The Czech crown is likely to depreciate in the near term as there are no fundamental reasons for its strength., the CNB governor Tuma commented during a meeting organized by the local Euro weekly. Tuma stresses that the CB does not target a specific exchange rate, but its level plays an important role in the monetary policy decisions. Despite the verbal intervention, the crown climbed to new high vs. the euro on Tuesday reaching CZK/EUR 24.83. One factor was the positive sentiment around Slovakia after the S&P decision to raise the rating outlook to positive.

Tuma's comments, the currency strength, as well as growth concerns, suggest that rates may remain on hold for some time despite the high headline inflation number for January (7.5% y/y). The latest inflation report is consistent with this view, but it would be important also to see the February CPI release, which is due out on Mar 10. The next monetary policy meeting is scheduled for March 26.

Domestic fuel giant PKN Orlen's trade unions are demanding a 10.5% raise for 2008. This works out to some PLN 640 per month per worker. The unions threatened to take any industrial action if management does not agree. This includes going on strike. Orlen, which employs some 23,000, has been racking up bumper profits. In Q4 2007, it reported a profit of around PLN 600mn, double analyst expectations and far better than the PLN 198mn loss a year earlier, though one-offs helped boost the bottom line. But the company also just saw the Law and Justice (PiS)-appointed CEO suspended and is in the process of searching for a new chief executive. It is not clear if this will keep the management from agreeing to the workers' demands. The wage call is clearly part of the ongoing pressure from workers for higher wages as the labour market tightens.

Privatisation revenues totalled PLN 86.7mn to end-Feb., the Treasury Ministry said in a statement. That comprises just 3.8% of the full-year target of PLN 2.3bn. It also marks a very small total against the Treasury's real stated goal of having sell-off receipts at around PLN 4.6bn or even higher. However, most of the sales seem set for later in the year, so this is not a large surprise. The new Civic Platform (PO)-Polish People's Party (PSL) government has promised to speed up privatisation after the prior Law and Justice (PiS)-led government basically stopped the process. For now, things remain at the planning stage, though a pledged 4-year plan should soon be unveiled. The initial statements see sell-off receipts at around PLN 5bn-7bn a year for the 4 years of a term that ends in 2011.

Monetary Policy Council member Marian Noga, a hawk, said Tues. that CPI inflation could accelerate to 5% in Apr. from a preliminary 4.3% in Jan. on the back of higher energy and food costs. In a written comment for the daily Gazeta Prawna, Noga said that Q3 would see another inflation spurt, though this depended on food-price movements. Wages were also threat, he said. "I continue to believe that with rates at 5.5% the 2.5% [inflation] target won't be hit . . . That's why further monetary policy tightening is needed," he said. Noga also warned of second-round effects. Overall, Noga has remained a consistent supporter of tighter policy. His latest view sees rates at 6-6.25%, with the higher end seeming to be the upper limit now considered by the hawks. We believe Noga will support another quarter-point hike in Mar., along with the hawks, but whether key swing-voters Jan Czekaj and Andrzej Slawinski do so as well remains to be seen and will depend in large part on coming data. But considering those data are likely to show a continuation of recent trends, this probably gives a greater chance of a hike occurring in Mar. than it not occurring.

The rumours that NBH is considering to give up its 3% medium-term inflation target are ridiculous and unfounded, NBH Governor Andras Simor said on Tuesday (March 4), adding that the inflation target remains in place. In our view, given the recent upward revision of inflation forecasts (which indicate NBH might fail to bring inflation to 3% in 2009) and lack of persistent HUF strengthening after the removal of the fluctuation band, the MPC is facing some sort of a credibility test, which some believe might be addressed by rate hikes. On other hand, there the MPC is also facing a dilemma concerning the magnitude of a rate hike (possibility of such a move is not excluded by MPC), especially at the time of notable economic slowdown and poor prospects for a quick revival of GDP growth in 2008 and 2009.

CEEMarketWatch estimates that the CPI fuel index will increase by 19.6% y/y and by 0.9% m/m in February. This will add 1.07pps to headline inflation in February, representing a larger impact that the 0.95pp seen in January.

The forecast is based the EconMin's report on the fuel prices (weekly data) for the entire February. According to media reports, fuel prices will continue moving upwards. It is worth noting that the gradually increasing fuel prices and the base effect have resulted in a situation where fuel prices have been putting increasingly more upward pressure on inflation since October 2007.

