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An Analysis of the Net International Investment Position: The Case of the Republic of Croatia

The net international investment position of the Republic of Croatia is negative. This means that liabilities are greater than assets, so the Republic of Croatia is a net borrower from the rest of the world. Likewise, the negative position decreases annually by 5.54% on average. The goal of this paper is to analyze the net international investment position of the Republic of Croatia. In the period from 2014 to 2018, an analysis is conducted using the available data published by the Croatian National Bank. The annual rate of changes and the structure of the main components of the net international investment position are analyzed. The causes that affected the decrease in the negativity of this position are to analyze, as well. The main cause of the negative position is a persistent current account deficit of the Republic of Croatia. However, in the last several years, the current account is in surplus. The increase of the current account surplus is the greatest cause of the fall of the negative net international investment position. Moreover, this surplus mainly resulted from the balance of services surplus and to a lesser extent from the balance of secondary income surplus. Still, for the negative international investment position to be annulled, the Republic of Croatia may not rely solely on foreign exchange inflow from services. It needs to apply economic policy instruments that will result in a surplus or at least in the equilibrium of the balance of goods to avoid risks from excessively relying on foreign exchange inflows from services.

the net international investment position ; the current account ; the direct investment ; the portfolio investment ; the other investment ;

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