As Novac/Augustin Palokaj writes on the 6th of November, 2020, the Croatian GDP drop should be at around 9.6 percent this year, which is among the largest declines in the EU, as only Spain with a 12.4 percent drop and Italy with 9.9 percent drop will have a larger decline than that.
The good news for Croatia is that mass job losses have been avoided so far, that unemployment growth is much lower than the economic downturn and that unemployment will drop again next year. Public debt in all EU countries is skyrocketing, which is understandable in the circumstances of the biggest crisis to ever hit it. Here in Croatia, public debt will rise to 86.6 percent of GDP this year, but should start falling once again next year. These are the main forecasts for Croatia from the autumn economic forecasts published by the European Commission in Brussels.
Croatia will begin to recover next year when GDP growth is expected to be 5.7 percent, and in 2022 – 3.7 percent.
These are better forecasts for Croatia than those published by the European Commission back in July, in which it forecast a 10.8 percent Croatian GDP drop. However, the Commission now predicts a slightly slower recovery next year, which, according to the latest forecasts, should be 5.7 percent, while earlier forecasts mentioned a possible growth in 2021 of 7.5 percent.
At the level of the entire European Union, GDP should fall by 7.4 percent this year, the least in Lithuania and Ireland with just over 2 percent and the most in Spain by 12.4 percent, Italy 9.9 percent, Croatia 9.6 percent, France 9 , 4 percent and Portugal 9.3 percent.
France and Italy, with a drop in employment of over 10 percent, had the largest impact on the labour market, while here in Croatia, the decline stood at only 1.4 percent. Unemployment in Croatia should be at the level of 7.7 percent this year, which will be at the exact average unemployment rate across the EU. Unemployment in Croatia should fall to 7.5 percent next year, and then fall again below 7 percent in 2022.
This situation in Croatia is, of course, a consequence of the crisis caused by the ongoing coronavirus pandemic, and preventing the collapse of the labour market is the result of multiple government measures. However, since they could dry out, this area could soon become far more sensitive.
However, the Commission predicts that the labour market will gradually recover and that private consumption and public investment will play a major role in economic growth. The reconstruction of Zagreb following the earthquake and the use of funds from the EU Recovery Fund will play a major role in this. Much will also depend on the recovery in the countries that are Croatia’s main trading partners.
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