CEEMarketWatch fuel index forecast (updated version)

KSH fuels (y/y) CEEMW fuels y/y CEEMW fuels m/m Fuels' impact on y/y CPI (pps) * Feb-07 95.3 95.1 99.5 -0.24 Mar-07 98.7 98.2 103.2 -0.07 Apr-07 97.3 96.9 102.9 -0.14 May-07 94.1 93.6 101.0 -0.30 Jun-07 96.6 96.1 102.8 -0.17 Jul-07 92.8 91.9 100.5 -0.37 Aug-07 92.1 91.8 99.5 -0.40 Sep-07 98 97.5 100.9 -0.10 Oct-07 103.6 102.9 100.5 0.18 Nov-07 109.5 109.8 104.3 0.49 Dec-07 113 113.2 102.3 0.66 Jan-08 117.5 117.8 100.2 0.95 Feb-08 119.6 100.9 1.05

Source: Source: KSH, CEEMarketWatch (*): from KSH's data when available, from CEEMarketWatch proxy elsewhere

To see the methodology of our forecast, click here. Similar forecasts are available for Slovakia (click here) and Poland (click here).

The probability of the scheduled adoption of the euro in 2009 increased to 80% in Feb. from 78% in Jan., according to a survey done by the INEKO think-tank and the Club of Economic Analysts (KEA). Overall, 16 of 18 local economists polled believed in euro adoption as planned. The economists thus expect the Maastricht criteria to be met. The average general government deficit forecast was cut to 2.4% of GDP from the 2.5% forecast the previous month. Some 91% believed the fiscal criteria would be met, this up 0.1 pp m/m.

The economists' forecast of 12-month average HICP inflation in March 2008 -- to be used for the EU's gauging of Slovakia's adoption application -- was 2.3%, up from the 2.1% forecast the previous month. That is to be lower than the expected Maastricht benchmark of 3.0%, which was up from 2.8% in Jan. Both reflect the supply shocks hitting inflation on a European scale. Some 79% believed the inflation criterion would be met, this down 0.1 pp m/m.

The forecast of the EUR/SKK conversion rate was lowered. The Feb. forecast was 32.58 (15 analysts saying so), down from 32.72 (13 analysts) the previous month. Some 95% of the economists expected the exchange-rate criterion to be met. This was up from 93% the previous month.

The report and the list of experts can be found here.

The Slovak Statistical Office (SSO) expects real GDP growth to be 7.5% y/y in H1 2008, according to forecasts released Tues. along with the full Q4 figures. But its inflation forecasts were probably more interesting. The office expects CPI inflation to average 4.2% in H1. The CPI rate was 3.8% y/y in Jan., meaning it expects a considerable acceleration. CPI inflation is to be 4.3% y/y in Jun. This will come on the back of higher food and fuel prices as well as some regulated price hikes.

The SSO also expects employment (LFS) growth of 1.7% y/y to 2.372mn in H1 2008. The unemployment rate is expected to be 10.5%. Nominal wages are expected to grow by 6.8% y/y to an average of SKK 20,360 per month. The real wage growth forecast is 2.5% as rising inflation eats away at real income growth.

Slovak real wages grew by 4.5% y/y in Q4 2007, marking acceleration from 4.2% in Q3 and 3.9% a year earlier, according to Slovak Statistical Office data released Tues. The stats office noted that real wages grew in all sectors of the economy. Real wage growth came as nominal wages grew by 8.0% y/y in Q4, up from 6.8% the previous quarter but slightly down from 8.2% the previous year. The nominal average monthly gross wage was SKK 22,925 in Q4, up from SKK 19,514 in Q3 and SKK 21,131 in Q4 2006. Employment growth sped up to 2.8% y/y in Q4 and unemployment fell to a roughly 13-year low of 10.3% in the final quarter of 2007. This marks a continued tightening of the labour market. However, wage growth remains relatively muted and productivity growth is very fast. That latter will mean the NBS's Bank Board will interpret the data in a largely favourable way.

The stats office said it expected the average nominal wage would rise by 6.8% y/y to SKK 20,360 in H1 2008 on employment growth of 1.6% y/y. The real wage forecast is 2.5% y/y for H1 2008. The stats office forecast that inflation would average 4.2% y/y in H1 2008 and be at 4.3% y/y in Jun.

