Raiffeisenbank Austria (RBA) analysts on Monday revised down their estimate of Croatia's economic growth in 2022 from 4.4% to 4%, underscoring uncertainty and negative risks, particularly regarding investments.

The analysts said that in light of the war in Ukraine and growing uncertainty, their forecast for the euro area economy has been marked down by 0.7 percentage points to 3.3%.

“The expected trends will have a negative, albeit a limited impact on Croatia’s GDP. In the scenario that excludes the possibility of the war spreading to other countries of the EU and/or Western Balkans and implies, at least for the time being, that the tourism season will be successful, the forecast for the real annual GDP growth rate for 2002 has been revised from 4.4% to 4%,” the analysts said.

The analysts however remain cautious, underscoring uncertainty and negative risks, particularly with regard to investments.

Inflation in 2022 at 4.9%

They also see a more significant risk in the spilling over of the global increase in energy and food prices, and have therefore revised up their inflation forecast.

RBA estimates that this year’s inflation rate in Croatia will be 4.9% whereas previously it was forecast at 3.6%.

Data from the Croatian state statistics bureau (DZS) indicated an increase in inflation of 5.7% in January this year compared to January 2021, which is the highest increase since October 2008.

“We expect that this year will see stronger inflationary pressure, directly on food prices, and that the impact of price growth on producers will also affect consumers, which will negatively impact available income. In such circumstances we cannot rule out the possibility of additional fiscal support,” the analysts said.