Entrepreneurs Are Not Panicking, They Are Only Afraid of Expensive Energy

The Croatian economy has survived two years of the pandemic, and it will also endure the consequences of the Russian invasion of Ukraine and the Western sanctions against Russia. All fears of the real sector at this moment boil down to one common denominator: the drastic rise in energy prices.

We analyzed the resilience of the Croatian economy by presenting the state of thirteen major sectors, and we also addressed a mini-analysis of the resilience of public finances to the challenges and uncertainties arising from the latest – Russian-Ukrainian – crisis. We asked entrepreneurs and analysts, good connoisseurs of individual sectors, what the current situation is in each sector, what tactics they are using to overcome business challenges, what the short-term and long-term sector forecasts are, and what measures they expect from the state to minimize the consequences of the crisis.

The situation in almost all sectors, it turned out, is complex. Entrepreneurs are currently faced with many questions to which they have no answers simply because no one can say how long all this will last and what the ceiling is for energy prices that no longer threaten only industrial production but also activities such as hospitality. The word ‘inflation’ is not mentioned often, perhaps to avoid further invoking it, but concern is ubiquitous. It seems that no entrepreneur would want to raise their prices due to rising input costs, but it is clear that many will have to do so.

Before Russian troops invaded Ukraine, domestic entrepreneurs generally managed to maneuver with the procurement of raw materials, components, and equipment, expecting that global supply chains, according to forecasts from world analysts, would return to pre-pandemic levels by the end of the year. They also calculated how to welcome summer with as few casualties in financial results as possible, for which it was forecasted that prices would stabilize. However, the impact of energy prices on business has now only deepened procurement problems and added a new dimension to them. Until a few months ago, goods could (only) not be easily and quickly procured; now everything has also become more expensive.

Despite all the uncertainties of doing business in the current circumstances, the analysis of the performance of individual sectors shows a relatively good level of resilience of the Croatian economy even to the latest crisis. Of course, one must be aware that resilience, in any case, has its lifespan.

At this moment, the best news is that no sector is crying out for lack of work. Some sectors are only crying out that they do not have enough raw materials and materials, or that they could soon run out of them, so they are calling on the state to prevent this as best as it can, preferably by banning or restricting the export of those raw materials, such as wood, for which there was already a shortage in the European market even before, and which has now further increased.

Since every crisis is also an opportunity, some sectors could profit in the upcoming period, precisely from what was considered the biggest problem in Croatia until recently, which means the fact that we export raw materials and semi-finished products while lacking products with high added value. Well, now raw materials and semi-finished products are the most sought-after goods on the world market. Agriculture could experience a renaissance this year thanks to crop production, from wheat to sunflower; tourism is (again) at an advantage over its Mediterranean competitors, primarily because it is accessible by road to the most important emitting markets; the metal and electrical industries will not be able to breathe from work due to the intensification of investments in renewable energy sources, and so on.

If only gas and oil could be replaced with new ‘renewables’ by tomorrow afternoon… 

You can read the full text about the state and forecasts in numerous sectors such as banking, agriculture, food industry, energy, trade, tourism, electrical industry, metal industry, construction, transport, IT, and telecommunications in the new printed and digital edition of Lider.