An economic forecast which is certain to be used for political purposes.
According to estimates of economists surveyed by Bloomberg, Croatia will be among the ten economies in the world with the lowest economic growth in 2016. The economists have analyzed 93 countries and have estimated that Croatia will grow by 1.1 percent, with a probability of going into a recession of 22 percent, reports Index.hr on January 13, 2016.
This year, Croatia emerged from a six-year recession. Croatian GDP grew in the third quarter of 2015 by 2.8 percent compared to the same period of 2014, which was the largest economic growth since the second quarter of 2008, when the economy grew by 2.9 percent. World Bank forecasts that Croatia grew by 1.5 percent in 2015 and expects continued recovery in 2016 and 2017 with an average growth of 1.9 percent.
Although the Croatian economy is starting to recover, the problem is that during the crisis the public debt has increased significantly, so the current growth rates are not enough to pay interest on debt. According to the Croatian National Bank, in August 2015 the general government debt amounted to 287.3 billion kuna, or 86.5 percent of the estimated GDP in 2015. Compared to August 2014, the public debt had increased by as much as 16.3 billion kuna, which represents a growth of 6 percent per year. Interest rates payments amount to about one billion kuna per month.
In the analysis published by the Croatian Banking Association late last year, economists from leading Croatian banks warned that this is one of the last years in which the Croatian government can independently sort out the state of public finances and implement reforms to modernize the economy. “The (small) space for the growth of public debt, which will not disrupt the stability of public finances and of the financial system, still exists. However, we should note that the growth is slow and fragile due to structural problems. It is not strong enough to significantly reduce unemployment levels. It has been hampered by multi-year deficits which have brought the public debt and interest payments to levels which prevent a more rapid economic recovery. Therefore, the next year is the last year (or one of the last years) in which the Croatian government still has time to independently implement fiscal adjustment measures and structural changes in order to modernize the Croatian economy”, claims the analysis of the Croatian Banking Association.
At the top of the Bloomberg’s list of the ten slowest growing economies in the world is Venezuela. Low oil prices have hit the country hard, which just added to existing severe economic problems and high inflation. Greece is also near the top and has similar problems to Croatia – it is drowning in debt. Russia has also been affected by low oil prices, with oil income representing a half of budget revenues. The list of ten slowest economies includes Finland, whose economy is suffering due to its exposure to the Russian market, while Switzerland has trouble maintaining growth due to the strong franc.
