EC Forecasts 1.1% GDP Increase in 2015 for Croatia

European Commission (EC)LPJ Issue 156, 9 November 2015

According to the autumn 2015 European Economic Forecast published by the European Commission (EC) on 5 November, Croatia’s GDP is forecast to grow by 1.1% in 2015, as decrease in domestic demand comes to an end and exports continue to increase. The EC forecasts continued growth in 2016 by 1.4%, reaching 1.7% 2017.

Unfortunately, general government gross debt is also growing and is expected to hit 89.2% of GDP in 2015, 91.7% in 2016 and 92.9% in 2017. The general government deficit is projected to improve to 4.9% of GDP in 2015, down from 5.6% in 2014, decreasing to 4.7% in 2016 and 4.1% in 2017. Furthermore, general government revenues are expected to grow by 2.8%, which is the highest rate since Croatia’s prolonged recession began in 2008.

The growth in goods exports is forecast to slow somewhat in 2016 and in 2017, but remain at 4.9% and 5.6%, respectively, while exports of services are also projected to contribute positively. Since imports are also set to rise, the overall contribution of external demand to growth is forecast to drop by 2017, but will remain positive.

However, the EC warns that the conversion of CHF loans into euros might threaten the growth forecast, citing that “banks’ losses due to the conversion could disrupt the capacity of the banking system to finance the recovery.”

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