Croatia's 2009 Economic Growth To Slow to 2.5% from 3.8% Forecast for 2008 - PBZ Bank

"This year we expect a further slowdown of economic growth to an annual rate of some 3.8%, we forecast continuation of the slowdown and a growth rate in the range from 2.0% to 3.0% for 2009, (…) where risks of lower growth are higher," the bank said in a statement. Last year Croatia's economy expanded by 5.6%.

The main risks for the forecast are primarily related to stronger-than-estimated slowdown of the economy of the European Union, Croatia's most important trade partner, PBZ added.

PBZ, a unit of Italian banking group Intesa Sanpaolo, sees Croatia's average inflation at 6.5% to 7.0% this year and at around 4.5% next year.

Croatia's current account deficit is expected to reach a ten-year peak of 9.9% of GDP this year, with a risk to exceed 10%, PBZ said. For next year it expects the same current account gap, 9.9% of GDP or a lower one in case of additional economic slowdown.

PBZ forecast the foreign debt-to-GDP ratio of the EU hopeful at 88.5% of GDP this year and 88.6% next year. Croatia, which started accession talks with the European Union in 2005 and hopes to join the bloc around 2011, ended last year with a foreign debt-to-GDP ratio of 88.6%.