According to the estimates released by the European Commission on Thursday, Croatia's GDP growth in 2019 was 3.0 percent, outpacing their earlier forecasts at 2.9 percent. They added that in 2020, Croatia's GDP will grow at a rate of 2.6 percent, and a further 2.3 percent in 2021.

“After a weak 2018, real GDP growth in Croatia is estimated to have risen to 3.0 percent in 2019,” the European Commission said in its latest Winter 2020 Economic Forecast.

“Domestic demand strengthened, driven by a noticeable pick-up in investment and government consumption expenditure, while continued improvements in the labour market and low inflation underpinned private consumption,” they added.

“Even though exports rebounded sharply, their growth was outpaced by imports… Economic growth is expected to moderate as GDP is forecast to expand by 2.6 percent and 2.3 percent in 2020 and 2021, respectively,” the Commission said.

Previous forecast compiled by the Commission, released in November 2019, estimated that the rate of Croatia’s GDP growth is likely to be 2.6 percent in 2020 and 2.4 percent in 2021.

The report said that domestic demand is expected to remain the main driver of growth in both 2020 and 2021.

“Household consumption growth is expected to inch down, but remains supported by rising real disposable incomes as unemployment, already at record low levels, is expected to further decline,” the Commission said.

“Investment growth is expected to remain strong, supported by a growing volume of maturing EU-funded projects from the 2014-20 programming period… Export growth is set to moderate, in line with lower growth in Croatia’s main trading partners, trade uncertainties and the limited scope for further growth in the tourism sector. Import growth should be underpinned by still strong domestic demand but is Expected to decline in both 2020 and 2021… After improving in 2019, the contribution of net exports to growth is expected to deteriorate in 2020 before stabilising in 2021,” the Commission’s analysts said.

The Commission also said that despite the expected decline in energy prices, wage pressures in the labour market and strong deomestic demand are likely to push up inflation, forecast at 1.5 percent and 1.7 percent in 2020 and 2021 respectively.