Croatia’s GDP recorded robust growth in the first quarter of this year (2.7% q-o-q, 6.7% y-o-y), supported by both domestic demand (most notably private consumption) and net exports. Available short-term indicators for the first months of the second quarter (retail sales, industrial production, construction and trade of goods) point to still positive but somewhat weaker economic activity compared to Q1.
Last update : Summer 2022 Economic Forecast (14/07/2022)
|GDP growth (%, yoy)||-8,1||10,2||3,4||2,9|
|Inflation (%, yoy)||0,0||2,7||8,2||3,6|
Real GDP is forecast to grow by 3.4% in 2022 and 2.9% in 2023. For 2022, growth is projected to be stronger than forecast in spring, mostly due to better than expected private consumption growth in the first quarter, which more than compensates for the deceleration towards the end of the year. The slower pace of growth at the end of 2022 is set to continue in 2023, when a somewhat weaker outlook is expected compared to the Spring Forecast, largely on account of lower growth prospects in main trading partners.
The growth profile in 2022 is set to be shaped mainly by domestic demand, to which private consumption and investments are expected to provide similar contributions. Despite rising inflation, private consumption is expected grow solidly given the accumulated savings, favourable labour market developments and a strong tourist season. Investments are expected to be backed by EU funds (both RRF and ESIF), with the public sector playing a leading role. Net exports are expected to also contribute positively, especially due to the strong tourist season, which – considering current bookings – is expected to surpass the 2019 record.
In 2023, domestic demand is set to continue to be the main driver of growth, supported by stronger private consumption in an environment of stabilising inflation and accelerating investments. On the other hand, the contribution of net exports in 2023 could turn negative due to rising pressures on imports and somewhat weaker demand than previously expected in main trading partners.
The average HICP inflation rate in the first five months of 2022 reached 7.9%, which is somewhat above the EU average of 7.3%. This is mostly due to stronger inflation in April and May, triggered by changes in administrated energy prices for households. In the remainder of the year, inflation is set to gradually decelerate given the current data on commodity futures, government measures and base effects from the last months of 2021. The inflation forecast for 2022 is revised to 8.2% (compared to 6.1% in spring), strongly affected by the higher than expected energy and processed food prices. In 2023, the inflation rate should decelerate to 3.6%, below the EA average.