ZAGREB, 16 May 2022 - This year the Croatian economy is expected to grow by 3.4%, the employment rate should increase by 1.5% and inflation might reach 6.1% due to increases in energy and food prices, the European Commission says in its Spring 2022 Economic Forecast, released on Monday.

"After a strong rebound of the economy in 2021, with a growth rate of 10.2%, GDP growth in 2022 is expected to be more modest but still solid at 3.4% as the direct exposure of the Croatian economy to the effects of Russia’s military aggression against Ukraine is limited," the Commission said in its report.

The Commission revised its growth projection for Croatia from 4.8% predicted in the Winter Forecast, released on 10 February. As for the growth forecast for next year, the Commission retained its previous growth projection of 3.0%.

Croatia's GDP is forecast to grow by 3.4% in 2022, mostly supported by domestic demand and as the labor market is expected to stay dynamic, with employment growing by around 1.5% this year. Inflation is projected to accelerate to 6.1% in 2022, driven by rising energy and food prices, before decreasing to 2.8% in 2023.

Before the Russian invasion of Ukraine, the Commission had forecast a long and strong recovery, but the war brought about new challenges at a time when the EU economy had recovered from the consequences of the COVID-19 pandemic. That's why the Commission revised its growth forecasts for EU economies and revised up its forecasts for inflation.

The Commission says that the fiscal package adopted by the Croatian government, including direct transfers to households and SMEs and cuts in indirect taxes, should cushion the effects of rising prices on disposable incomes and corporate profits. Despite this further fiscal support to the economy, the sustainability of the key fiscal figures is expected to continue improving, with the general government deficit narrowing toward 1.8% of GDP and public debt to around 73% of GDP by 2023. In 2023 GDP is expected to grow by 3.0%.

Private consumption is forecast to grow by 2.4%, lower than previously expected, due to rising consumer prices and uncertainty, which increases precautionary savings. On the other hand, the implementation of the National Recovery and Resilience Plan (RRP), and the acceleration of post-earthquake reconstruction should push investment growth to 6.5%, despite the drag induced by the rising costs of materials, supply bottlenecks, and increased uncertainty.

Government consumption should retain its positive contribution to economic growth, with a growth rate of around 2.5%.

Exports of goods are expected to be affected by weaker demand in main trading partners, but the growth rate should remain solid, at around 5%. The growth of exports of services should be mostly driven by tourist activity, which is expected to converge towards pre-crisis levels.

Imports are projected to increase in line with final demand.

"The balance of risks to the forecast is tilted to the downside, with key negative risks stemming from the rising global uncertainties and commodity price shocks, which could affect both domestic and external demand. On the upside, the envisaged euro adoption in 2023 could benefit investments and trade, while RRP-related investments and reforms, if swiftly implemented, could more rapidly increase the growth potential of the economy," the Commission said.

After peaking at 7.6% in 2021, the unemployment rate is projected to gradually decline below 6.5% by the end of 2023.

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ZAGREB, 27 April 2022 - The government forecasts a 3% rise in GDP in 2022 and it expects the budget deficit to narrow to 2.8% of GDP, and the government debt to fall to 76.2% of GDP and an inflation rate of 7.8%, Prime Minister Andrej Plenković said opening a cabinet meeting on Wednesday.

The government expects real GDP to increase by three percent in 2022, which will be followed by a growth of 4.4% in 2023, then 2.7% in 2024 and 2.5% in 2025.

A gradual narrowing of the budget deficit is expected and that being 2.8% of GDP in 2022, 1.6% in 2023 and 2024 then 1.2% of GDP in 2025.

The government's 2023-2025 Convergence Programme expects government debt to decrease from 79.8% of GDP in 2021 to 76.2% in 2022, 71.7% in 2023, then to 68.9% in 2024 and 66.9% in 2025.

The government estimates an inflation rate of 7.8% and for it to decrease significantly in the years to come (3.7% in 2023 and 2.5% in 2024).

The Convergence Programme is a document that the government presents every year within the framework of the European Semester. It defines the framework and objectives of the government's economic policy, macroeconomic and fiscal trends as well as key structural reforms in the medium term.

