Croatia’s GDP Growth Forecast for 2017 Increased to 3.5 Percent

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Addiko Bank has announced its GDP growth forecast for this year.

Addiko Bank has increased its forecast of growth of the Croatian economy in 2017 from 2.8 percent to 3.5 percent, due to expected positive impact of tax reform, another record tourist season and increased investments, reports on January 19, 2017.

In their latest quarterly macroeconomic forecast published on Thursday, analysts of the bank estimate that in the fourth quarter of last year GDP growth accelerated to 3.5 percent, while in all of last year the economic growth should amount to about 3 percent, while prior forecast was 2.8 percent.

Strong growth of earnings from tourism, improvements in the labour market and significantly reduced taxes have contributed to positive atmosphere in the economy, so the indicator of confidence has reached its highest level in 10 years, according to the report by Addiko Bank. Due to stronger growth in consumption, better prospects for investments, another record tourist season, the growth of export competitiveness and easing of fiscal policies, analysts have increased their forecast of GDP growth in 2017 to 3.5 percent.

After three years of deflation, they expect that inflation will return this year – but it will stay under 2 percent year-on-year – due to the impact of energy prices, higher prices of raw materials and stronger domestic demand.

Analysts also believe that consolidated budget deficit in 2016 fell below 2 percent of GDP, thanks to the revenue growth. They expect that this year Croatia could fulfil formal conditions for exit from the excessive deficit procedure, which would support the improvement in the country’s credit rating.

“Given the nominal GDP growth, and if budget deficit in 2017 does not exceed 2.5 percent of GDP according to the ESA 2010 methodology, we expect further reduction of public debt and risk premiums”, concluded the analysts of Addiko Bank. According to their estimates, public debt fell in 2016 to 85.6 percent of GDP, from 86.7 percent a year earlier, while this year it could further decline to 83.8 percent of GDP.


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