Slovakia’s unemployment rate fell to 10.3% in Q4 2007 from 11.2% in Q3 and 12.0% a year earlier, marking the lowest rate since 1994, according to a Labour Force Survey published Tues. by the Slovak Statistical Office. Some 275,300 were classified as unemployed, down 22,600 from the previous quarter and 43,700 from the same quarter of 2006. Against a year earlier, the biggest decline was the nearly 10,000 drop in unemployed in industry, with this reflecting strong manufacturing activity and growing output. The unemployment rate overall in 2007 was 11%, down from 13.3% in 2006. For H1 2008, the stats office forecasts a jobless rate of 10.5%.

Employment rose by 2.8% y/y to 2.398mn, the growth rate well up from 2.0% in Q3, though down from 3.5% a year earlier. The gain in the number of employed against a year earlier was 65,600. Industry noted the biggest growth (22,300 y/y). Construction also rose sharply (15,700), and real-estate, rental and business activities increased by at even quicker pace (17,700). The rise suggests that labour productivity remained blistering at just over 11%, compared with just over 7% the previous quarter. The stats office forecasts employment growth of 1.7% y/y in H1 2008.

Real GDP growth surged to 14.3% y/y in Q4 2007, the Slovak Statistical Office (SSO) said Tues. in a full data release revising up overall growth from the 14.1% flashed in mid-Feb. The Q4 growth rate was lifted by pre-stocking of tobacco products ahead of an excise tax increases this year. Though it did not mention a growth rate without this impact, the stats office previously said growth without the one-off impact was around 9.7% y/y in Q4. For the Q4 figures released Tues., foreign demand was the main driver, though domestic demand remained relatively solid. The structure of domestic demand was favourable from an inflation standpoint, with investment growing in share and consumption slowing. The NBS's Bank Board will not be overly affected by the data, though it will likely hail its favourable structure as productive capacity continues to grow and inordinate demand pressures are largely absent. For full-year 2007, growth was a record 10.4% y/y, up from an already high 8.5% a year earlier.

Fixed investment grew by 8.9% y/y in Q4, up from 5.0% a year earlier as companies continue to invest in production capacity largely destined for domestic markets. This could open the economy up to downside risks if EU demand should slow sharply, though supply-chain integration does partly shield the domestic Slovak economy.

Consumption rose by 4.4% y/y, well down from 7.3% a year earlier. This came as both private and public consumption slowed, with the latter seeing an especially sharp decline as the government strove to meet the Maastricht fiscal criteria. Private consumption rose by 5.9% y/y in Q4, down from 6.9% a year earlier. Wage growth has continued but considering labour-market tightness has been relatively muted. Retail sales figures show largely slow but steady growth. Public consumption fell to just 0.8% y/y in Q4, sharply down from 9.2% a year earlier. Government spending has been constrained, in part as it eyes euro adoption in 2009.

Export growth continues to be the main pillar of overall growth. Exports grew by 16.0% y/y in Q4, a robust result considering the high 23.1% y/y base of the prior year. Export demand in the euro-zone, the main destination for Slovak-built products, was relatively strong last year, though this could give downside risks going forward. Imports grew by 11.6% y/y in Q4, down from 14.9% a year earlier. Rising income, koruna strength and investment are helping fuel import growth, though favourable export developments are bigger. The main car companies and other manufacturers will up output again in 2008, helping keep the net export contribution as a main growth driver, though this will shrink somewhat.

Quarterly national accounts (%, y/y)

Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 2006 2007 GDP 8.2 8.3 9.3 9.4 14.3 8.5 10.4 Final consumption: 7.3 5.7 5.0 6.9 4.4 6.7 5.5    Private 6.9 6.3 7.8 8.3 5.9 5.9 7.1    General govt 9.2 3.5 -3.5 2.2 0.8 10.1 0.7 GFCF 5.0 11.0 5.9 6.5 8.9 8.4 7.9 Exports 23.1 22.7 18.1 8.5 16.0 21.0 16.0 Imports 14.9 14.5 13.2 3.0 11.6 17.7 10.4

Source: SSO; chain-linked volumes to 2000 (ESA95)

Societe Generale announced its offer to the minority shareholders of Rosbank after it added to the initial stake of 25% + 1 share another 30% of the capital by exercising its option for USD 1.7bn on February 13. The offered price is RUR 194.09 or USD 7.87 per share which is above the prevailing market price. At the moment the bank shares are traded at USD 7.35 on RTS while at MICEX their price is RUR 183. In case all the minorities decide to take advantage of the offer it will cost to the French bank some USD 2.8bn. However, it is unlikely that all the minorities will sell their stake in Rosbank. Rosbank is among the top ten banks in Russia in terms of assets.

