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Croatia: Economy

Due to the economic crisis impact, the Croatia's growth outlook for 2009 remains poor . Slowing credit growth (access to international markets for corporate is minimal compared to previous years) points to a contraction in investment activity by 7.8% while private consumption entering 2009 is in negative territory. Meanwhile, export growth is being hampered by the global recession, and the current account deficit is expected to narrow to 4.7% of GDP as import growth slows (the key for Croatia’ s current account will be the tourist season). Unemployment is expected to rise to 14.6% (10.5% on an ILO basis) while inflation is expected to halve this year 2.5%). Economic growth in Croatia depends largely on the economic performance of the EU, which is its largest trading partner, and on the continued expansion of the tourism sector. Both o these sources of growth are being endangered by the current international financial and economic crisis. Rising global interest rates could increase the cost of servicing the external debt and may give rise to financial instability in the future. The spillovers from the global recession in 2009 have led to revised growth expectations. After a negative growth rates in 2009, a modest recovery of 0.9% growth rate is expected for 2010. Future growth performance could be improved even further if Croatia takes steps to overcome its competitiveness problem by reducing subsidies to large industries, reforming its public services, improving the environment for the entry and development of innovative new small businesses, and reforming and improving the education system to increase the skill levels of the workforce.

Croatia, Economic Development, Economic Performance and Outlook

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