Chief analysts of the Croatian Banking Association (HUB) have revised their forecast of the country's GDP growth to 2.7 percent this year, or slightly down from their previous estimate of 2.8 percent seven months ago, adding in their commentary that the economy overall is experiencing sound growth momentum.

The report released on Thursday noted that estimates from various analysts have put the real GDP growth in 2018 between 2.3 and 3.0 percent.

It added that the main driver of Croatian economy’s growth has been gradually transforming from exports toward internally driven growth. Personal spending is expected to increase on average by 3.2 percent on the back of somewhat higher wages, with household borrowing dominating over the gross value of investments.

Investments are expected to grow at an average of 5.4 percent, and account for about 20 percent of GDP, compared to the personal spending share of GDP of 60 percent.

HUB said that investments have a considerable indirect impact through imports, as a significant portion of demand for investment goods results in increased imports of those goods. A faster rate of increase in imports compared to Croatia’s exports renders the net contribution of the foreign trade sector to GDP growth to be negative.

Nevertheless, HUB’s chief analysts said they expect the current account balance of payments to remain in the black by 2.4 percent. Although the unemployment rate continues to drop, it is still high, estimated at about 10 percent.

The annual inflation rate is expected to be about 1.3 percent in 2018. Public debt is also decreasing, and is expected to drop to 74.6 percent of GDP, with the foreign debt ratio also expected to continue falling.

HUB also listed six factors which might pose negative risks, all of which refer to trends in the global markets. These include protectionist measures, increasing energy prices and inflation rates, increasing interest rates, political instability and crisis in the euro zone, global political instability, as well as the global debt of the private sector and inflated real estate prices.

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