The European Bank for Reconstruction and Development (EBRD) said on Thursday it expects Croatia's GDP to grow by 2.7 percent in 2018 and 2.5 percent in 2019, joining a number of institutions and analysts projecting a slower growth rate in 2018 compared to last year.

In 2017, Croatia’s economy grew by 2.8 percent, slowing down from 3.2 percent in 2016.

“The deceleration was primarily due to a pick-up in imports. Growth was supported by another good tourist season, strong household consumption, and investments,” said EBRD’s analysts in a report released on Wednesday, during the bank’s annual meeting in Amman, Jordan.

EBRD said that efforts on fiscal consolidation have continued, with the general government balance posting a surplus of 0.8 percent of GDP. Although the public debt started to decrease in 2016, it is still high at a high level, at 78 percent of GDP.

“Growth is expected to decelerate further in 2018 and 2019 as supportive cyclical factors (primarily a boost from tax cuts) are running out. However, the slowdown is expected to be rather marginal (to 2.7 and 2.5 percent, respectively) as early indicators point to possibly another record tourist season in 2018, and the country is expected to put EU funds to better use,” EBRD said.

Achieving higher productivity levels and long-term economic growth will require tackling excessive corporate debts, and improving corporate governance.

“Also, the potential spill-over effect of Agrokor’s financial problems to its subsidiaries and suppliers still poses a downside risk in the short term,” analysts said.

By region, growth in the Central Europe and the Baltic States (CEB), which includes Croatia, has picked up to an average 4.3 percent in 2017, up from 2.9 percent in 2016, boosted by stronger investments and higher wage growth.

Growth strengthened in every economy in the region, with the exception of Croatia.

Most of Croatian and foreign analysts said they expect Croatia’s GDP to grow at the same rate as last year, 2.7 percent, or slightly less.

Last week, the European Commission issued its Spring Forecast saying that Croatia’s economy continued expanding, although the growth was slowing down, and was weaker compared to its peers.

The European Commission expects the Croatian economy to grow at a rate of 2.8% in 2018, unchanged from the previous forecast it had made three months ago.

The central bank (HNB) was slightly more optimistic, projecting the national GDP to grow 2.9 percent in 2018, the International Monetary Fund (IMF) predicted a 2.8 percent growth, while the World Bank was more cautious, expecting GDP to increase by 2.6 percent.

The government had based its 2018 budget on a 2.9 percent GDP growth.

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