Croatia’s economy to grow by 5.4% in 2021, IMF says

Croatia’s economy to grow by 5.4% in 2021, IMF says
By bne IntelliNews September 13, 2021

Croatia’s economy is expected to post robust growth in 2021 and 2022 mainly thanks to the recovery of the services sector, the International Monetary Fund (IMF) said in a statement following the completion of an Article IV consultation with the country.

GDP is seen expanding by 5.4% this year and by 5.8% in 2022, assuming that the tourist arrivals this year will be equal to two-thirds of the pre-coronavirus (COVID-19) pandemic level and will fully recover next year.

Investment, which will be bolstered by significant EU grants over the medium-term, will also support economic growth. Over the medium term, economic growth is expected to ease to around 3%.

The IMF called on Croatia to accelerate implementation of structural reforms and to boost its capacity to absorb EU structural funds, in particular in the area of public investment management.

“Such reforms are essential to make progress toward the goal of closing the income gap to the EU average and to achieve the desired decarbonisation, digitalisation and diversification of the economy,” the IMF noted.

Inflation is projected to pick up and stay at 2% through 2023, in line with the European Central Bank (ECB) inflation target.

The IMF noted that coronavirus mutations in the near-term could result in significant economic scarring. At the same time, medium-term growth would be much lower if the pace of recovery in EU trading partners is lower than expected, or if the country does not absorb EU funds effectively.