Croatia's GDP will shrink 9.4 percent in 2020, government's projections released on Thursday showed, only to bounce back in 2021 and post 6.1 percent growth.

The latest forecast seem even more pessimistic than predictions released earlier this month by the World Bank and the International Monetary Fund, which projected Croatia’s GDP to shrink by 6.2 percent and 9.0 percent in 2020 respectively.

Speaking at a regular cabinet session on Thursday, Prime Minister Andrej Plenkovic said that although the impact of the coronavirus crisis on both the local and global economies would be “short-term in nature.”

The general government deficit is projected at 6.8 percent of GDP, or 24.8 billion kuna (€3.3 billion) in 2020. In 2021, it is expected to drop to 2.4 percent of GDP.

Meanwhile, the public-debt-to-GDP ratio in 2020 is expected to jump to 86.7 percent of GDP, a 13.5 percentage points increase from 2019, due to increased borrowing after the local economy had been brought to a standstill which in turn emptied the government’s coffers. In 2021, the public-debt-to-GDP ratio is projected to fall to 83.2 percent of GDP.

Consumer prices are expected to drop mildly in 2020 by 0.3 percent year-on-year.

Plenkovic said that the government is hoping that a series of measures adopted to help businesses retain jobs – including a state-subsidised 4,000 kuna (€530) minimum wage for furloughed workers – would help reduce the likely increase in unemployment rate.

The fall in the number of people employed, which was around 1.5 million before the coronavirus crisis, is expected to drop just 3.3 percent in 2020, and the average surveyed unemployment rate is projected at 9.5 percent in 2020 and 9.0 percent in 2021.

(€1 = 7.56 kuna)

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