July 7 (SeeNews) - The European Commission said on Tuesday it has revised its forecast on Croatia's economic performance this year, now expecting a 10.8% drop in economic output, stronger than the 9.1% decline it predicted in May.
"Overall, real GDP is expected to contract sharply in 2020 (close to 11%) and to partially recover in 2021, leaving output below its pre-crisis level. Domestic demand is expected to be the main driver of both the drop in GDP in the first half of 2020 and its recovery thereafter," the Commission said in its Summer 2020 Economic Forecast report.
In 2021, the Croatian economy is expected to grow 7.5%, the Commission said, leaving unchanged its projection made in Spring 2020 Economic Forecast in May.
According to the June forecast, among the remaining EU member states only Italy and Spain will experience bigger contractions of economic output in 2020, with the Italian economy expected to shrink 11.2% and Spain's GDP to fall 10.9%.
In Croatia, private consumption is expected to recover quickly with the reopening of the economy, and thanks to the avoided large-scale layoffs, as a result of the government’s wage support measures.
Recovery in investment should also follow thanks to EU funds flowing to ongoing and new projects.
"Croatia’s sizeable tourism sector, accounting for the majority of services exports, is expected to remain depressed throughout 2020 and to only gradually recover in 2021, owing to remaining disruptions in international travel," the Commission said, adding that exports are expected to recover slowly amid the worsened global outlook and trade uncertainties.
Tourism contributes around a fifth of Croatia's GDP.
The average HICP inflation in the Adriatic country is seen at 0.4% this year and 1.4% in 2021.