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European Commission Significantly Increases GDP Growth Forecast for Croatia

14.11.2016  16:58
EC has raised its forecast of the growth of Croatian economy from 1.8 percent to 2.6 percent.

The European Commission on Wednesday significantly increased its forecast of growth of the Croatian economy this year from 1.8 percent to 2.6 percent. “It is expected that this year Croatian economy will grow by 2.6 percent on the basis of the growth of consumption, strong investment growth and record-breaking tourist season”, announced the Commission in its autumn economic forecast. For the next year, the Commission expects growth of 2.5 percent, and 2.4 percent in 2018.

The general government deficit this year, according to the Commission's forecast, should amount to 2.1 percent of GDP, next year it should fall to 1.8 percent, and in 2018 to 1.4 percent of GDP. The reduction of deficit has stopped the growth of public debt, which is for this year projected at 85 percent of GDP, while last year it stood at 86.7 percent. In the next two years, the public debt will continue to decline – to 84.3 percent in 2017, and to 82.8 percent in 2018. “Reduction of public debt is a result of higher GDP growth and the appreciation of kuna, since the majority of debt is in the euro”, the Commission said.

The European Commission pointed out that unemployment rate would fall significantly due to an increase in employment, but also due to the decrease in workforce. This year, the unemployment rate is expected to be reduced to 13.4 percent, from last year's 16.3 percent. Next year it is expected to further decline to 11.7 percent, and in 2018 to 10.3 percent. The acceleration of economic activities will have a positive impact on the labour market and the number of employed persons should increase by 1.8 percent. Prices in Croatia have continued to fall faster than is the European average, and the deflation will this year amount to 0.9 percent.

The growth of public spending has been restrained, more due to the fact that Croatia had a caretaker government than due to some structural measures being taken. The risks for the future depend on the results of wage negotiations with the public sector employees, on the dispute with banks due to the conversion of loans in the Swiss franc into euros, as well as on the tax reform under discussion, the Commission said.

Finance Minister Zdravko Marić said he was pleased with the latest forecast, adding that the tax reform would give an additional impetus to economic growth next year. “We can be satisfied with this forecast. We believe that the tax reform will come into force on 1 January, which will give additional contribution to economic growth next year”, said Marić.

Source: Total Croatia News

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