Croatian GDP growth is estimated at 2.6% for 2023, unchanged from the European Commission's autumn forecast. in 2024, the Croatian economy is expected to grow by 2.6%, while inflation is likely to fall to 2.5%, according to the European Commission's winter forecast on Thursday.

According to the EC Winter Forecast 2024, the Croatian economy will grow by 2.8% in 2025.

As for economic performance in 2023, economic activity was supported by domestic demand and “private consumption benefited from favorable wage developments and good consumer sentiment, while monthly retail sales data point to an acceleration in the fourth quarter.”

“The strong investment growth was supported by EU funds, including those from the 2014-20 Multiannual Financial Framework, which had to be absorbed by the end of 2023. While goods exports declined last year due to weak external demand, overall (net) trade contributed positively to growth thanks to strong services exports (especially in tourism) following the introduction of the euro and accession to the Schengen area in early 2023.”

In 2023, Croatia had the second highest growth in the EU, while Malta performed best with + 4.6%.

EU economy starts 2024 weaker than expected

“After subdued growth last year, the EU economy started 2024 weaker than expected,” says the EC.

In the European Commission’s winter interim forecast, growth in both the EU and the euro area is lowered from 0.6% in the autumn forecast to 0.5% in 2023 and to 0.9% (from 1.3%) in the EU and 0.8% (from 1.2%) in the euro area in 2024.

In 2025, economic activity is still expected to grow by 1.7% in the EU and by 1.5% in the eurozone.

Croatia’s inflation will fall below the EU and eurozone average

Croatian HICP inflation fell from 10.7% in 2022 to 8.4% in 2023, while inflation excluding energy and food was 8.8%. Both figures were above the corresponding rates in the eurozone of 5.4% and 5% respectively, according to the EC.

The slowdown in HICP inflation in 2023 was mainly caused by energy and processed food prices. Inflation in services proved to be more persistent, with a significant contribution coming from tourism-related services, largely reflecting foreign demand. HICP inflation is forecast at 2.5% and 2% in 2024 and 2025 respectively, with energy and unprocessed food prices expected to drive the downward trend, while services inflation is expected to remain more persistent.”