The bank expects a somewhat lower GDP growth this year.
Hypo Alpe Adria Bank has announced that in 2016 it expects Croatia’s GDP to grow by just one percent, while in 2017 the growth should accelerate to 1.5 percent, announced the bank during the Macroeconomic Outlook Conference, reports tportal.hr on March 23, 2016.
The results of the analysis have been presented by Hrvoje Stojić, director of the Bank’s Department of Economic Research. “The reason why we have not dared to increase our estimates is the exacerbated external outlook which primarily concerns the slowdown in the growth in the euro area and the volatility in the financial markets”, explained Stojić.
He said that the growth rate of one percent was low, but that it should be pointed out that there were positive changes in the structure of growth since net exports have been contributing more to the growth. Exports and investments should be the engines of growth, Stojić said, noting that it was necessary to stabilize public debt since it restricts growth.
Stojić added that Croatia had reduced the share of interest expenses in the GDP from 4 to 3.5 percent of GDP, but this was still a high level which left Croatia quite vulnerable in case the interest rates begin to rise. The good thing is that the rise in interest rates is not expected, it will probably not happen in the next year or two, said Stojić.
Commenting on the budget, he said it was good news for Croatia that it would have two consecutive years of relative fiscal consolidation. “Last year, there was some fiscal consolidation, and this year it will probably continue. The deficit should certainly be lower, and whether it will be closer to 3 or 4 percent of GDP will depend on economic growth, inflation, and the issue of the wage bill. Negotiations with the unions are yet to come, and we should also definitely wait for the final report on the budget execution in 2015”, said Stojić. If the wage bill remains frozen, that will be a success, he added.
Stojić stressed that there were certain positive signs of economic growth, but that they mostly depended on better tourism results this year. There are many things which are good for Croatia and if there are no major political disturbances in Europe, then the tourism could achieve better results, he concluded.