Gazprom will reduce gas supply to Ukraine by another 25% from today, March 4, at 20:00 Moscow time, the speaker of the monopoly announced. At the moment Gazprom supplies about 75% of the usual quantities to Ukraine which amounts to 104mn cubic meters of gas. The decision suggests that Gazprom is determined to put more pressure on Ukraine's Naftogaz. The initial 25% reduction in supplies did not have the desired effect as Naftogaz said it can manage without these quantities for a month. This appears to be undesired development by Gazprom taking into account that the monopoly reduces the financial obligations of the Ukrainian side and in fact loses money without receiving any favorable result. Prolongation of the present situation is not in favour of the monopoly while it brings positive points to the Ukrainian authorities.

The Central Election Committee announced today the election results after the count of 100% of the votes. According to them Dmitry Medvedev receives 70.28%, Zyuganov is second with 17.72%, followed by Zhirinovski with 9.34% and Andrey Bogdanov with 1.29%. What should be noted is that the turnout increased to 69.78%, slightly below the 70% we expected, which is much higher than the earlier announced 64%. This can be considered unexpected change taking into account that usually the number of voters is known with high precision immediately after the elections. The final results of the elections are expected to be announced on March 7.

During a meeting with members of the government yesterday President Putin recommended optimization of the Reserve and National Prosperity funds as well as CBR international reserves. The idea is not new and such a recommendation has been already given in December although it now has clearer shape. According to finance minister Kudrin, managing companies will be chosen for management of the accumulated resources in the mentioned institutions, in particular the National Prosperity Fund. This should happen by October 1 till when a special state agency will be created in order to select the managing companies. These can be Russian as well as foreign ones. Till then the rules for investments of the money will also be elaborated. The idea is the accumulated funds to be invested in corporate papers. In the beginning these will be mostly foreign ones although investments in Russian companies are not excluded. The experience of other sovereign funds will be used.

According to the latest report of the FinMin the funds to which the Stabilization fund was split in the beginning of February changed in different directions. Thus, the Reserve fund reports increase by RUR 13.3bn to RUR 3,082bn (USD 127.8bn). The increase is due to the return realized in January for the period December 15 2007 – January 31 2008, which amounted to RUR 28.63bn. In February alone the return earned from the resources of the Reserve fund was USD 0.90bn (RUR 21.64bn) while the exchange rate differences were negative and amounted to RUR 15.35bn.

The return of the National prosperity fund realized in February was RUR 5.74bn. At the same time the loss due to exchange rate changes amounted to RUR 5.77bn. We note that the Reserve fund should be equal to 10% of the GDP. At the moment the currency structure of both funds is USD:EUR:GBP in proportion 45%:45%:10%.

Reserve and National Prosperity Funds as of Feb 2008

Reserve Fund Total in RUR bn 3082 in USD bn 56.95 in EUR bn 38.57 in GBP bn 6.37 Monthly change RUR bn 13.3 Total in USD 127.81 National Prosperity Fund Total in RUR bn 777.03 in USD bn 14.31 in EUR bn 9.74 in GBP bn 1.62 Monthly change RUR bn -5.8 Total in USD 32.22

Source: Source: FinMin

The major parties failed to reach agreement on a resolution about NATO membership, leaving the parliament still inoperational. New talks were held at 14:00 local time with a view of resuming the parliamentary session at 16:00, but Regions of Ukraine continued blocking the work. The parliamentary speaker Yatsenyuk gave parties till 10:00 tomorrow to either reach agreement or accept that the talks have failed. Meanwhile, President Yuschenko warned that he plans to start consultations with political parties on dissolving the parliament. According to the constitution he has the right to dissolve parliament if it is not operational for more than 30 days. The last parliamentary session was held on Feb 12.

The gas argument between Russia and Ukraine escalated further Tuesday after Gazprom said it would cut supplies by another 25% from this evening, while Naftogaz threatened to take the missing gas from transit to the EU in order to "protect the interests of Ukrainian consumers". Besides, Naftogaz said Gazprom did not respond to its latest proposals thus blocking the resumption of dialogue.

