November 6 (SeeNews) - The European Bank for Reconstruction and Development (EBRD) said on Wednesday it is lifting its 2019 economic growth forecast for Croatia to 3.0% from 2.5% expected in May.
"GDP growth of 3.0 per cent is expected in 2019, followed by a light moderation to 2.5 per cent in 2020, broadly in line with the country’s current growth potential, as supply-side constraints for the tourism sector become more apparent," the EBRD said in its latest Regional Economic Prospects report, keeping unchanged its 2020 growth forecast.
Private consumption will remain a key growth driver, supported by positive labour market developments and low inflation, the bank said, adding that risks to the projection might come from a possible weaker demand from Croatia’s main economic partners, such as the eurozone countries.
The EBRD also noted that Croatia's commitment to joining the European Exchange Rate Mechanism II (ERM II), as part of its euro adoption strategy, should act as an anchor for prudent fiscal policy in the coming years.
The Croatian authorities sent in July a letter of intent to join the ERM II, the first formal step towards adopting the euro. The government hopes that Croatia will join the ERM II in about a year, while the whole process of joining the euro area is expected to take at least four years to complete, including the two-year mandatory stay in ERM II.
The Croatian economy advanced by 3.1% in the first half of the current year, faster than the 2.6% expansion recorded in full 2018.
GDP growth in the EBRD's region of Central Europe and the Baltic States is seen decelerating from 3.7% in 2019 to 3.2% in 2020, but remaining above the forecast average growth of all EBRD regions, of 2.4% and 2.9% in 2019 and 2020, respectively.
The Central Europe and the Baltic States region in the EBRD's report comprises Croatia, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia.
Economic growth in EBRD's region of Southeast Europe, which comprises Bulgaria, Cyprus, Greece, Romania, Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia, is seen slowing down from 3.3% in 2019 to 3.0% in 2020.