The Croatian Employers' Association (HUP) has revised up its GDP growth forecast for 2023 from 1% to 3%, expecting the growth to accelerate in the second quarter of this year by 3.5-4%.

In its latest projections, published in its publication Kvartalni Izgledi (Quarterly Outlook), HUP expects the national economy to grow by 2% in 2024.

HUP’s forecast is more optimistic than the revised projections of the government, which expects the economy to grow by 2.2% in 2023 and by 2.6% in 2024.

The average inflation rate is projected at 7% for this year, half a percentage point higher than in the previous forecast. Next year, inflation is expected to fall to 3.5%. On the other hand, government expects inflation to slow down to 6.6% in 2023 and to decline further to 2.8% in 2024, 2.4% in 2025 and 2.2% in 2026.

According to the HUP’s forecast, wages should grow by 10.4% this year compared to last year, and by 7.2% in 2024. The unemployment rate is projected at 6.6% in 2023 and 6% in 2024.

HUP says that the good trends are owing to strong tourism performance and the robust labour market supporting personal consumption, the rise in EU-funded public investments and the strong improvement of the energy balance.

Considering the good performance of public finance, HUP expects that next year Croatia might be awarded an A-grade credit rating, which would help bring down bond spreads by about 50 basis points and have a positive impact on borrowing by central government and domestic companies.