ZAGREB, 17 Dec 2021 - The Croatian economy is expected to grow at a rate of 9.5% in 2021 and 4.6% in 2022, the Croatian Banking Association (HUB) said on Friday, citing projections by the four largest banks in Croatia.

HUB once again revised the Croatian GDP growth rate upward from July's estimate of 5.3%.

The national economy is expected to grow at a rate of 9.5% this year, with economists' projections ranging between 9.2% and 9.7%, HUB said in its latest outlook.

"That isn't surprising considering the developments and data released since July. Croatia is firmly positioned in the group of Central and Eastern European countries which are mostly surpassing the pre-pandemic level of economic activity," the report says.

Bankers' optimism isn't waning for 2022 either with the average expected growth rate forecast at 4.6%, with very little divergence in estimates - from 4.4% to 4.8%. 

Increased inflation to "eat up" a great deal of wage growth

The analysts expect that the accelerated economic growth will spill over to the labour market through lower unemployment rates and increased wages. They expect wages to increase by 3.7%, which is a faster rate than the 2.9% inflation rate estimated for next year.

The difference between the two rates is less than in previous years. "In other words, increased inflation will 'eat up' a great deal of the expected growth in nominal wages," HUB said.

The two main drivers of economic growth will be exports and investments. After a spectacular increase in exports this year, this trend is expected to continue at a high rate of 12% in 2022 while investments are expected to accelerate from 9.2% in 2021 to 11% in 2022.

NPOO to stimulate investment

Given that the corporate sector is still fairly passive with regard to investment, the main stimulus to investment in the short term should come from state investments, depending on how quickly funds from the National Recovery and Resilience Plan (NPOO) are activated. 

Croatia to catch up with ECB monetary expansion

HUB said that the general government balance to GDP ratio is decreasing roughly in accordance with government projections by 4.5% in 2021 and by 2.9% in 2022, and that gross public debt should decrease from 87.3% in 2020 to 82.9% in 2021 and 79.7% in 2022.

With regard to Croatia's aspirations to join the euro area in 2023, the analysts believe that the European Central Bank's quantitative easing policy will continue long enough for Croatia to catch, in terms of the impact of euro area monetary policies on demand for Croatian government bonds.

For more on business, follow TCN's dedicated page.

This Croatian startup's beginnings come from Zagreb and it first became well known back in 2014 as the first startup attract a large investment from outside of the Republic of Croatia.

As Bernard Ivezic/Poslovni Dnevnik writes on the 12th of April, 2019, the Croatian startup Bellabeat received an investment from AOL Ventures in the amount of 14.2 million dollars, the equivalent of 12.5 million euros. It's not the biggest investment to be received by a Croatian startup last year, as that remains marked by Porsche's entrance into the co-ownership of Rimac Automobila for 18.7 millions euros, but it remains the second largest. Bellabeat has so far kept this massive investment secret.

AOL is one of the three largest Internet service providers in the United States of America. The company is part of the large Verizon group, which owns a number of popular media outlets including The Huffington Post, Engadget, TechCrunch, and MapQuest. In the group is also the former Yahoo and the AOL Desktop software solution.

Croatia's Bellabeat underwent restructuring half a year before the investment took place, at the end of 2017 and in early 2018. The company then let a number of its employees go. Sandro Mur, co-founder and director of Bellabeat, subsequently announced that he currently has a total of fifty employees and plans to increase this number to seventy. At that time, the Croatian company's focus was on establishing an office across the Atlantic over in New York. The company has developed a range of high-tech products for women, from jewellery to smart water bottles, and plans to deal with artificial intelligence in the health preservation sector.

Five years ago, the founders of Bellabeat, Sandro Mur and Urška Sršen, set the bar very high for Croatian startups. They received a record 4.5 million dollar investment from a number of well-known investors. Among them were actress Jessica Alba, the creator and leading developer of Google Earth, Paul Buchheit, the founder of TechCrunch, Michael Arrington, one of the hundred richest people, Nicolas Berggruen, and one of the most famous investors in the Silicon Valley and one of the very first to have invested in Google and PayPal, Ron Conway.

Make sure to follow our dedicated Made in Croatia and business pages for much more on startups and companies from Croatia, as well as the overall business and investment climate in Croatia.

Click here for the original article by Bernard Ivezic for Poslovni Dnevnik