The government is also expected to adopt the National Reform Programme today which, according to Plenković, is based on the National Recovery and Resilience Plan. It contains 95 measures in six areas (the same areas as the Recovery Plan): economy, pubic administration, judiciary and state assets; education, science and research; labour market and social welfare; health and building reconstruction.

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ZAGREB, 25 Feb 2022 - Croatia's economy grew by 10.4% in 2021, according to first estimates given by the national statistical office (DZS) on Friday.

According to the DZS, Croatia's Gross Domestic Product increased 9.7% in the fourth quarter of 2021 compared to the corresponding period in 2020.

In 2020, the corona crisis affected the national economy which contracted about 8% that year, while in 2021 it recovered at a rate of 10.4%.

The Croatian economy saw the expansion in the last three quarters in a row.

In 2021 Q4, the growth was on the back of the rise in all the components of the GDP, including household consumption, state spending, exports and investments.

ZAGREB, 26 Nov 2021 - The 15.8% GDP increase in Q3 has prompted RBA analysts to review their growth forecast for 2021 of 7%, the Chamber of Commerce says Croatia could be among the fastest-growing EU economies in 2021, 2022 and 2023, while employers note growth at the end of 2021 will be just a little higher than it was 10 years ago.

The State Bureau of Statistics (DZS) on Friday released its first estimate of GDP growth in the third quarter of the year, under which it is 15.8% higher than in Q3 2020.

That is the second-largest jump in economic activity after a record growth of 16.5% in Q2.

HGK: GDP growth in three quarters as much as 10.7%

Considering the good results in Q2 and Q3, in the first three quarters of the year GDP went up by as much as 10.7% compared to the same period of 2020, the Croatian Chamber of Commerce (HGK) said in its analysis of the latest DZS data.

Real GDP was not only significantly higher than in 2020 but it even exceeded the 2019 GDP by about 1.5%, putting Croatia among the most successful EU countries for which data is available.

"Of a total of 21 member states for which Eurostat has data for all three quarters, only ten achieved a GDP that was higher than in 2019. Compared to other member states, Croatia also stands out for the growth rate, having achieved the highest growth," the HGK said.

According to the European Commission, with an average GDP growth of 5.7% in this and in the next two years Croatia could rank third among EU countries, behind Ireland and Romania, and its growth is expected to be more dynamic than that of the entire EU, which will enable it to get closer to the EU development average.

HUP: GDP at end 2021 just a little higher than it was a decade ago

The Croatian Employers' Association (HUP) underscored that based on available indicators, the DZS's initial estimate confirms the double-digit growth rate of real GDP in the third quarter of this year as against the same period last year, however, it noted that  at the end of 2021, GDP would be just a little higher than the growth achieved more than a decade ago.

HUP notes that based on most economic indicators, Croatia continues to be at the bottom of the EU along with Bulgaria.

"In order to change that and for growth to be stepped up and the level of development of other EU members from central and eastern Europe to be achieved, we need to use the present time to create foundations for strong and sustainable growth rates in the future," HUP underscored.

Joining the euro area and accessing EU funds "could additionally push growth rates up in the coming period but exclusively on the condition reforms are implemented to enable investments and new employment."

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ZAGREB, 13 Nov, 2021 - Prime Minister Andrej Plenković said on Saturday Croatia's likely entry into the euro area in 2023 was a signal and message to the investment community that the government's economic and fiscal policies were correct, just as in the case of Fitch Ratings, which upgraded Croatia's credit rating.

"The key and anchor of our economic course, as a result of which the European Commission, rating agencies and international financial institutions have increasing confidence in our policy, is accession to the euro area. Further guidance for our entry, which we expect in June and membership in the euro area on 1 January 2023, gives credibility to everything we are doing. People who deal with this matter in greater detail know what it means for the economy and stability. They see this driver of the Croatian economy as the most important one," Plenković told press.

"Croatia has been given the best investment rating in its history. We never had a BBB rating and a positive outlook. This indicates what that agency assesses, following what is going on with our fiscal policy."

