May 3 (SeeNews) - The European Commission said on Wednesday it maintains its outlook on Croatia's economic growth this year at 2.8%, to be driven by private consumption.
"A pickup in investment is set to support the pace of growth, while private consumption remains robust," the European Commission said in its Spring 2018 European Economic Forecast publication.
The Commission also affirmed its 2019 growth forecast for Croatia at 2.7%. It, however, said that despite growth moderating over the forecast horizon, Croatia's economy remains on track to reaching its pre-crisis volume of output in 2019.
The EU executive body explained that continued wage and employment growth and increasing remittances from Croatians working abroad will boost private consumption, which will drive growth over the next two years.
EU-funded capital spending should also rise this year and next, particularly in the public sector. Despite ongoing deleveraging, credit flows to the corporate sector are slowly picking up as financing conditions improve.
Overall, the Commission noted, investment is projected to contribute more strongly to growth than in recent years.
Goods exports are projected to progressively slow this year and next, despite solid external demand and further, albeit more modest, market share, while tourism is projected to continue posting strong figures.
The negative balance of primary income is also set to deteriorate mostly on account of higher profits in the banking sector, the Commission said. The current account surplus is thus projected to drop below 3% of GDP in 2018, and to decrease further in 2019.
Forecast risks arise from results of the ailing Agrokor creditors’ settlement agreement, which is still pending, the Commission said.
"A successful outcome could increase production and investment in the group and its suppliers, while a failure to agree a final settlement could result in financial and operational disruptions."
The Commission also said that it sees Croatia's inflation at 1.4% in 2018, while a slight increase is expected next year.
Croatia ended 2017 with lower-than-expected real GDP growth of 2.8%.
In its Autumn 2017 economic forecast published in November the Commission said that backed by positive trends, Croatia's real GDP is expected to grow by 2.8% in 2018 and 2.7% in 2019.