Croatia's economy will contract by 9% in 2020, the biggest drop in the group of emerging European economies, the International Monetary Fund (IMF) said on Tuesday, slightly revising upward its outlook for 2021.

This confirms IMF’s April outlook of a GDP fall of 9% released as part of the global economic forecast.

The forecast for 2021 has been revised to 6.0% from the 4.9% projected in the spring.

The international lender also confirmed it revised growth rate for 2019 to 2.9%.

Unemployment and deficit in 2020 revised down

The IMF now expects a significantly lower unemployment rate in Croatia this year, of 9.3%, as against the spring forecast of 11.5%.

In 2019, unemployment was at 7.8%, as was forecast in April.

In 2021, unemployment is expected to continue increasing to 10.3%, which is significantly higher than had been estimated in April when it was estimated that the unemployment rate would be 8%.

The current account deficit expressed as a share of GDP would amount to 3.2% this year, which is 0.8 percentage points less than estimated in the April report. It is expected to slide down to 3.1% compared to the spring estimate of 1.5%.

The 2019 balance recorded a surplus of 2.8%, which is more or less in line with the spring outlook.

The forecast of consumer price growth in 2020 has been revised down by 0.3 percentage points, and in 2021 inflation is expected to accelerate to 0.8%, equal to the 2019 rate.

Inflation in 2021 would be 0.4 percentage points less than originally forecast in the spring report.

Croatia sees biggest contraction

The latest IMF estimates show that this year Croatia’s economy is expected to drop the most among the group of emerging European economies, which includes Russia, Turkey, Poland, Romania, Ukraine, Hungary, Belarus, Bulgaria and Serbia.

The IMF estimates that these economies will drop by 4.6% on average this year, as against a 5.2% forecast in the spring.

A mild recovery is expected in 2021, with an estimated growth rate of 3.92%.

The mildest fall in this group of emerging economies is forecast for Poland (-3.6%), followed by Bulgaria and Romania with an expected contraction of 4% and 4.8% respectively. All three economies are expected to reach their pre-pandemic levels already next year, the IMF said in its report.

In addition to Croatia, Hungary’s economy is expected to contract by 6.1% and then increase by 3.9% in 2021.