Analysts at the Economic Institute Zagreb (EIZ) have downgraded their outlook of economic activities in Croatia and now estimate that the fall in Gross Domestic Product (GDP) for 2012 will be 1.9% and that this year GDP could fall by 0.2%, economic recovery is expected in 2014 with a growth in GDP of 1.5%.
Due to negative economic trends, the EIZ downgraded its outlook given in October last year when a GDP of a negative 1.4% was forecasted for 2012 and economic recovery with a mild growth in GDP of 0.5% was expected to occur in 2013.
EIZ analysts noted in the latest "Croatian Economic Outlook Quarterly" that domestic demand is shrinking as are total investments with a delay in public sector investments however, investments are expected to intensify in the second half of 2013, which could lead to economic revival and a growth in GDP of 1.5% in 2014.
The budget revision in 2012 and the 2013 budget have shown the government's reduced ambition to implement fiscal consolidation in expenditure and the new budget foresees a greater fiscal deficit compared to earlier projections which indicates a slowing down in consolidation processes.
Analysts note that forecasts are impacted by uncertainties such as the process of accession to the European Union and the costs involved as well as delayed reactions on financial markets to Croatia's recent downgrade in credit rating.
