The European Commission has revised its forecast for Croatia's GDP growth for this year to 5.4 percent from 5.0 percent projected this spring, while revising down its forecast for next year, to 5.9 percent from 6.1 percent. 

“Croatia’s GDP picked up robustly in the first quarter of this year (5.8% q-o-q), continuing the strong
performance from the second half of 2020. On an annual basis, real GDP is forecast to grow by 5.4% in 2021 and 5.9% in 2022. This is a slightly faster recovery than anticipated in the spring, largely due to the strong outturn in the first quarter and the positive high frequency indicators concerning consumption, construction, industry and tourism prospects,” the Commission said in the Summer 2021 Economic Forecast, released on Wednesday.

The Commission publishes a full set of macroeconomic forecasts for the EU and its member states in spring (May) and autumn (November) and publishes interim forecasts updating GDP and inflation figures in winter (February) and summer (July).

“Since the spring, the Covid-19 restrictions have been further relaxed in line with the improvements in the health situation, which are partly due to the pick-up in vaccination rates. Consumer sentiment and other high-frequency indicators continued to improve through May, suggesting the resumption of strong economic performance in the second half of the year. Preliminary data show that job creation is on the rise in the hospitality and IT sectors as well as construction, which is in line with the strong performance of investment data.

“Investment growth is set to accelerate over the course of the forecast horizon, supported by the Recovery and Resilience Plan. The tourist season is projected to remain well below 2019 levels, but substantially stronger than last year. As a result, exports of services should show strong growth. Goods exports are also expected to perform well, driven by strong demand in key trading partners.

“After remaining stagnant in 2020, prices started to rise again in 2021, in large part driven by increasing energy prices. While annual HICP inflation reached 2.4% in May, core inflation remained rather muted at 0.4%,” the report said.

Overall, the HICP is projected to increase by 1.5% this year and 1.3% in 2022, the Commission said.