The growth rate of the Croatian economy for 2021 is currently projected at 7.6 percent, and if the epidemiological situation remains broadly favourable, strong and broad-based growth is expected to continue in 2022 and 2023, the World Bank said in a report on Wednesday.

In its latest “Europe and Central Asia Economic Update”, the World Bank analyses emerging and developing economies in this region, saying that “a surprisingly strong rebound in the first half of this year boosted economic activity in emerging market and developing countries in the Europe and Central Asia region, with the regional economy now projected to expand by a better-than-expected 5.5 percent in 2021.”

“The rebound in the region was largely driven by a strong recovery in exports during the first half of this year, as activity in the Euro area bounced back and commodity prices rose sharply, as well as strengthening domestic demand due to vaccinations and support packages. The boost to exports, however, may be fading due to the ongoing global and regional spread of more contagious Covid-19 variants, which has also dampened the recovery in regional domestic demand,” the World Bank said.

The Croatian economy has also recorded a strong recovery, with GDP growth for 2021 now forecast at 7.6 percent.

“In Croatia, GDP growth was broad based with all components of aggregate demand positively contributing to such developments, supported by less stringent social distancing restrictions, higher external demand, and improved labor market conditions. Strong economic activity continued also in the third quarter with tourism activity rebounding much faster than previously expected,” the report said.

“In Croatia, if a broadly favorable epidemiological situation continues and social distancing measures remain limited, strong and broad-based growth is expected to continue over the 2022-23 period,” it added.

“Many governments implemented broad policy support programs to promptly address the initial economic fall-out from the crisis. These policies provided immediate relief that protected firms and workers from the worst effects. While the reach of government support measures varied widely across countries, on average 50 percent of firms reported receiving some government support in response to the economic fall-out of the pandemic. In Croatia, a large fiscal stimulus package and introduction of loan moratoriums protected employment and prevented a sharper economic contraction and rise in poverty.

“Overall, based on the surveys, less productive firms were more likely to receive government support, larger firms were more likely than smaller firms to receive support in the form of payment deferrals and fiscal relief, and support measures were given to firms regardless of the level of their pre-crisis innovation. In Croatia, SMEs were the largest recipient of support in the form of employment protection subsidies while large companies relied more on loan moratoriums, guarantees and new loans.

“As economies enter the economic recovery phase, it will be important for policy makers in all countries to phase out broad policy support measures as soon as appropriate and focus on fostering a competitive business environment which is key to a strong recovery; resilience to future crises; and sustainable, long-term economic growth.

“Most countries in Europe and Central Asia can improve both the institutional framework and enforcement of laws for a strong competition environment, including policy reforms to strengthen insolvency and dispute resolution, ease entry for new firms, and improve financial sector capacity to provide credit for the business sector,” the World Bank said.