, with the operator signing a collective bargaining agreement (CBA) with the Independent Union of Employees of Port of Rijeka. The deal, which is set to provide education, social development, safety and productivity for the terminal's workforce, highlights ICTSI's desire to develop a strong relationship with terminal workers and the unions. This is vital in BMI's view, if the company is to achieve its goal of making the terminal more efficient and boosting throughput. An example of how devastating an effect disagreements between a new operator and workers at a port can have on throughput is exemplified at the Greek port of Piraeus, when the privatisation of one of the port's container terminals to COSCO Pacific led to year-long rolling strikes, which witnessed container throughput at the port drop by 68.4% y-o-y.
Coastal Shipper Janaf In The Black
Croatian coastal oil and petrol transport and storage company Janaf posted a net profit of HRK60.20mn (US$10.37mn) in the first nine months of 2012, up by 25.5% y-o-y. Oil transport rose by 21.4% to 3.4mn tonnes. However, income from basic operations dropped by 4.3% to HRK266mn. Despite this, total income grew by 8.3% y-o-y to HRK324mn. Total outgoings increased by 4% to HRK248.5mn.
Risks To Outlook
BMI expects the eurozone countries to finally get back on the path of recovery by late 2013. This is based on recent developments, with the European Central Bank (ECB) stepping up its involvement in solving symptoms of the crisis. But the downside risk is that there remains the potential for the situation to again deteriorate. This would weigh heavily on Croatia's economic outlook, given the high degree of investment and trade ties the country shares with the common currency bloc. Therefore we remain concerned about the potential negative knock-on effect on Croatian exports, coupled with lower domestic demand caused, among other things, by any related contraction of the tourism industry.
Balkans political risk is another factor that needs to be monitored. The main downside risk here is that regional disputes might delay Croatia's expected accession to the European Union. There have in fact been tensions with the country's immediate neighbours. Analysts noted a chill in relations with Serbia, following the election of a nationalist president there. There have also been threats by Slovenia to delay Croatia's accession to the EU on the back of a Yugoslav era banking dispute. However, we see little scope for these disputes to get out of hand and hold to our forecast for Croatia to join the bloc in 2013. We expect Croatia to make the necessary concessions and for Slovenia's position to soften somewhat towards the end of the year.
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