Croatia among Countries with Above-Average Growth

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European Commission expects Croatia’s GDP to grow 3.1 percent in 2017.

European Commission on Monday announced its winter economic forecasts and significantly raised its estimates of growth of the Croatian economy – in 2016, it estimates that the growth was 2.8 percent, which should jump to 3.1 percent this year, with a slight decrease to 2.5 percent next year. Compared to autumn economic forecasts published in November, this represents a substantial upward revision, reports Večernji List on February 13, 2017.

“Economic recovery accelerated in 2016. The GDP growth in the third quarter of 2016 was higher than expected. All the components of domestic demand have contributed to the good performance. While exports of goods experienced a temporary slowdown, service exports jumped by 3.5 percent year-on-year, thanks to another strong tourist season. Growth probably slowed down in the fourth quarter of 2016, but overall the expected growth of the Croatian economy in 2016 is solid 2.8 percent. Strong growth momentum in the second half of 2016 will extend throughout 2017 and get an extra boost from government’s expansionary fiscal policies”, said the European Commission in its forecast.

Croatia is in a group of EU countries with above-average growth, given that the Commission expects the growth in the EU to reach just 1.8 percent this year.

The European Commission expects consumption growth in Croatia of 3.4 percent, in particular due to tax cuts. It also expects that there will be growth in corporate investments due to high liquidity and favorable financial conditions for credit expansion. EU funds should also provide an extra boost to public investment. Public spending should grow more modestly, but it is expected that the total domestic demand will stimulate growth of real GDP.

The Commission expects smaller budget deficit and further reduction of public debt. It is expected that the general government deficit in 2016 was 1.8 percent, that this year it will reach 2.1 percent, and again decline to 1.8 percent of GDP in 2018. The growth of the deficit is projected due to a decrease in tax revenues. It is expected that the direct effect of the tax reform on tax revenues will amount to 0.6 percent of GDP this year and 0.2 percent next year.

The reduction of public debt to GDP ratio will continue. It is estimated that in 2016 the share was 84.1 percent, which should decrease this year to 83 percent, and to 81.3 percent next year.

Possible risks which could bring into question these estimates is possible deterioration of external environment and tightening of monetary policy. On the other hand, positive trends in export of goods and tourism should continue this and next year.

It is expected that the unemployment rate in 2016 was 12.8 percent, due to the reduction in the workforce, but also due to the increase in employment. For this year, the Commission predicts an unemployment rate of 10.8 percent, and 9.3 percent in 2018.

After three years of deflation, the European Commission expects that this year inflation rate will reach 1.7 percent, and next year 1.6 percent.


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