EXECUTIVE SUMMARY

This report reviews key macroeconomic data and microeconomic developments for Croatia published between May 2 and May 31, 2016.
The European Commission cut its 2016 GDP growth forecast for Croatia to 1.8% in its latest Spring 2016 Economic Forecast from 2.1% in the Winter 2016 Economic Forecast, while it kept its 2017 GDP growth forecast constant at 2.1%.
The International Monetary Fund warned that domestic political conditions in Croatia remain challenging with possible adverse implications for reform implementation and the economic policy-making environment.
The report also provides details on EBRD’s latest growth forecasts for Croatia, and the European Commission’s warnings on budget deficit targets. It mentions latest developments in structural reforms. The report also reveals the latest investments in tourism sector, and the details on public borrowing.

Key Points:

• GDP growth in Croatia accelerated to 2.7% y/y in Q1 from 1.9% y/y in the last quarter of 2015.

• Croatia's consumer prices fell 1.8% y/y in April, deepening from a 1.7% annual decline the previous month.

• Croatia's working-day adjusted retail sales rose by a real 3.5% y/y in March, accelerating from an annual increase of 1.4% in the previous month.
• House prices in Croatia rose by 0.11% q/q on average in the last quarter of 2015, but declined by 2.13% y/y compared to Q4/2014.