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ZAGREB (Croatia), April 21 (SeeNews) - The Croatian unit of Addiko Bank, former Hypo Alpe Adria Bank, has maintained its forecast for Croatia's 2017 gross domestic product (GDP) growth at 3.5%, despite the threats posed by the financial problems at its food and retail concern Agrokor, local media reported on Friday.
Addiko noted that exports will remain the backbone of Croatia's economic recovery, aided by strong domestic demand, a record tourist season and EU funding, news agency Hina reported, citing an Addiko report.
"Given the negative fallout from financial issues at systemically important food-to-retail group Agrokor - whose sales account for 15% of the GDP - the concern's yet-to-be-seen restructuring needs, its rehabilitation and the potential downsizing of a number of firms, around 2,000, with strong commercial ties with Agrokor, we see downside risks to growth, which are too early to quantify," Addiko said.
The lender, however, noted that expectations for another record tourist season and good exports, stronger EU funding and robust FDI flow, could level potential disappointments related to Agrokor.
Addiko slightly lowered its estimate for Croatia's consumer price growth to 1.4% but noted that it may rise following another record tourist season.
The lender also said it sees Croatia's headline deficit at around 2% of GDP on the back of broad-based tax cuts, public wage hikes, stronger EU co-sponsored investment spending, higher spending on defense, growing healthcare arrears and lower CIT due to banking NPL write-offs.
Public debt is forecast to drop further to 82.5% of GDP, from 84.2% at the end of 2016.