Croatian c-bank sees GDP growth slowing to 2.8% in 2020

"The growth weakening compared to the 2019 estimate reflects the expected slower growth of total exports," the central bank, HNB, said in a statement on Monday.

Domestic demand is expected to continue its stable growth with the focus shifting further to personal consumption. Employment should continue growing, while the unemployment rate will drop.

Inflation could speed up to 1.4% in 2020 due to higher food prices and excise duties, from 0.8% expected this year, HNB said.

As far as the fiscal policy is concerned, this year's general government budget could swing to a small deficit, before returning to a moderate surplus in 2020 again. Government debt is expected to continue falling in line with the adopted fiscal rules.

"In such macroeconomic conditions, HNB intends to continue with the implementation of its expansionary monetary policy, supporting the high liquidity of the monetary system, along with maintaining the kuna exchange rate versus the euro stable," the central bank said.

This high liquidity should continue improving the financing terms of the domestic economy, HNB concluded.

The Croatian economy expanded by a surprising 3.9% year-on-year in the first quarter of 2019 and cooled down to a 2.4% annual increase in the second quarter, before registering an annual expansion of 2.9% in the third quarter, according to official data released earlier.

In their latest estimates, the World Bank, the International Monetary Fund, the European Bank for Reconstruction and Development and the European Commission expect Croatia's economy to grow by 2.9% - 3.0% this year and predict a slowdown to 2.5% - 2.7% in 2020.