Analysts at Raiffeisenbank Austria (RBA) expect that the Croatian GDP to grow 5.8 percent in 2022 before slowing down to 1.8 percent in 2023 due to the "euro zone's expected slide into a recession and high uncertainty in light of the Ukraine war, and relatively strong inflationary pressures." Pročitaj više

The Croatian economy grew by 7.3 percent in the first half of 2022, driven by exports of services, personal spending and “replenishment of reserves.” Along with Slovenia, this was among the highest growth rates in the European Union, RBA analysts noted in their latest press release.

Perceived inflation rate remains high and is having a direct impact on consumer sentiment and optimism, which is relatively low. The first signs of a slowdown have been observed in the latest indicators for September and are expected to be more pronounced as the year draws to an end. In such a scenario, the real GDP growth rate is expected to reach 5.8 percent, they said, revising up their previous growth forecast for this year of 3.9 percent.

The ongoing war in Ukraine, the energy crisis, inflationary pressures across Europe and the decline in disposable income are some of the challenges that would continue into 2023.

“The euro zone is expected to step into a recession already at the start of the new year, and its intensity will largely determine the economic outlook for Croatia,” said Zrinka Zivkovic-Matijevic, Director of Economic and Financial Research at RBA.

RBA projected the growth rate for Croatia in 2023 at 1.8 percent, revising down their previous projection of 3.0 percent. Inflation is expected to remain in double-digit territory in the next quarter as well, with a “gradual tendency to decline.” The average inflation rate is forecast at 10.6 percent in 2022 and 6.7 percent in 2023.

Next year, economic policymakers will find themselves under pressure to increase wages as personal spending, which generates the most substantial revenue for the government budget through VAT, will slow down, RBA said.

“Croatia joining the euro zone and the EU’s passport-free Schengen Area, and its fulfillment of the requirements for receiving EU funding from the National Recovery and Resilience Plan give Croatia a chance for a stronger, more resilient and more sustainable economy,” Zivkovic-Matijevic said.