HNB expects better GDP statistics for this and next year.
The Croatian National Bank (HNB) on Tuesday announced that it had raised its estimate of the growth of Croatian economy for this year to 2.8 percent, from previously expected 2.3 percent. At the same time, it increased its estimate of GDP growth for next year to 3 percent, reports N1 on December 20, 2016.
At the beginning of the fourth quarter, there was a continuation of favourable economic trends, said the leaders of the central bank in a discussion with reporters, noting the growth of industrial production and turnover in retail trade. Therefore, they estimate that economic activity in the fourth quarter could rise by 2.6 percent year-on-year.
The estimate for this year was increased to 2.8 percent, while in the next year HNB expects acceleration of growth of gross domestic product (GDP) to 3 percent, while the previous estimate for 2017 was 2.5 percent. HNB believes that personal consumption and investments will be the main generators of economic growth in the next two years.
According to HNB Governor Boris Vujčić, the impact of tax reform on personal consumption in 2017 will be positive and will contribute to GDP growth by 0.7 percent in 2017 and by 0.6 percent in 2018. The growth of private consumption will also affect the rise in inflation next year, which is expected to increase to 1.6 percent. “However, the main cause of rising inflation in 2017 will be imported inflation – expected rise in energy prices, rising inflation in the euro area, and strengthening of the dollar against the euro, and also against the kuna”, said Vujčić.
“The growth rates of exports of goods will be reduced, on the one hand due to the decrease in foreign demand dynamics, and on the other hand due to the ending of the initial effects of joining the EU, which will now lose its importance”, noted Vujčić.
According to the projections, this year the employment rate could increase by 1.8 percent, while the survey unemployment rate will fall by just over one percentage point. In 2017, they expect employment growth of 1.5 percent, and the decline of survey unemployment rate to below 14 percent.
Commenting on the reduction of external and public debt, the Governor pointed out that the trend was good and that it was in the focus of rating agencies and investors. With further reduction of public debt in 2017 to 83.5 percent of GDP, said Vujčić, Croatia could meet the conditions to leave the excessive deficit procedure.
Vujčić added that cyclical recovery of the economy was taking place in Croatia, and that the gap between potential and actual GDP will slowly close in 2017. This means that higher rates of GDP growth cannot be achieved as before. Now, that will demand implementation of structural reforms, explained the Governor, who in this context mentioned the reform of the public administration system, labour market, and restructuring of public companies.
HNB announced that, in the context of relatively low expected inflation rate and slow recovery in lending to the private sector, it would continue with expansionary monetary policies and continue to maintain a stable exchange rate against the euro. This means supporting high liquidity of the monetary system through structural and regular repo operations, while foreign exchange interventions will be used as needed.
