The Croatian National Bank (HNB) on Wednesday lowered the forecast of real economic growth for this year to 3% from the previously forecast 3.1%, saying that the slowing growth of some of Croatia's important trade partners could negatively affect future economic trends.

In the third quarter of this year, GDP growth stepped up, with industrial production going up 0.2% and real retail trade dipping 0.2% from Q2, the HNB said in a press release. Employment growth slowed down and the number of the jobless stayed the same as in Q2, while wages continued to grow at the same pace as in Q2.

The annual growth of consumer prices dropped from 1.1% in July to 0.8% in August. The balance of payments in Q2 worsened due to a marked growth of the foreign trade deficit.

The high kuna liquidity of domestic credit institutions continued to increase in September, supporting the favourable trends in financing domestic sectors. Lending went up 3.7% on the year, with corporate lending decreasing 1.9% and household lending increasing 7%.

The general government’s debt at the end of June was above the level recorded at the end of 2018 due to the servicing of foreign securities due in the second part of the year.

In the months ahead, the annual inflation rate could fluctuate around 1% and the assessment of the average annual inflation rate for this year is 0.9%, a projection increase of 0.2 percentage points, the HNB said.

The monetary policy will remain expansionary, maintaining the stability of the nominal kuna-euro exchange rate.

Exposure to systematic risks in the first half of the year remained moderately high and the financial system is stable, the HNB said.

In the financial sector, favourable trends continued owing to higher quality assets, higher solvency and reduced dependence on foreign financing. Favourable financing terms facilitate the servicing of household and corporate debts, but the extended period of low interest rates could result in underestimation of risks and higher vulnerability, the HNB added.