In October 2020 the EBRD forecast that Croatia’s economy would grow by 3.5% in 2021.
In 2020, marked by the coronavirus pandemic, Croatia’s GDP dropped by 8.4%, slightly less than the EBRD had forecast last autumn.
The latest forecast shows that by the end of 2021 the economy will contract by 2.9% compared to the pre-pandemic year 2019.
In 2022 the growth of economic activity is expected to slow down to 4.5%.
Tourism and European fund
The COVID-19 pandemic inflicted significant damage on the Croatian economy in 2020, and a key channel for disruption was tourism, which normally accounts for around 20 per cent of GDP, says the EBRD.
Nevertheless, the economy inched closer to prepandemic levels in the first quarter of 2021, with GDP growth at -0.7 per cent year-on-year (5.8 per cent quarter-on-quarter) on the back of robust exports of goods, investments in construction and a partial recovery in private consumption.
The strong momentum of the economy will likely be maintained in the remaining quarters of 2021 as the vaccination campaign progresses and tourism picks up, the EBRD says.
If tourism invoices reach 70 per cent of 2019 levels, as expected, GDP could expand by 6 per cent in 2021, it says.
In 2022, incoming EU funds and post-earthquake reconstruction will boost investment, and together with expanding private consumption and recovering tourism, will continue the high-growth momentum at around 4.5 per cent.
The main risk to the outlook remains the pandemic evolution, as new variants and insufficient vaccination could lead to other infection waves, the EBRD notes.
The EBRD also significantly increased its growth estimate for 2021 for the region of Europe and the Baltics, which includes Croatia, by 1.3 percentage points to 4.8%. It expects a similar growth rate in 2022.
In the entire region where the EBRD operates, economic activity is expected to grow in 2021 by 4.2%, 0.6 percentage points more than forecast last autumn.
In 2022, economic activity in the EBRD region is expected to slow down to 3.9%.
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