The economic consequences of the coronavirus outbreak are potentially dire, and we’re already seeing the negative effects the virus is having on the labour market, stock markets, and much more. With many Croatian companies having to deal with the brand new and utterly unexpected reality of not knowing whether or not they’ll even exist in three months, these are truly nail biting times.
As Frenki Lausic/Novac writes on the 2nd of April, 2020, in a new rating, the Fitch credit rating agency left the Republic of Croatia’s main rating at BBB minus, which is encouragingly still at investment level, but lowered its outlook from positive to a mere stable.
The aforementioned agency predicts, due to the crisis caused by the spread of coronavirus and the stringent restriction measures that have been put in place to try to combat it, that Croatia’s GDP will drop by a significant 5.5 percent in 2020, instead of experiencing the previously projected growth of 2.9 percent.
“Croatia is highly dependent on tourism and activities related to tourism, which together account for 25 percent of the country’s GDP. Croatia has taken measures to mitigate the coronavirus crisis, which will amount to 7.5 percent of GDP, but additional measures can be expected,” stated Fitch, referencing a report that made this assessment before the Croatian Government adopted a second package of coronavirus measures.
In the baseline scenario, the agency expects a rapid recovery in the second half of the year and even economy growth of three percent in 2021, and an average growth of 2.2 percent in the coming years.
The Republic of Croatia’s state budget deficit is also projected to grow to five percent in 2020, instead of the projected surplus of 0.2 percent so far, and a rise in public debt to 77.7 percent of GDP, instead of the previously expected 68.1 percent, is also now expected.
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