Price stability is still the best way to describe price behaviour in Croatia.
A slowing down of employment growth had already been observed in self-employment and independent professional activity and this has spread to small private businesses. The main cause of the increase in unemployment in early 1997 is the increased inflow of demobilised military personnel, who have reported to the unemployment offices in large numbers due to their legally defined extended rights in the event of unemployment. The lower rate of increase in gross salaries is primarily the result of a reduction in the basic rate of income tax and an increase in the tax-free allowance put into effect at the beginning of this year. This indicates that the cost of labour will not be Croatia's comparative advantage when foreign investors decide where to make their direct investments. In January 1997 the State Statistics Bureau began reporting data on the volume of industrial output in accordance with the new national classification of activities which corresponds to international standards.