A decision on Croatia's euro area entry is expected next June. A positive decision will "automatically signal" to agencies that Croatia will be even more predictable, more stable, and economically and financially even stronger, he said.

Fitch's upgrade and the European Commission's significant revision upwards of Croatia's growth forecast earlier this week are not important just for borrowing on the domestic and foreign financial markets, Plenković said, adding that this kind of "credentials" and legitimacy help SMEs, banks, citizens and the whole system.

Croatia's achieving the highest credit rating in its history, despite a number of negative circumstances, shows that the government knows where it is going and what is good for Croatia, he said.

He said that in the process of achieving its goal to enter the euro area, Croatia found itself in challenging and extremely risky circumstances, including entering the European Exchange Rate Mechanism in July 2020, just five days after a parliamentary election, which he said showed a high level of trust in Croatia.

Another important element is the stability of public finances, he said, recalling that Croatia had a budget surplus before the outbreak of the pandemic and that, had there been no pandemic, Croatia's public debt would have been below 60% of GDP.

Because of the COVID crisis and last year's GDP fall, several steps back were made, but this year already Croatia has returned to the previous public debt reduction course, Plenković said.

He highlighted growths in industrial production, commodity exports, construction and tourism, as well as the abundant EU funds Croatia will have at its disposal in this decade.

He said political stability was very important, as recognised by Fitch, adding that it was the fundamental prerequisite for any economic progress.

Plenković also underlined the importance of COVID vaccination "because it's closely related to the economy and finances."

He went on to say that during his government the relevant agencies have upgraded Croatia's credit rating six times - Fitch three, Standard & Poor's twice and Moody's once.

Asked why Moody's was the only one keeping Croatia's rating in the non-investmen zone, Plenković said every agency had its own approach and that Moody's last rating occurred exactly a year ago. "We hope they will follow what the other agencies are saying."

Fitch yesterday revised its forecast of Croatia's GDP growth this year from 5.5% to 8.9% and the European Commission revised it earlier this week from 5.4% to 8.1%.

Plenković recalled that the Croatian National Bank put the forecast at 8.5%. "If there is verified confirmation of the catchphrase 'let's underpromise and overdeliver', then it was fully confirmed from several competent instances."

He said the Commission's and Fitch's forecasts for this summer's tourist season were above those of the government.

If the season's results are at about 80% of the record year 2019, he said, it means the government and all other actors made a step forward given the pandemic and the related restrictions. This was confirmed by Euronews reports about Croatia as the country with the best tourism results in the Mediterranean, he added.

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ZAGREB, 2 Sept 2021 - The latest macroeconomic trends indicate the upward revision of forecasts of the growth for this year and we now can expect a 7% rise on the year, Finance Minister Zdravko Marić said on Thursday.

He recalled that the government's current forecast is five percent.

Marić said that tax revenue from 1 January to 31 August was 0.7% higher than fin the corresponding period last year while VAT was over four percent more year on year.

YTD profit tax is a little lower as against the same period last year, but that was to be expected given that that is calculated based on the results in 2020. Contributions for pension insurance were 4% higher and that is on track with what we expected, he said.

The only levy that is mildly staggering is for automobiles which he explained by the reduction in some levies and global stagnation in the automobile industry.

As far as budget revenue is concerned, in August alone the value of fiscalised receipts was almost 21% higher than they were in August 2020.

He underscored a key role of the expenditure side for the sustainability of public finances.

Asked by the press about possible inflation in autumn particularly regarding food prices, Marić said that the latest data calls for caution.

According to the latest information from the national statistical office (DZS), inflation in July amounted to 2.8% on the year, the highest rate since April 2013. Consumer prices are fuelled by industrial producer prices which in July rose by 7.9% on the year, the biggest jump since April 2011.

Marić said that inflation was to be expected given monetary concessions on the global level and the amount of money released in the system which resulted in a drop in its price which then impacted inflation pressure.

He added that he isn't sure that the price hike on food and construction material can be entirely attributed to global trends and disruptions in the supply chain.

He warned there are very few prices that can be regulated as they are mostly regulated by the market and that market development and competitiveness are a must.

