January 24 (SeeNews) - French credit insurance agency Coface said it forecasts Croatia's GDP growth rate will drop to 2.8% in 2018 from 3.1% last year.
Croatia's economy is expected to post a third boom year in 2018, buoyed by domestic and foreign demand, Coface said in its Country and Sector Risks 2018 report published on Tuesday.
The credit insurance agency estimated that even though the effects of tax cuts in 2017 are expected to fade, household consumption will benefit from firm employment and wage trends.
Public investment, especially in energy and transport, will benefit from improved absorption of European funds, while private investment will rise somewhat due to high corporate debt levels (80% of GDP), despite the resumption in credit and growing tourism requirements, Coface said.
Croatia's tourism sector, which generated 25% of the GDP, will also continue to benefit from the disaffection with several Mediterranean countries.
Coface said that resolving the failure of Croatia's concern Agrokor is not expected to have a significant impact, unless it unfolds in a disorganised and unsystematic way, in which case local suppliers and their employees could be affected.
Coface also predicts that Croatia's inflation will accelerate to 1.6% in 2018, from 1.3% last year, while the country's budget balance is expected to remain at a negative 0.9%. Public debt is expected to drop to 78% of the GDP from 80% last year.
In its report on Croatia, Coface also pointed to what it perceives to be the country's strengths. These include tourist attractiveness and a long coastline, oil and gas potential, high-quality infrastructure and the fact the kuna currency is pegged to the euro.
As Croatia's weaknesses Coface noted the country's high public and private debt, lack of efficiency in administration and justice, weak industrial development and the Agrokor case, poor absorption of EU funds and a low female employment rate.