Croatia's GDP will grow by 6 percent in 2021, the European Reconstruction and Development Bank (EBRD) said in its forecast released on Tuesday, almost doubling its previous 2021 estimate, state agency Hina reported.

Hina said the EBRD’s optimistic projection is “in anticipation of vaccination against Covid-19 and tourism recovery.”

In its previous projection, from October 2020, the EBRD forecast that Croatia’s GDP would increase by 3.5 percent in 2021. In 2020 Croatia’s GDP shrank by 8.4 percent, slightly less than the EBRD had projected during the pandemic.

The latest forecast shows that by the end of 2021 Croatia’s economy will have contracted by 2.9 percent compared to 2019. In 2022 GDP growth is expected to slow down to 4.5 percent.

“The Covid-19 pandemic inflicted significant damage on the Croatian economy in 2020, and a key channel for disruption was tourism, which normally accounts for around 20 percent of GDP,” EBRD said.

“Nevertheless, the economy inched closer to its pre-pandemic levels in Q1 2021, with GDP growth at -0.7 percent year-on-year (5.8 percent quarter-on-quarter) on the back of robust exports of goods, investments in construction and a partial recovery in private spending… The strong momentum of the economy will likely be maintained in the remaining quarters of 2021 as the vaccination campaign progresses and tourism picks up,” EBRD’s analysts said.

If tourism revenues reach 70 percent of their 2019 levels, as expected, Croatia’s GDP could expand by 6 percent in 2021, EBRD said.

In 2022, incoming EU funds and post-quake reconstruction efforts will boost investment, and together with expanding private spending and recovering tourism, will continue the high-growth momentum at around 4.5 percent.

“The main risk to the outlook remains the pandemic evolution, as new variants and insufficient vaccination could lead to other infection waves,” EBRD said.

EBRD’s analysts also significantly increased their growth estimate for 2021 for the Europe and the Baltics region – which includes Croatia – by 1.3 percentage points to 4.8 percent. It expects a similar growth rate in 2022.

In the entire region the economic activity is expected to grow in 2021 by 4.2 percent, 0.6 percentage points more than last autumn’s forecast. In 2022, it is expected to slow down to 3.9 percent growth.