July 20 (SeeNews) - Croatia's economic recovery which started in 2015 has continued in the first half of 2016, pushed by domestic demand with indications that this year's growth may exceed the current forecast of 1.5%, the local unit of Raiffeisen Bank International said on Wednesday.
Personal consumption has found footing in the continued price decline, stabilisation in the labour market and healthy tourism indicators, RBA commented.
It however warned that the positive effects of goods and services exports was diminished by the growth of imports, thus calling for the strengthening of competitiveness in order to reduce the relatively high dependence of imports.
RBA noted that positive trends have remained overshadowed by political bickering which has ended in snap parliamentary elections being scheduled for September. It, however, believes that Croatia is unlikely to see a clear cut winner for the second time in the past 12 months.
In general elections last year, the HDZ-led Patriotic Coalition garnered 59 MP seats, while the Croatia is Growing alliance, led by SDP, secured 56 seats. MOST, a relative newcomer to the political scene, got 19 MPs and formed a government with the Patriotic Coalition, appointing businessman Tihomir Oreskovic as prime minister.
The lender also predicted that despite the political upheaval's negative effects on the financial market, Croatia will continue to enjoy the continuation of ECB's "unconventional monetary policy measures", which are likely to be extended due to the UK's decision to leave the EU.
In terms of Croatia's postponement of a euro bond issue mid this year, RBA commented that it was successfully substituted by domestic borrowing and that a similar trend may be expected in the corporate sector as bank's crave for foreign sources of funds.
The lender predicts that Croatia will go ahead with the international issue, but sometime at the beginning of next year, which will be facilitated by a stable political situation, good macroeconomic fundamentals as well as a favourable situation in foreign markets.
Croatia's GDP growth quickened to 2.7% in the first quarter from 1.9% in the preceding quarter.
The Croatian National Bank, HNB, said earlier this months that it expects country's economic growth to reach 2.3% this year.