External Risks Obstacle to Croatian GDP Growth

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ZAGREB, December 30, 2018 – After a steady growth in 2018, analysts expect Croatian GDP growth to decelerate in 2019, the tourism sector to attract record-high numbers, the public debt to further go down and the country’s credit rating to improve, while a slower global economic growth and protectionism will pose the biggest risks to the national economy.

Croatia’s Gross Domestic Product (GDP) growth in 2019 could be below the level recorded in 2018.

According to eight economists polled by Hina, the average economic growth in 2019 could reach 2.7%, with their projections ranging between 2.5% and 3%.

OTP Bank Croatia expects the 2019 growth to slow down to 2.5%, compared to the projected growth of 2.7% in 2018.

The bank’s chief economist Zdeslav Šantić warns that 2019 will bring many external risks, including a trade conflict between the United States and China, the escalation of which could result in a significantly lower global economic growth which will indirectly affect Croatia.

He also believes that 2019 will be a turning point in the European Central Bank’s monetary policy which next year could absorb all monetary incentives and launch a gradual normalisation of interest rates, after reducing them for years. This will result in a higher price of borrowing.

Šantić also said that the unemployment rate would continue to go down in 2019, albeit at a slower pace than in 2018.

Zrinka Živković-Matijević of Raiffeisenbank Austria (RBA) expects a mild deceleration in the economic growth pace in 2019. She also expects a steady tourism growth.

“Despite the continued favourable tourism results, albeit at a more moderate rate, and growing exports, the net foreign demand will have a negative contribution to GDP growth in the projected short-term period,” she says.

Živkovic-Matijević says that competitive tourism destinations such as Turkey, Greece and Northern Africa should not be overlooked.

This analyst predicts that further strengthening of protectionist measures on the global scene could lead to a slower growth in some of Croatia’s important trade partners which in the end could result in unfavourable domestic economic trends.

Erste Bank main economic analyst Alen Kovač tells Hina that he expects a mild deceleration of the economic growth in the new year.

Household consumption continues giving a significant contribution to GDP growth, as reflected through positive labour market trends, higher employment and stronger income rise, according to Kovač’s assessment. He also forecasts a rise in investments at an accelerated rate.

Changes in the taxation framework will have a positive impact in 2019, he says, adding that he expects the public debt to keep falling.

Kovač commented on uncertainties in the pace of foreign demand as the biggest obstacle to a more robust growth.

Croatia is vulnerable to certain shocks stemming from the trends in external demand considering global trends, trade war and rising uncertainties in the global economic pace, he says.

More news on Croatia’s economic growth can be found in our Business section.


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