Italy’s banking giant, UniCredit, has thrown a slight curveball at Croatia’s economic expectations. In its recent CEE Quarterly report, Unicredit revised its GDP growth forecasts for Croatia downward, predicting a slightly slower pace of expansion for both 2023 and 2024.
What’s the story?
- Revised forecasts: UniCredit now expects Croatia’s economy to grow by 2.2% in 2023 and 2.5% in 2024, down from earlier predictions of 2.4% and 2.6% respectively.
- Reasons for the revision: The downward adjustment reflects weaker-than-expected external demand, particularly in the second half of 2023, along with actual GDP figures for the first three quarters of the year.
Looking beyond the immediate:
- Investment contraction: While investment is likely to see a decline, Unicredit predicts other components of domestic demand to pick up the slack.
- Boost from elections and EU funds: Increased private consumption, driven by improving real incomes, and government spending spurred by upcoming elections are expected to provide a counterbalance.
- Political stability: UniCredit anticipates the ruling HDZ party to retain its power and President Milanovic to be re-elected, maintaining a generally stable political environment.
Brighter days ahead?
- Bounce back in 2025: UniCredit predicts a stronger rebound in 2025, with GDP growth projected to reach 3.5%. This optimism stems from expected recovery in investments, fueled by EU funds and increased government spending.
- Taming inflation: Inflation is projected to cool down, reaching 3% by the end of 2024 and staying within a 2.5-3% range throughout 2025.
- Fiscal balancing act: UniCredit foresees Croatia’s budget balance shifting to moderate deficits in the coming years, reaching 1.9% in 2024.
UniCredit’s revised forecasts paint a slightly less rosy picture for Croatia’s immediate economic future. However, the long-term outlook remains positive, supported by domestic demand drivers and EU assistance. As always, external factors and domestic policy choices will play a crucial role in shaping the trajectory of Croatia’s economic growth.