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U.S. DEPARTMENT OF STATE
CROATIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                             CROATIA



    In 1994 Croatia's economy showed tentative signs of
recovery from the disruption it suffered after the breakup of
the former Yugoslavia.  But the scars of war remain highly
visible as Serb forces still occupy one-fourth of Croatian
territory.  With 25-30 percent of its agricultural capacity
destroyed, Croatia's 1993 GDP remained around half of its 1990
level.  Due largely to the war and the collapse of
intra-Yugoslav trade, industrial production remained at 30-40
percent of Croatia's 1991 production level.  Despite these
figures, a bold economic stabilization program initiated by the
government in October 1993 has shown promising results.

    The ongoing occupation of Croatian territory by Krajina
Serbs continues to retard Croatia's recovery.  The Krajina
Serbs continue to cut a key railroad link to the coast as well
as the Adria pipeline.  Energy production suffers while oil
fields in Slavonia remain occupied.  The war crippled Croatia's
profitable tourist industry, which in the summer of 1994
operated at only one third of the pre-war level.  Nonetheless
tourist activity improved, especially in the Istrian peninsula;
in October 1994 Hina reported a 55% increase in tourist
activity over the previous year's level.  Intermittent
hostilities and U.N. sanctions restrict trade with Serbia, a
major pre-war market.  A tentative step towards reconciliation
with the Serbian population of Croatia occurred in December
1994, with the signing of an agreement on economic
confidence-building measures.

    The three-phase stabilization program which the government
adopted in October 1993 has improved Croatia's economic
situation.  The unemployment rate continued its three-year
decline, yet at 15 percent remains well above the pre-war level
of nine percent.  Inflation dramatically fell by the summer of
1994 to a monthly rate of 1-2 percent, one of the lowest in the
region.  Croatia had increased its hard currency reserves to
$1.68 billion by July 1994.

    With the signing of the Washington Accords in March 1994,
Croatia won key support for multilateral assistance.  The World
Bank approved a $128 million Economic Recovery Loan in June. 
Another $100 million for agricultural support and private
family support are in the pipeline for approval.  The IMF
recently approved a Standby Arrangement and Systemic
Transformation Facility totalling $192 million.  The EBRD will
act upon two additional infrastructure project proposals in
late 1994, $46.7 million for electricity network reconstruction
and $76.3 million for roads and bridges.

    Croatia's economy supports over 400,000 refugees and
displaced persons from Bosnia and occupied Croatian
territories.  An estimated 80 percent of refugees have found
shelter with families in Croatia; this situation is untenable
in the long term.  Refugees continue to occupy hotels and fill
refugee centers.  In September 1994, refugees continued pouring
into Croatia at a rate of nearly 500 per week.  While the 
international community has provided the bulk of the food
needed for the refugees, the Croatian government pays for
medical care and utilities at an estimated daily cost of $1.2
million.  Even with such expense, the conditions in many
refugee camps are inadequate with a lack of warm water, health
care, schools, and other basic necessities.

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