Boston, MA -- (SBWIRE) -- 07/29/2013 -- BMI expects the Croatian CE market will report low single-digit growth, with trading conditions remaining challenging, despite an upwards revision of our forecast due largely to macroeconomic factors. In 2012, the government's introduction of a fiscal austerity budget weakened consumer demand for durables, which was also hit by the increase in VAT to 25% from 23%. Meanwhile, with private consumption contracting by 4.2% y-o-y in Q412, and unemployment growing to 21.9% in January 2013, we hold a bleak private consumption outlook for 2013. Despite these exogenous factors, we expect demand for consumer lifestyle products such as smartphones, computers and Smart TV sets and Wi- Fi enabled digital cameras to be growth areas. Consumer electronics retail sales drivers include growing affordability of digital products, retail channel expansion, digital TV conversion and 3G mobile network rollouts.

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Headline Expenditure Projections

- Computer Hardware Sales: US$824mn in 2012 to US$867mn in 2013; +5% in US dollar terms. Strong tablet sales have constrained sales of traditional notebooks.
- AV Sales: US$256mn in 2012 to US$266mn in 2013; +4% in US dollar terms. The UEFA Euro-2012 tournament and the London Olympics provided a boost to demand for flat-screen TV sets last year.
- Handset Sales: US$228mn in 2012 to US$247mn in 2013; +8% in US dollar terms. Forecast in US dollar terms unchanged but with stronger growth in smartphone sales, which now account for more than half of postpaid handset sales for some mobile operators.

Risk/Reward Rating: Croatia's score was 38 out of 100.0. Croatia took seventh place in our latest CE RRR table, behind established EU markets such as the Czech Republic and Hungary but ahead of Serbia.

Key Trends & Developments

- A number of factors should support momentum in the Croatian computer market, including a government plan to provide 800,000 tablet computers to Grade 1 schoolchildren. Consumer demand will still continue to be the main IT market growth driver, owing to economic growth and rising income levels. Amid fierce competition, aggressive promotions and new products are likely to be unveiled by retailers, resulting in pressure on margins.
- Digital TV availability and programming should continue to expand in Croatia and should remain a driver of TV set upgrades. While around 98% of Croatia's 1.7mn households have TV sets, there is a trend for multiple sets. Sales of LCD and plasma sets have increased as prices have fallen over the last few years. 3D sets and 'smart' TV sets are growth areas, with interactive and social media elements being incorporated in Croatian TV programming.

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