How Would Brexit Affect Croatia?

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The largest influence would be felt by countries with highly developed trade and financial relations, while Croatia would suffer more from a general decline in EU economy

The world financial markets are bracing for unstable trading due to the upcoming referendum on the exit of Great Britain from the EU as that move would greatly affect markets and many countries in the world, but Croatia would, analysts say, probably be spared from major negative effects, Poslovni Dnevnik write on June 20, 2016.

Many world countries, especially EU members, are carefully monitoring events prior to the referendum on June 23 and estimating what effect the exit of the second largest EU economy might have.

“In case of an exit the most intense consequences would be felt in the British economy as they export almost half of their products to the EU market,” Zdeslav Šantić, chief economist of the Societe Generale Split bank says. “Part of the financial institutions would transfer their base to other European cities, while the level of investments in Britain would be reduced and directed to other countries.”

Brexit could strengthen euro sceptics in other member countries, prompting a redefinition of their membership status. EU would also be forced into slowing down the process of further integration and expansion.

Analysts of Raiffeisenbank Austria (RBA) state the level of British and Croatian economic ties have remained modest in the last 10 years. Between 2010 and 2015 the average share of Britain in Croatia’s export varied between 1.2 and 1.7%

“Croatia has also had a very stifled inflow of direct British investments, under a 100 million Euro annually between 1993 and 2014,” RBA cites. However, they point out the 505 million Euro investment last year by British American Tobacco. Although a one-time transaction, BAT plans to invest a further 30 million Euro in production capacity, so the secondary effect might be a reduction in investments.

The analysis also covers positive trends in tourism relations, considering the number of overnight stays and arrivals from Britain has grow in double figures for the last four years.

“Potential negative implications can come from a general weakening of the European economy, threatening the fledgling recovery in Croatia,” RBA analysts say. A stronger effect might be felt in higher costs of loans, with a negative effect on public debt and fiscal consolidation.


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