The central bank issued a short note on the February price developments today, where it stated that processed food prices are the main reason for he unexpectedly high February inflation figures. The actual figures exceeded the inflation expectations of the CNBC-e pool, which had predicted a 0.47% m/m rise in consumer prices and a 0.69% rise in producers’ prices. CPI inflation rose by 1.29% m/m, and PPI was up by 2.56% m/m, while annual inflation was pulled to 9.1% y/y. The heavy snowfall was blamed for the rise in food prices in the note. The highest monthly increase in February was 5.05% m/m in the index for food and non-alcoholic beverages. Despite the recent surge in food prices, the central bank said that the disinflation trend in core inflation is expected to continue. The note once again reminded that high prices in processed foods are blocking overall prices to drop further. Deceleration in service sector prices and rent prices is said to continue in February, but headline inflation is still under the risk of from processed food and energy prices. The central bank said headline inflation will continue on its downward trend and pointed out that the disinflation trend in core inflation indices, like index-H, which excludes the prices of gold, energy, unprocessed food, alcoholic beverages and tobacco, will continue.

The fiscal reserve increased by EUR 146.4mn in January, up to EUR 3.96bn (12.5% of GDP) at the end of the month, according to figures of the finance ministry. The increase was on the back of favourable budget performance, as a notable surplus was reported. As far as the lower ratio to GDP is concerned, it is entirely because of the higher GDP forecast for 2008, though we expect that the fiscal reserve will quickly exceed 13% of GDP over the next couple of months. The higher value of the fiscal reserve will continue to increase pressure over new early debt prepayments, though a part of it will be used for that purpose, as we expect public domestic debt to decrease this year.

The general government budget reported a surplus at BGL 440.3mn (0.7% of projected GDP) in January, according to figures of the finance ministry. The surplus was on the back of an expectedly strong performance of tax revenues, which is due mostly to technical effects. At the beginning of 2007, proceeds from VAT were delayed, due to the introduction of new rules on intra-community supplies. As a result, VAT revenues from deals within the EU started coming in as late as in March, distorting budget performance.

In January, revenues jumped by 23.9% y/y (in real terms), adding up to BGL 2.08bn, which represents 7.7% of the annual plan. Tax revenues alone were up by 35.3% y/y, reaching 8.5% of annual plan. The greatest contribution, as noted above, came from indirect taxes, which increased by 82.8% y/y in January, reaching 10.6% of plan. Apart from the VAT effect, as mentioned above, there were also higher revenues from excise tax, resulting from the more expensive oil and metals at the beginning of 2008. Furthermore, the government has increased excise tax rates on fuels, electricity, coal and tobacco, the full effect to be reported completely in February. Finally, customs revenues are no longer affected by EU membership, as in 2007 revenues from customs duties were considerably lower, due to Bulgaria’s entry to EU.

Meanwhile, the contribution of direct taxes, and health and pension insurance was expectedly smaller, falling by 17.8% y/y and 11.2% y/y respectively. This is the result of tax changes that took place in 2007, reducing personal income tax to a flat rate at 10%, as well as bringing down social and health insurance contributions by a total of 3pps. Expectations are that on the back of a decreasing informal sector, as well as higher employment and economic growth, the total effect on the budget in 2008 will be at least neutral. Other changes regard corporate taxes, where advance contributions were removed for smaller enterprises, along with some other minor tax breaks.

Expenditure was slightly on the rise, going up by 5% y/y in January (including the contribution to the EU budget). Non-interest expenses increased by 6.7% y/y, affected mostly by the much higher capital expenditure, which was doubled in real terms. The higher capital expenses have been necessitated by Bulgaria’s commitments to EU membership, requiring additional funding of some projects, such as the common emergency number, as well as expenses on prevention of natural disasters. Otherwise, current expenses increased by 1.1% y/y in January, mostly on the back of personnel expenses. There was also a surge in transfers to the social security system, reflecting the government’s attempts to reduce debts of the system. Meanwhile, interest expenses were lower by 13.5% y/y, reflecting the much lower public debt levels in 2008.

