The Current Account for HR posted a deficit of -1,948 million HRK in September 2025, improving from a -3,634 million HRK deficit in June 2025 but still below the estimated -1,460 million HRK. This marks a partial recovery from the deep deficits seen in late 2024 and early 2025. The 12-month average remains negative at approximately -1,900 million HRK, reflecting persistent external imbalances. The geographic scope centers on HR’s trade and financial flows with the EU and neighboring economies, while the temporal scope focuses on the last 12 months, highlighting seasonal and cyclical effects.

Drivers this month

• Improved export performance to EU markets, especially machinery and transport equipment.
• Moderation in energy import costs amid global price stabilization.
• Reduced income outflows due to lower dividend payments abroad.

Policy pulse

The current deficit remains above the central bank’s comfort zone but shows signs of easing. Monetary policy remains cautious, balancing inflation control with growth support. Fiscal policy continues to focus on deficit reduction, indirectly supporting external balance improvements.

Market lens

Immediate reaction: The HRK currency appreciated 0.30% against the EUR within the first hour after the release, reflecting market optimism on the narrower deficit. Short-term yields on government bonds edged lower, signaling reduced risk premia.

Core macroeconomic indicators underpinning the Current Account include trade balances, income flows, and transfers. HR’s trade deficit narrowed to -1,200 million HRK in September 2025 from -1,800 million HRK in June 2025, driven by a 5% increase in exports and a 2% decline in imports. Income account deficits shrank by 15%, reflecting lower profit repatriation. Transfers remained stable, supported by remittances and EU funds.

Drivers this month

• Exports rose 5% MoM, led by automotive parts and electronics.
• Imports declined 2%, notably in energy and raw materials.
• Income outflows fell 15%, improving net primary income.

Policy pulse

Monetary tightening since early 2025 has helped stabilize inflation near 3%, indirectly supporting external competitiveness. Fiscal consolidation efforts have reduced government borrowing, easing pressure on foreign financing needs.

Market lens

Immediate reaction: The 2-year government bond yield declined by 5 basis points post-release, reflecting improved confidence in fiscal and external sustainability.

Drivers this month

• Export growth accelerated by 5% MoM, reversing a three-month decline.
• Import costs fell 2%, led by lower energy prices.
• Income deficits narrowed by 15%, reflecting reduced profit outflows.

Policy pulse

The current account improvement aligns with monetary policy tightening and fiscal consolidation, which have enhanced competitiveness and reduced external vulnerabilities.

Market lens

Immediate reaction: The HRK appreciated 0.30% versus the EUR, while 2-year yields declined 5 basis points, reflecting positive market sentiment.

Looking ahead, the Current Account deficit is likely to continue narrowing under a base scenario of moderate export growth and stable import prices. Bullish scenarios (30% probability) envision stronger EU demand and further energy price declines, potentially pushing the deficit below -1,000 million HRK by year-end. Bearish scenarios (20% probability) include renewed geopolitical tensions or global supply chain disruptions, which could widen the deficit above -2,500 million HRK.

Drivers this month

• EU economic growth forecasts remain positive but cautious.
• Energy markets show signs of stabilization but remain volatile.
• Geopolitical risks in the region could affect trade flows.

Policy pulse

Monetary policy is expected to remain data-dependent, balancing inflation risks with growth. Fiscal discipline will be key to maintaining external stability.

Market lens

Immediate reaction: Forward-looking market indicators suggest moderate HRK strength and stable bond yields, reflecting balanced risk perceptions.

HR’s Current Account deficit shows signs of recovery but remains a key vulnerability. Continued export growth, energy price moderation, and prudent policy will be essential to sustain improvements. External shocks and geopolitical risks pose downside risks, while structural reforms could enhance competitiveness long term. Monitoring financial markets and policy responses will be critical in the coming months.

Drivers this month

• Export resilience amid global uncertainty.
• Energy price trends and supply stability.
• Policy coordination between monetary and fiscal authorities.

Policy pulse

Policy remains cautiously optimistic but vigilant, aiming to balance growth and external sustainability.

Market lens

Immediate reaction: Market sentiment remains cautiously positive, with moderate HRK appreciation and stable yields.