The Vienna Institute Monthly Report 1998/11
SUMMARIES

Croatia: The mood changes
The 1998 GDP growth rate will be only half of that anticipated by the Croatian authorities at the beginning of the year. Expectations of a marked increase in earnings from tourism and a substantial lowering of the high trade deficit did not materialize; the current account deficit will remain at a high level this year, 8-9% of GDP. Due to these persisting deficits and growing difficulties to sustain steady inflows of foreign capital, the exchange rate has been under pressure and therefore prices too. Government officials are warning that 1999 will also be very difficult.
 

Macedonia: Possible government change
Growth is picking up while stability is preserved. Trade balance and current account are in large deficits as in previous years. Employment is not growing and the unemployment rate is very high. In the October parliamentary elections the opposition has posted large gains and a change in government is quite possible. This change, if it happens, should not lead to a sharp turnaround both in inter-ethnic relations and in economic policy. If that indeed would be the case, the economy should continue to grow in 1999.
 

Slovenia: Sticking with gradualism
Economic growth slowed down in the second quarter of 1998. For the whole year 4% GDP growth is feasible. Real wage increases have continued at a moderate pace and monthly inflation has remained stagnant since June. The foreign trade deficit has been lower than a year before, the current account even was in balance after the first eight months of the year. The policy of balancing both the budget and current account during the preceding years has shielded Slovenia from a contagion-type spillover from the Russian crisis.
 

Yugoslavia: Everything worsens
The Kosovo crisis has significantly increased security concerns  in  Yugoslavia  and  also  regionally.   The macroeconomic situation has worsened with inflation accelerating considerably and growth slowing down. Microeconomic changes have been non-existent. International relations are if anything worse as the USA and EU have introduced a ban on state-related investments in Yugoslavia (on top of the still existing outer wall of sanctions). The government has initiated a crackdown on the universities and on the media. The prospects are that in all these areas there will be a process of continuous worsening unless the political set-up changes.

 

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