"We project real growth at 3.4% in 2024 and 2.9% in 2025, supported by buoyant domestic demand even as tourism growth is expected to recede from its strong performance in recent years," the global lender said on Friday in its staff concluding statement of the 2024 article IV consultation mission.
Its previous forecasts, announced in the April edition of its World Economic Outlook report, were for 3.0% growth this year and 2.7% growth next year.
"Following an exceptionally strong post-pandemic recovery during 2021-22 and with tighter monetary policy, Croatia’s growth moderated to 3.1% in 2023, still among the highest in the euro area," IMF said on Friday.
"Disinflation is expected to continue albeit gradually, with inflation averaging about 4.2% in 2024 and approaching the European Central Bank’s target of 2% only in late 2025," IMF said adding that services inflation would be sticky, reflecting strong wage increases and tourism demand.
"Over the medium term, we project growth to approach its potential of 2.5%, as productivity enhancing investment under the national recovery and resilience plan (NRRP) mitigates the drag from demographic headwinds," according to the IMF.
Croatia held a general election in April, reelecting for a third time the prime minister Andrej Plenkovic of the conservative HDZ party.
The IMF praised Croatia's government for its strong implementation of the NRRP and its potential to improve living standards over the next four years. The IMF recommended policies that focus on maintaining fiscal responsibility, implementing reforms to prepare for future challenges, ensuring financial stability, and making structural changes to support growth and environmental goals.