This report reviews key macroeconomic data and microeconomic developments for Croatia published between June 3 and July 4, 2014. The World Bank dramatically downgraded its GDP forecast for Croatia for the current years, saying the economy will contract by 0.5% in 2014 instead of growing 0.8% as expected back in December. This is still somewhat more optimistic than the IMF’s projection for a 0.8% contraction this year. At the same time the statistics office confirmed its flash estimate that the Jan-March GDP dropped by 0.4% y/y, verifying everyone’s fears that Croatia has entered a sixth consecutive year of recession. In other to curb the rising budget gap amid the lasting recession, the government has decided that state-owned firms will pay part of their profits to the state budget. Some positive economic news came from the tourism sector, which saw the Jan-April revenue from tourists rising 21% to some EUR 755mn. The report also contains information about the estimated damage in the country from the mid-May floods that hit the region. It also speaks about Adris Grupa raising its stake in the country’s largest insurer Croatia Osiguranje, as well as about Agrokor’s plans to take over the remaining stake in Slovenian peer Mercator – and the price per share it is ready to offer to the small shareholders. Key points: • CPI dropped by 0.2% y/y in May following a 0.5% y/y decrease in April 2014. Retail sales rose 1.8% y/y in May after edging up 0.3% y/y in annual terms the previous month. • The working-day adjusted industrial output recovered in January-May (up 1.3% y/y) after contracting in the prior nine months in a row on an annual level. It rose by 1.2% y/y in May alone, building up on the 0.6% y/y increase a month earlier. • The unemployment rate continued to decline in monthly terms in May to 19.66% from 21.1% in April and 22.3% in March. It was also below the end-2013’s 21.6%. The average net monthly wage continued rose by a real 0.9% y/y in April after increasing 0.1% y/y in March.