June 12 (SeeNews) - Erste Group said on Tuesday it is keeping its forecast for Croatia's economic growth in 2018 at 2.8%, despite risks being somewhat tilted to the downside.
Growth is expected to be boosted by steady private consumption, amid disposable income gains (employment and wages) and a supportive credit and sentiment trajectory, the banking group said in its latest macroeconomic outlook on Croatia.
The lender noted that it expects some acceleration on the investment side, as the tourism outlook remains supportive to investments. Erste is also hopeful that the uncertainty related to the crisis in the country's ailing Agrokor concern will diminish and EU funds will become more propulsive.
The exports outlook in the coming quarters should be supported by a sound tourism outlook, while imports should remain under pressure due to the domestic demand profile.
In terms of Croatia's monetary policy, Erste said it continues to see 2018 average inflation in the region of around 1.5%, while it predicts growth up to 2.0% next year.
Erste noted that the process of Agrokor restructuring has taken its toll on croatia, elevating political tensions and increasing the risk of early elections.
"The fragile political setup is likely to continue to impede the reform agenda, suggesting that Croatia is likely to maintain its laggard status vs. CEE peers when it comes to potential growth rate and convergence process dynamics," Erste warned.
The lender, however, predicts Croatia's growth will only slightly slow to 2.7% next year.
Croatia saw economic expansion of 2.5% in the first quarter of 2018, slightly beating expectations.