Table H11 Indices of harmonised competitiveness indicators
Harmonised competitiveness indicators are calculated on the basis of weighted averages of bilateral exchange rates vis-à-vis the currencies of the trading partners of Croatia and are deflated by appropriate price or cost indices. The weights for the calculation of HCIs are based on bilateral data on trade in manufactured goods, as defined in Sections 5 to 8 of the Standard International Trade Classification (SITC) and trade in services in accordance with Extended Balance of Payments Services classification (EBOPS 2010) for the periods 1995–1997, 1998–2000, 2001–2003, 2004–2006, 2007–2009, 2010–2012, 2013–2015 and 2016–2018.
The weights incorporate information on both exports and imports. Import weights are the simple shares of each partner country in the total imports. Exports are double-weighted in order to account for “third-market effects”, i.e. to capture the competition faced in foreign markets from both domestic producers and exporters from third countries. The final overall weights of each partner country are obtained as the weighted average of the export and import weights. The HCIs are chain-linked at the end of each three-year period and updated every three years in order to reflect recent developments in the pattern of international trade.
The group of countries for the formation of HCIs published on the website of the Croatian National Bank (HCI-18) consists of 37 trading partners, including a) all other 19 euro area countries and b) the 18 remaining countries: Australia, Canada, Denmark, Hong Kong, Japan, Norway, Singapore, South Korea, Sweden, United Kingdom, Switzerland and the United States (HCI-12) as well as Bulgaria, China, the Czech Republic, Hungary, Poland and Romania.
The nominal HCI is calculated on the basis of data on bilateral exchange rates available on the ECB website.
The HCI deflated by consumer prices is calculated on the basis of data on harmonised consumer price indices for European countries (Eurostat) and for the other trading partners based on national consumer price indices.
The HCI deflated by producer prices is calculated on the basis of data on producer price indices in domestic manufacturing (according to the NACE Rev.2 classification) for European countries (Eurostat), and for the other trading partners these data are derived from data published by the Bank for International Settlements (BIS).
The HCI deflated by GDP deflators is calculated on the basis of GDP deflators derived from their quarterly national accounts as published by Eurostat for European countries and for the other trading partners they are derived from their national accounts as published by the BIS, OECD and IMF.
The HCI deflated by unit labour costs in the total economy is calculated on the basis of data that are for European countries derived from their quarterly national accounts as published by Eurostat. For the other trading partners, these data are derived from their national accounts as published by the BIS, OECD and IMF. The unit labour cost is the ratio of total compensation per employee to labour productivity, with labour productivity measured as GDP at constant prices divided by the total number of persons employed.
Table H11a Effective exchange rate indices
The index of the nominal effective exchange rate of the kuna is a weighted geometric average of the index of bilateral nominal exchange rates of the kuna against the selected currencies of the main trading partners. The currencies of the main trading partners and their weights are determined based on the structure of imports and exports of manufactured goods, where the weights used reflect direct import competition, direct export competition and export competition in third markets (see Box 2 in CNB Bulletin No. 165, 2011). The group of countries included in the formation of the index of the effective exchange rates of the kuna comprises the following 22 partner countries: nine euro area countries (Austria, Belgium, France, Germany, Italy, the Netherlands, the Slovak Republic, Slovenia and Spain), four EU countries outside the euro area (the Czech Republic, Hungary, Poland and Sweden) and nine non–EU countries (Bosnia and Herzegovina, Japan, China, Russia, the United States, Serbia, Switzerland, Turkey and the United Kingdom). The weights assigned to specific countries in the calculation of the effective exchange rates of the kuna are time varying weights, calculated to reflect the average structure of RC’s foreign trade over three consecutive years (for more details see Box 3 in CNB Bulletin No. 205, 2014), up until the period from 2016 to 2018, which is currently used in the calculation of indices for the subsequent years. In the calculation of the effective exchange rates of the kuna, the fixed chain–linking methodology on a three–yearly basis is used. The time series for base indices are calculated based on 2010. The increase in the index of the nominal effective exchange rate of the kuna in a certain period indicates that the kuna has depreciated against the basket of currencies and vice versa.
The index of the real effective exchange rate is a weighted geometric average of the index of bilateral exchange rates of the kuna adjusted for the corresponding indices of relative prices or costs (the ratio of price indices or costs in partner countries to domestic prices). Industrial producer price indices on the total market, consumer price indices (harmonised consumer price indices for EU member states) and unit labour cost indices in the total economy and manufacturing are used as deflators. The time series for the index of industrial producer prices on the total market (domestic and non–domestic) for Croatia is available from January 2010, while for the years before 2010, the time series for the index of industrial producer prices on the total market equals the index for producer prices on the domestic market. The time series for consumer prices in Croatia is constructed in the following manner: retail price indices are used for the period until and including December 1997 and consumer price indices for the period as of January 1998. As data on unit labour costs are not available for all the countries, the basket of countries for the calculation of the real effective exchange rate of the kuna deflated by unit labour costs in the total economy and manufacturing was narrowed to 16, that is, 14 countries trading partners – all countries trading partners (22 of them) excluding Switzerland, Turkey, China, Russia, Bosnia and Herzegovina and Serbia, that is, excluding these six countries and Belgium and Japan. Unit labour costs in Croatia are calculated as the ratio of compensation per employee to labour productivity (expressed as GDP per employee) (for more details on the calculation of unit labour costs, see Box 1 in CNB Bulletin No. 141, 2008). Data on the real effective exchange rate for the last month are preliminary. The historical data may be corrected for the subsequent changes in the data on deflators used in the calculation of the index of the real effective exchange rate of the kuna.