The Council of the Croatian National Bank (HNB) said it expects that Croatia's GDP will contract 1% in 2013 and will increase 0.7% in 2014.
The real GDP drop in 2013 could be attributed to declines in personal consumption and government spending and a very slow increase in exports and investments, the bank said in a statement on its website.
The decline in personal consumption is due to the unfavourable trends on the labour market, which will lead to a significant decline in disposable income. In 2014 the economy is expected to recover, reporting an economic growth as a result of better growth in exports and investments.
The inflation rate is forecasted at 2.6% on the year in 2013. Next year the inflation rate will continue to drop.
The central bank will conduct a monetary policy for maintaining the stability of the kuna against the euro. It expects that the country will enter in the excessive budget deficit procedure as part of the EU Stability and Growth Pact, which on the other hand will require strong fiscal consolidation in the coming years.
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