While we expect Croatia s long-term political risk profile to continue improving following its accession to the EU, we caution that further pro- gress and reforms are needed for the country to realise its full potential. We highlight the key challenges that could threaten stability in Croatia over the next -- years, and outline three possible long-term scenarios for the country. ...Football matches often degenerate into violent inter-ethnic brawls and participants in Croatia s first gay pride parade in ---- were attacked by a group of skinheads , some reportedly giving the Nazi salute. The ongoing criminal proceedings at the International Criminal Tribunal for the former Yugoslavia (ICTY), with which coopera- tion has been a key exigency of the European Commission, has sparked national uproar against what many in Croatia see as a -- Business Monitor International Ltd www croatia Q- ---- perceptions of corruption still High Poll Results To `Has Corruption Worsened In The Past Two Years? , total Source: Global Corruption Barometer ----, BMI underperforming the region Poll Results Of `Do You Agree Corruption Is Widespread In Busi- ness? , Total Source: Gallup ----, BMI government betrayal in handing over national heroes to be tried for war crimes. In our view, though necessary for improving investor sentiment towards the country and thereby bettering the country s economic prospects, Croatia will have a difficult time divesting itself from its ethno-nationalist past. ...In this scenario, transformation fatigue and increased public ambivalence towards the EU contributes to the government s failure to address some of the key structural problems under- -- Business Monitor International Ltd www political outlook set to surge dependency ratio, total f = BMI forecast.
...Source: BMI, CIA World Factbook thrusting the case into the public consciousness. ...Reflecting these risks, Croatia scores only --.- (out of ---) in our Business Environment Ratings, which places the country in --st place out of --- countries in our proprietary risk rankings. uneasy start to Life in eu continues We expect Croatia s difficult start to EU membership to continue over the coming quarters, with the relationship still reeling from Croatia s reluctance to uphold a European Arrest Warrant (EAW) issued by Germany in mid----- (see EU Membership Off To Shaky Start , September - ----). Croatia s standing within the EU is also likely to be damaged by the growing prevalence of views that are perceived to be intolerant. ...Taken together, the developments are likely to ensure that Zagreb remains under close scrutiny from the EU over the coming quarters, and we believe Croatia will need to demonstrate a renewed commitment to EU values before the relationship starts to improve again. - Business Monitor International Ltd www political outlook a regional underperformer
...