At central government level, the situation was quite similar. The central government budget reported as surplus at BGL 378.1mn (0.6% of GDP). Revenues increased by 38.2% y/y, on the back of the factors listed above, out of which tax revenues were higher by 54% y/y. Meanwhile, government expenses were up by 21.7% y/y, which is on the back of higher transfers to social security. We should note that this is a one-time event, the result of a technical operation. Thus, we expect expenditure growth to decrease considerably over the next few months.

All in all, budget performance remained very solid, giving strong indications that end-year targets will be met without major problems. In fact, there are going to be some arguments that revenue forecasts are once again too conservative, letting the government to operate with much larger financial resources than envisaged in the budget law. On the other hand, external factors are still very unfavourable, and we won’t be surprised if there is no lasting improvement in external balances. Therefore, there might be a need for further fiscal consolidation, and budget performance at the beginning of the year gives strong indications that there will be enough contingencies to allow even a higher surplus than the envisaged 3% of GDP.

General governmetn budget, January

BGL mn %, y/y % of plan % of GDP REVENUES 2,083.2 23.9 7.7 3.4 Tax revenues 1,868.9 35.3 8.5 3.0 Direct taxes 237.1 -17.8 4.6 0.4 Social and health insurance 345.4 -11.2 7.2 0.6 Indirect taxes 1,286.4 82.8 10.6 2.1 Non-tax revenues 210.5 -15.9 6.6 0.3 Aid 3.7 -92.6 0.2 0.0           EXPENDITURE 1,642.9 5.0 6.5 2.7 Non-interest expenses 1,331.3 6.7 5.5 2.2 Current expenses 1,191.3 1.1 6.2 1.9 Capital expenditure 140.0 100.1 2.8 0.2 Interest expenses 237.8 -13.5 35.6 0.4 Contribution to EU budget 73.8 75.9 11.2 0.1           BALANCE 440.3 n.m. n.m. 0.7

Source: Ministry of Finance

Industrial producers’ prices on both the domestic and international market went up by 13% y/y in January, read data released by the statistical institute (INS). Thus, Romania's pace of PPI inflation is outpaced only by Lithuania, Denmark and Bulgaria in the European space. The most dynamic sectors were those of products of energy industry (+15.4% y/y) and consumer goods industry (+13.3% y/y). A slower pace was reported in the industry of capital goods (+11.9% y/y), intermediary goods (+10.6% y/y) and durable goods (+8% y/y). On monthly basis, prices in the manufacturing industry reported a 2.9% m/m growth in January, while those in the energy sector were up by 0.7% m/m. Meanwhile, the extraction industry prices went down by 0.9% m/m. As regards the big industrial branches, the intermediary goods industry went up by 4.4% y/y, while the capital goods industry reported a growth under expectations (+1.7%), consumer goods industry (+1.6%), thermal power industry prices only by 1.2%.

Investments reported a 29% y/y hike to EUR 18.3bn in 2007, read the provisory data released by the statistics institute (INS). Industry has attracted the highest amount of investments (39%), followed by trade (34.07%) and construction (13.95%). Regarding Q4 2007, the increase of investments was 29.5% y/y, up to EUR 7.8bn. The amount of money invested in new construction works went down by 1.4% y/y in Q4 2007, but investments in equipments (including vehicles) grew by 0.3% y/y. Nevertheless, investments in new construction works reached RON 31.04bn, up by 31.3% y/y in 2007, while RON 31.48bn were invested in equipments and vehicles (up by 26.8% y/y). According to INS, the sectors that attracted the most significant investments were industry, domestic trade, car repair, construction, transportation means and communications. Prime Minister Calin Popescu Tariceanu has stated investments are the solution for the government to be able to manage budget deficits, as a reply to EC's warning that the budget deficit is likely to exceed 3% of GDP over the next couple of years.

GDP growth reached 6% in 2007, according to preliminary figures of the statistical institute. GDP reached RON 404.7bn last year, which has been somewhat above official expectations. At any rate, growth has been below last year’s 7.9%, which was largely expected, as the economy wasn’t that buoyant as in 2006, when it was driven by EU accession. In Q4 2007, GDP grew by 6.6%, reaching RON 137.8bn. The growth rate was somewhat smaller than the 7.7% growth reported in Q4 2006, but given the high base, GDP has grown remarkably high. A complete breakdown of GDP data will be available on 12 March (next Wednesday).

IMF expects GDP growth to reach between 4% and 4.5%, according to statements of IMF experts at the end of their mission in Croatia. The forecast goes in line with the updated government forecast, w