Croatia’s GDP Growth to Be Higher than Expected

Total Croatia News

Good news for the Croatian economy.

Economic growth in Croatia in the next year will accelerate to 1.8 percent, mainly due to exports of goods and services and an increase in private consumption, which will reflect the continued recovery of the labour market, slowing down of deleveraging processes and strengthening of consumer optimism, announced today the Croatian National Bank (HNB), reports Vecernji List on December 16, 2015.

For this year, HNB expects the economic growth to reach 1.7 percent. This is substantially higher growth then was expected earlier this year. “In the fourth quarter, we expect a relatively high GDP growth of 2.3 percent”, HNB Governor Boris Vujčić said. “We are still experiencing very low interest rates set by major central banks. It is expected that the ECB will leave interest rates unchanged, while the US Fed will start with gradual increase in interest rates, which could have an impact on the credit markets, primarily in emerging markets including Croatia”, Vujčić added.

He noted that the difference in yields on Croatian debt and European emerging markets is very high, over 1.5 percentage points. “Further movements in the difference will depend on the performance of the Croatian economy in 2016 and the initial market perception of the first measures adopted by the new Croatian government”, Vujčić said.

HNB pointed out that there has been a positive shift in the labour market in 2015, and in 2016 they expect slight intensification of the increase in employment and the continued decline of unemployment. In 2015, HNB expects deflation of 0.4 percent mainly due to falling energy prices, while in 2016 they expect the return of inflation at the level of 0.9 percent.

Monetary policy will remain expansive, Vujčić said, noting that the bank has taken various measures to intervene in the money market to stabilize the situation after the conversion of Swiss franc loans into euros. “The structural liquidity surplus in the market is again at 8 to 9 billion kuna, which is almost three times more than in the euro area”, Vujčić said.

The general government deficit could this year fall to 5 percent of GDP, while the general government debt at the end of 2015 could reach 86.5 percent of GDP. HNB did not want to estimate deficit and debt levels in 2016, pointing out that we should first see the budget of the new government. However, Governor Vujčić stressed that it was important for Croatia to achieve a primary surplus of the budget and that this surplus should reach the amount of 4.5 billion kuna per year in the next two years.


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