July 12 (SeeNews) - The European Commission said on Thursday it has revised down its forecast for Croatia's economic growth this year to 2.6% from 2.8% projected in May, due to the lower than expected goods export growth.
"Private consumption is expected to remain the main driver of growth throughout the forecast period, supported by rising household disposable incomes and low inflation," the European Commission said in its Summer 2018 European Economic Forecast publication.
The sudden slowdown of goods exports in early 2018 is in line with the weakening observed in the manufacturing sector and its impact should be partially offset by a slowdown in import growth, the EC said.
The Commission also reduced slightly its 2019 growth forecast for Croatia to 2.6% from 2.7%.
The EU executive body explained that labour market conditions continue to improve, as wages are projected to continue rising, as worker shortages become more apparent in the tourism and construction sectors. "The employment rate should continue declining mainly thanks to rising employment, as outbound migration flows slow down."
The settlement plan adopted by creditors on the debt restructuring of the country’s largest employer, Agrokor, has reduced the downward risks to the forecast scenario, but the successful implementation of the agreement remains crucial for the operational and financial stability of the company.
Strong consumer spending and rising wages are expected to eventually drive consumer price inflation up to 1.6% in 2018 and 1.8% in 2019, the EC said.
Croatia ended 2017 with lower-than-expected real GDP growth of 2.8%.
In its Spring 2018 economic forecast published in May the Commission said it maintains its outlook on Croatia's economic growth this year at 2.8%, to be driven by private consumption.