The Croatian economy is facing a new recession this year, mostly because of the crisis in the European Union, and a GDP decline might exceed one per cent, a survey conducted by the Croatian Banking Association (HUB) showed on Tuesday.
Six economists from the biggest domestic banks projected a GDP decline of 1.3% on average. Two of the economists polled expected a drop of about 2% and four of up to 1%.
Four of the economists said the main cause of Croatia's GDP decline would be the debt crisis and recession in the EU, while four cited domestic fiscal adjustment.
If a recession really occurs, it will prevent a serious fiscal adjustment, the HUB said.
Whatever the government does, lower budget revenues than expected will cause a relatively high fiscal deficit. The average expected general government balance for 2012 is a worrying -4.9%, with the biggest optimist expecting -4.5% and the biggest pessimist -6% of GDP, the HUB said in a comment on the survey.
A GDP decline would mostly be fueled by a further drop in investment, and a new recession would also cause a further rise in unemployment. The economists polled said they expected a decline in investment of 2.7%, an unemployment rate of between 13.1% and 16.4%, and a rise in retail prices of 2.5%.
The economists expect the kuna-euro exchange rate to remain stable at present levels of between 7.5 and 7.6 kuna for one euro.
