Croatia: Raiffeisen Bank analysts more cautious about GDP growth

Croatia: Raiffeisen Bank analysts more cautious about GDP growth

Contrary to the optimism of the central bank and the government about the dynamics of recovery in 2021, ranging between 8.5 and 9 per cent, Raiffeisen Bank (RBA) analysts are still somewhat more cautious with the expectation that GDP growth will stop at 7 per cent.

“Our estimates are significantly lower than the Government’s because we expect a slowdown in the last quarter of the year,” said RBA chief economist Zrinka Zivkovic Matijevic at the presentation of the latest RBA research.

She adds that the “risks” for the forecasts are on the side of the positive ones, which in the case of their realization significantly brings those forecasts closer.

The summer quarter, due to a good epidemiological situation and a surprising season that brought in 8.5 billion euros of inflows (85 per cent of the 2019 level), could end with a double-digit growth rate.

However, on the side of the rapid deterioration of the epidemiological situation as the end of the year approaches, the withdrawal of the ”parking brake” in terms of optimism is a reflection of the uncertainty of energy and raw material prices, as well as disruptions in supply chains. Nevertheless, real Croatian economic recovery and indeed growth throughout 2021 will remain strong, primarily driven by growth in the export of services, ie tourism and personal consumption.

Next year, domestic economic growth should pull in investment on the wings of using European Union (EU) money under the much talked about National Recovery and Resilience Plan.

“From a macroeconomic point of view, investments are a desirable generator of growth,” said Živković Matijević, explaining that the benefits of a generous European Union cash injection are wider than the availability of the money itself because its withdrawal depends on measures and reforms that will work to reduce the weaknesses of the domestic economy in the long run, and whose outlines are slowly emerging.

The news about Croatian economic recovery and the acceleration of economic dynamics has recently been overshadowed by inflation, which accelerated to 3.3 per cent in Croatia back in September (as opposed to 4.1 per cent in the Eurozone), which is expected to peak in the first quarter of next year.

“Inflationary pressures continued to strengthen, dominantly caused by strong growth in energy prices, thus reflecting developments in world crude oil exchanges. Since the second half of the year, energy prices have been joined by rising food prices,” they added from RBA.