ZAGREB, September 27, 2018 – Next year, the Croatian economy is expected to grow roughly at the same rate as this year, or “slightly below three percent of GDP”, Croatian National Bank (HNB) Governor Boris Vujčić said on Wednesday, warning of the first signs of external risks.
Speaking at a conference organised by Lider business weekly, Vujčić said that one of the risks which eventually might result in smaller growth was a possible decline in trade in light of a possible escalation of the US-Chinese trade war.
In this context, he also mentioned a slowdown in industrial production in Italy and Germany, Croatia’s main trading partners, adding that the coming months would show whether this slowdown was temporary or it was becoming a trend.
The biggest contributions to the Croatian GDP growth are expected to come from exports, growing personal spending and investment, Vujčić said, noting that the latter had fallen short this year.
The HNB expects employment to continue to grow next year despite labour shortages. An HNB survey has found that this has become the biggest problem for companies after overregulation.
Vujčić drew attention to considerable structural problems in the economic sector, such as weak productivity growth, as a result of which the current growth rates were not high enough. He warned that demographic trends, notably population ageing and emigration, could lead to a lower contribution of the labour factor to GDP growth and total productivity, and called for finding a way of offsetting the decline of the working age population as this put additional pressure on the pension and healthcare systems.
The World Bank’s chief economist for Europe and Central Asia, Hans Timmer, said that ten years after the outbreak of a global financial crisis, the European Union had returned to its pre-crisis levels with regard to employment, reducing the fiscal deficit and increasing exports. He noted that the situation in Croatia did not differ much from the rest of the EU.
Timmer, however, underlined that Europe, including Croatia, was facing challenges that were partly the legacy of the crisis, citing the European Central Bank’s quantitative easing policy, adjustment to new digital technologies and the need to respond to anti-globalisation movements.
Given the changes on the labour market and its flexibilisation, which has resulted in new forms of employment, Timmer said that the response to this should include expanding and improving the social protection system. He noted that this could lead to growing discontent, especially among young people, because it could increase the feeling that the system was not functioning for them, and such sentiment could increase resistance to globalisation.
