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Croatian economy set to improve in 2016

By  Dec 28, 2015

After emerging from the recession in 2015, Croatia's economy is likely to continue rising in 2016, with analysts projecting growth rates between 0.5% and 1.8% as well as a rise in the country's public debt.

In 2016 Croatia's economic growth will pick up to 1.8% on the back of rising exports of goods and services as well as on the back of a continued rise in personal consumption and investments, according to a recent statement issued by the Croatian National Bank (HNB).

Apart from the central bank, other institutions project growth in Croatia's GDP as well.

The European Commission forecasts a rise of 1.4%, while the International Monetary Fund is less optimistic, putting the forecast at 1%. The European Bank for Reconstruction and Development (EBRD) projects Croatia's growth at the rate of 0.5%, and the Institute of Economics in Zagreb believes the rise will be around 1%.

Similar projections have been given by analysts in major banks operating in Croatia. For instance, Alen Kovac of Erste Bank believes that the growth rate in 2016 would be similar to 2015, namely between 1% and 1.2%.

The HNB, however, has been warning against a snowball effect on public finances, namely a situation when GDP growth rates are lower than the average interest rate on the country's public debt, thus causing an increase in the public debt.

"In order to halt this effect, it is crucial to ensure a stronger fiscal adjustment," HNB Governor Boris Vujcic said recently. He said that this adjustment should not be dramatic compared to what some EU countries had had to do in that regard during the crisis.

Croatian Employers Association Director-General Davor Majetic expects a feeble growth due to the non-performance of structural reforms and weakening external positive effects.

Analysts of the Croatian Chamber of Commerce say that developments in 2016 will depend on the expertise in pursuing the country's economic and development policies and on regional and global trends.

(Hina) ms