November 5 (SeeNews) - The European Commission said on Thursday it expects Croatia's gross domestic product (GDP) to contract by 9.6% in 2020, revising its July projection for 10.8% annual drop.
"Croatia’s economy is expected to contract sharply in 2020 due to the impact of the COVID-19 pandemic. Output should partially recover in 2021, thanks to private consumption and investment, but is not expected to reach its pre-crisis level by 2022," the Commission said in its Autumn 2020 Economic Forecast report.
In 2021, the Croatian economy is expected to grow 5.7% and by 3.7% in 2022.
According to the report, the Adriatic country's domestic demand should be the carrier of recovery.
"Household consumption is expected to have begun recovering in the second half of 2020, supported by low inflation, and accumulated involuntary savings due to deferred spending," it said.
The EC said that exports of goods are expected to grow in line with Croatia's main trading partners' recovery. However, the country's service sectors such as tourism should remain under pressure due to further travel restrictions.
Tourism contributes around a fifth of Croatia's GDP.
The EC said that the next two years (2021-2022), it expects tax revenue to recover strongly on account of household consumption, employment and wages.
"The take-up of EU funds should boost revenues in 2021 before moderating in 2022. Expenditure growth should subside in 2021, after a strong 2020, and pick up in 2022," the Commission also said.
The average HICP inflation in the Adriatic country is seen at 0.1% this year and 1.5% in 2022.