ZAGREB, May 9, 2018 – The European Bank for Reconstruction and Development (EBRD) expects Croatia’s economy to go up 2.7% in 2018 and 2.5% in 2019, thus joining a number of Croatian and foreign institutions and analysts projecting a slower growth rate compared to last year.
The Croatian economy grew by 2.8 percent in 2017, a slight slowdown from 3.2 percent the previous year. “The deceleration was primarily due to a pick-up in imports. Growth was supported by another good tourist season, strong household consumption and investment,” according to a report which the EBRD released on Wednesday, as part of the bank’s annual meeting in Amman, Jordan.
Fiscal consolidation continued with the general government balance turning to a surplus of 0.8 percent of GDP. Although public debt started to decrease in 2016, it is still high at 78 percent of GDP.
“Growth is expected to decelerate further in 2018 and 2019 as supportive cyclical factors (primarily a boost from tax cuts) are running out. However, the slowdown is expected to be rather marginal (to 2.7 and 2.5 percent, respectively) as early indicators point to possibly another record tourist season in 2018 and the country is expected to put EU funds to better use,” the EBRD said in its report.
Higher productivity and long term economic growth will require tackling corporate over-indebtedness and improving corporate governance. “Also, the potential spill-over of Agrokor’s financial problems to its subsidiaries and suppliers still poses a downside risk in the short term,” the EBRD report said.
Following several years of weaker economic performance, growth in the EBRD region averaged 3.8 percent year on year in 2017. The acceleration, now sustained for two years, has been broad-based, with contributions from stronger investment activity and higher exports. “Average growth in the region may now have peaked and is expected to moderate to 3.3 percent in 2018 and 3.2 percent in 2019,” the EBRD report said.
Growth in central Europe and the Baltic States (CEB), the region in which the EBRD places Croatia, picked up markedly, from an average of 2.9 percent in 2016 to 4.3 percent in 2017, boosted by stronger investment and higher wage growth.
Growth strengthened in every economy in the region with the exception of Croatia.
Most of Croatian and foreign analysts expects Croatia’s economy to grow the same as last year or slightly less.
Last week, the European Commission issued its spring forecast saying that Croatia’s economy continued expanding, although the growth was slowing down and was weaker compared to its peers.
The European Commission expects the Croatian economy to grow at a rate of 2.8% in 2018, sticking to the forecast it made three months ago.
The Croatian National Bank projects the national GDP to grow 2.9% in 2018, the International Monetary Fund projected a 2.8% growth, while the World Bank expects Croatia’s economy to increase by 2.6%.
The government based the 2018 budget on a 2.9% GDP growth.
