November 7 (SeeNews) - The European Bank for Reconstruction and Development (EBRD) affirmed on Tuesday its forecast of Croatia's 2017 economic growth at 2.9%, on the back of solid domestic demand.
"The consumption recovery is supported by tax cuts, falling unemployment and record-breaking tourism revenues, while investments are underpinned by favourable financial conditions and lower corporate tax," the EBRD said in its latest Regional Economic Prospects report.
The lender also affirmed Croatia's 2018 growth forecast at 2.6%. It explained that the projected lower growth rate compared to 2017 reflects a slow-down in consumption growth due to the fading out of the effects of the tax reform and lower probability of another year of record tourism revenue.
The EBRD warned that the outlook may be negatively affected by the potential for spill-overs from the financial troubles of ailing concern Agrokor on its subsidiaries and suppliers.
Additionally, it noted, Croatia's medium-term growth prospects remain weak due to long-standing structural weaknesses, including high corporate over-indebtedness, still weak business environment reforms, and slow EU fund absorption – all of which need to be addressed consistently.
In 2016, Croatia's economic growth accelerated to a revised 3.0%, from 2.3% expansion in 2015.