Croatia's economy will record a deeper dip than forecasted earlier and recovery is not expected until 2014, the European Commission notes in its autumn economic forecast released on Wednesday.
It is expected then that Croatia's economy will shrink by 1.9% which will be followed by stagnation next year however, an annual growth rate of 1.4% is forecasted for 2014.
In the spring forecast released in April the commission estimated a GDP contraction of 1.2% for this year and that recovery would follow in 2013 with a growth rate of 0.8%.
"The Croatian economy continues to face both cyclical and structural headwinds. Contracting economic activity in many EU Member States in 2012, not least among some of Croatia's most important trading partners, is affecting the domestic economy", the commission's report notes.
In the next two years it is expected that economic activity will receive support from the investment side where the government is promoting capital spending in state-owned companies particularly in the energy and transport sectors. Private investments should be stimulated by Croatia's accession to the EU mid-2013, the commission notes.
The effects of investments should lessen the decline in consumer and government spending and rising imports. The positive effects of investments will be evident in 2014.
Croatian exports will subtract this year by about one percent which is a little less than the Commission had forecasted in the spring. In 2013 exports should increase by about 1.5% which is a little less than had previously been expected. The rise in exports is projected at 3.3% in 2014.
The number of jobless is still rising and this year will probably reach 14.2% which is significantly higher than 13.4% which Brussels had expected back in the spring. This trend should be blunted a little in 2013 and be even better in 2014.
The Commission's latest projections put the budget deficit at 4.4% as against the projections of 5.1% in the spring. The deficit should be reduced in 2013 to 4.2% of the GDP and then reduced even further in 2014 to 3.9%.
The general government debt is projected to continue its steady increase since the beginning of the recession and this year may amount to 53.8% of the GDP, growing to 56.6% in 2013 and 60.6% in 2014.
Brussels estimates that the inflation rate in Croatia in the current year will amount to 3.4% which is again significantly higher than had been projected in the spring (2.45). Next year inflation should slide back to 3.2% and be lower again in 2014 when it is estimated that inflation will be 2.1%.
