February 1 (SeeNews) - Croatia's economic growth, which exceeded even the most optimistic projections in 2016, is expected to continue this year backed by domestic demand and investments, the local unit of Raiffeisen Bank International said on Wednesday.
In 2016, Croatia finally caught up with the recovery dynamics of its CEE peers, with an estimated growth of 2.7%. These positive developments are expected to continue in 2017, RBA commented in a monthly research report.
This year, Croatia should achieve GDP growth of 2.8%, Raiffeisenbank Austria d.d. Zagreb (RBA) said.
The elements leading up to economic development should be positively influenced by the country's new tax reform and a strong tourist season, it explained.
"According to our expectations, tourism will continue to generate investments", RBA noted. It added that improved utilisation of EU funds will also contribute to growth in investments, both private and public.
Personal consumption is expected to be strong in 2017, propelled by the relatively high growth of real salaries in a subdued inflation.
RBA also noted that opportunities for growth "come the higher impact of the tax reform on consumer spending and possible noticeable improvement of the business climate, which would together with the alleviation of the taxation burden from corporates encourage entrepreneurs to invest and hire workers" in 2017.
A possibility that the recovery of Croatia's main trading partners will slow down can threaten to growth. Great exposure to tourism also exists. "The materialisation of these risks would directly lead to a decline in the export of services, personal consumption and much lower budget revenues", RBA said.
The lender predicts Croatia's GDP growth will remain at 2.8% in 2018.