2013-12-24 20:08:16 - Fast Market Research recommends "Croatia Shipping Report Q1 2014" from Business Monitor International, now available
2014 Outlook Reduced Again
The Croatian economy is set to recover in 2014, but after five consecutive years of retrenchment (negative or zero growth), BMI is projecting a very weak and slow improvement. On the plus side, sentiment has been boosted by accession to the European Union in mid-2013; tourism is performing well, and household consumption is edging back into positive territory. On the negative side Croatia already finds itself in political dispute with the EU (over its failure to implement a European Arrest Warrant); investment and government spending remains constrained; and unemployment remains stubbornly high at 16.9%. Although inflows of EU money following accession should support infrastructure development over the long term, inefficient policy implementation is likely to delay its
impact on investment spending in 2014. The export outlook remains weak, so we expect the trade deficit to widen in 2014, acting as further drag on growth. Weighing up these factors, we are maintaining our estimate for GDP contraction of 0.4% in 2013, followed by growth of only 0.6% in 2014 (down from our forecast of 1.1% in our last quarterly shipping report).
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Looking at the ports and shipping sector, we believe annual bulk cargo percentage growth will remain in the low single digits, in line with a slow and rather painful recovery and a continuing weak trade performance. The largely import and transit-led box traffic outlook is more encouraging, with growth in the higher single digits (between 5% and 10% per annum). This at least in part reflects 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 2014 port of Rijeka tonnage volume will rise by 1.9% to 8.871mn tonnes, after 1.9% growth in 2013. Over the medium term to 2018, we project average annual growth of 2.5%.
* 2014 port of Rijeka container throughput forecast to grow 8.3% to 198,887 twenty-foot equivalent units (TEUs). Over the medium term, we project a good average annual increase of 7.7%, significantly ahead of GDP.
* 2014 total trade growth forecast at -0.8%, following a contraction of 1.2% in 2013 and 1.7% in 2012.
Key Industry Trends
GEFCO To Use Croatia As An Automotive Logistics Hub: Global automotive and industrial logistics operator GEFCO plans to open a new subsidiary in Zagreb, Croatia in 2014 with the aim of establishing a point of entry for the entire EU. The subsidiary has already entered into an agreement with PSA Peugeot Citroen to provide logistics services for its new vehicles and spare parts in partnership with local companies. In addition, it intends to provide distribution, automotive logistics and customs assistance services in Croatia, Romania, Serbia, Bulgaria and Bosnia-Herzegovina. Locating the new facility in Zagreb means it is in close proximity to the port of Rijeka, the largest port complex in the country, and one that lends itself to GEFCO's intended expansion into Western Europe, Asia and the Mediterranean rim.
Adriatic Gate Has Big Ambitions: 'We may be the new kid in town, but we have very ambitious plans for AGCT (Adriatic Gate Container Terminal), and that is to help develop Rijeka as the new gateway for south and central Europe,' Phillip Marsham, AGCT's chief executive, said. The terminal's new 320-metre quay, with a draft of up to 14 metres, opened in July equipped with two post-panamax ship-to-shore gantry cranes.
It has increased annual capacity at AGCT to around 750,000 TEUs. Marsham is enthusiastic about what it can deliver. 'With our new terminal and handling equipment, expanded yard, increased rail capacity and closer distance to the Hungarian border, plus Croatia's admission to the EU, we can offer shipping lines a clear first-port-of-call advantage and their customers faster transit times to key markets, such as Budapest. We can save the shipping lines a day on their voyages and significant costs too,' he says.
'We're Still Talking To China' Says President: In an interview with a Chinese publication Croatian president Ivo Josipovic said his country wanted to deepen cooperation with China and 'become another door to Europe for Chinese investors'. He said that the Croatian port of Rijeka provided 'a very good new opportunity' for Chinese companies, and noted that talks about potential investment in the port by Chinese shipping group COSCO are ongoing. The president said that Chinese companies trading with Central Europe has traditionally moved their cargo through Amsterdam or Spanish ports, but that by using Rijeka or Slovenia's port of Luka Koper they could cut down on shipping times.
Risks To Outlook
A key downside risks for Croatia remains 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.
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