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Cablegate: Zagreb Activity Report - July 18

VZCZCXRO0693
PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHVB #0538 2001020
ZNR UUUUU ZZH
P 181020Z JUL 08
FM AMEMBASSY ZAGREB
TO RUEHC/SECSTATE WASHDC PRIORITY 8498
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS ZAGREB 000538

DEPT FOR EUR/SCE, EUR/RPM, EUR/PPD, PRM AND S/WCI LAVINE
OSD FOR POPOVICH

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: PREL ECON PGOV MARR HR
SUBJECT: ZAGREB ACTIVITY REPORT - JULY 18

1. (U) CROATIAN SABOR SUPPORTS DEPLOYMENTS TO PEACE SUPPORT
OPERATIONS: ISAF, KFOR AND CHAD:
In its final sitting prior to the summer recess, the Croatian Sabor
voted overwhlemingly to continue its support for the participation
of the Croatian Armed Forces in a variety of multilateral
peacekeeping operations. The Sabor re-authorized Croatian
deployments as part of the EU-led force in Chad and the continued
deployment of up to 300 troops as part of ISAF in Afghanistan
through 2009, and approved a newly-proposed deployment of two
helicopters and 20 personnel to operate them to KFOR in Kosovo.
(RHoltzapple)

2. (U) GDP GROWTH DOWN, AS EXPECTED:
Croatia's GDP growth slowed from 7.6% in the first quarter of 2007
to 4.3% in the first quarter of 2008. Personal spending saw the
strongest slowdown, though government spending, household credit,
and fixed capital investment also slowed. At the end of 2007,
analysts had forecast a drop in GDP growth from 5.9% for 2007 to
about 4.5% for 2008, so first quarter performance came in just below
annual expectations. As of early July, the Croatian National Bank
(CNB) was projecting an annual growth of real GDP at 4.4% for 2008,
based on a 7% inflation rate. (SLitke)

3. (U) INFLATION UP, AS EXPECTED AND THEN SOME:
According to the Croatian Central Bureau of Statistics, consumer
prices in June 2008 were 7.6% higher than in June 2007, for an
average annual rate of 5.1%. The 7.6% rise was the highest inflation
rate recorded since the index of consumer prices was introduced 8
years ago. The rise was fueled largely by price hikes in food and
transportation. In response, PM Sanader announced July 16 that the
government would deploy inspectors to determine who is raising
prices and why, and would consider measures to cushion the shock of
inflation. Croatian National Bank (CNB) Governor Rohatinski also
told the press more measures were needed to hold back inflation. The
rise in inflation is not unexpected; at the end of 2007, government
and private analysts forecast a rise from 2.9% in 2007 to 4.5-5.2%
for 2008. However, with inflation expected to continue to rise,
possibly to 8.5% for July and August, some analysts have revised
their forecasts to 6-7% for average annual inflation for 2008.
Rohatinski told the press 7% would be a best case scenario.
(SLitke)

BRADTKE

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