He recalled that when VAT was reduced on eggs, fresh meat, fish, fruit, and vegetables, tax policies had a limited impact because even after VAT was reduced the price of these products did not decrease significantly.

He mentioned the recurring rise in the debt by hospitals and that payment deadlines are now about 180 days for hospitals, 200 days for pharmacies and that the health insurance fund had transferred about HRK 5.9 billion to settle liabilities.

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ZAGREB, 27 Aug 2021 - Croatia's GDP growth of more than 16% in Q2 2021 shows that the country's economy is recovering faster than expected, and that confirms that the government has responded strongly to the crisis, ensuring economic stability in the current pandemic, Prime Minister Andrej Plenković said on Friday.

The Croatian Bureau of Statistics (DZS) on Friday published its preliminary estimate showing that GDP in Q2 grew by 16.1% from the same period of 2020.

This is the first time the country's GDP has grown after going down for four consecutive quarters and it has grown at the highest rate since 1996, when the national statistical office started collecting those data. In 2020 economic activity contracted by 8%.

The government said in a statement that Croatia's GDP growth was significant also in relation to current Eurostat data, the fifth highest in the EU, after Spain, France, Hungary and Italy. Together with Hungary, Croatia also has the fifth fastest growth among countries of Central and Eastern Europe.

"The fact that Croatia now has more employed persons than before the COVID-19 crisis proves that we have switched from the job-retention phase to job creation. Croatia's approach to balancing measures for public health protection and the economic sector has proven effective, as evidenced also by results of the tourist season, which are beyond expectations. The government is committed to reforms and investments envisaged by the National Recovery and Resilience Plan as well as to the reconstruction of earthquake-struck areas. Close to €25 billion that has secured from the EU for the next decade will be a strong lever of Croatia's economic development," Plenković said.

Economic growth in Q2 2021 is owing to the growth of all GDP components, mostly personal consumption as its biggest component. DZS data show that household spending in Q2 grew by 18.4% from Q2 2020, after going down by 0.3% in Q1. The export of goods and services rose by 40.9%, owing to the significant recovery of tourism-related services.

The government has contributed to the economic recovery and large increase in personal consumption with its job-keeping policy, which has kept the labour market stable, and by continuing the tax reform, which has enabled a further growth of the average wage, the government said.

Croatia's GDP growth in Q2 is higher than the EU average, which stands at 13.2%. In the first half of 2020, the country's GDP grew by 7.7% from the same period of 2020, the government said in its statement.

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ZAGREB, 18 July, 2021 - The Croatian National Bank (HNB) Governor, Boris Vujčić, said on Sunday that Croatia's economy would likely reach a growth rate of about 18% in the second quarter of 2021, which was partly due to the low base in the Q2 2020 when the country had experienced a strong downturn.

Vujčić told the press in Dubrovnik where he had formally opened the 27th international economic conference, that Croatia's economic activity for the whole of 2021 would likely rebound at a rate of 6.8%, however, the epidemiological situation caused by the COVID pandemic still created uncertainties.

Vujčić explained that in the worst-case scenario, the GDP could rise by 4.8% in 2021.

The governor underscored a significant role of the government that provided job-retention grants which helped save jobs and made it possible for the recovery to be faster.

The crisis has made the ongoing digitisation processes faster, prompting remote working. I expect a large number of people to go back to work sites. Only after all things go back to normal, we will be provided with the real picture regarding the labour market that has behaved during the pandemic differently than during the big financial crisis in 2009 and 2010. In Croatia, we have already reached the 2019 levels in terms of employment figures and we are now faced with the recurring problem of shortage of skilled workforce, he said.

Commenting on the European Union's Next Generation plan, he said that that would be crucial for the economic recovery in the medium term.

In the next two years, the maximum of available funds will be tapped, and this amount of the funds withdrawn from the EU will have a positive impact on Croatia's GDP, according to his explanation.

The 27th Dubrovnik Economic Conference brought together about 70 experts and researchers from abroad and Croatia as well as representatives of financial institutions, central banks and the financial sector.

Some of the topics on the agenda of the conference are the further strengthening of the role of the state, particularly through the EU Next Generation programme, exchange mechanisms, corporate bankruptcies and so on.

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