January 16 (SeeNews) -
Croatia's economy is expected to expand by 1.5% in 2023, Italian banking group UniCredit said, scaling down its prediction for 2.7% growth made in September.
“Declining household income, private investment sentiment and external demand have dampened our outlook for 2023,” UniCredit said in a quarterly macroeconomic report on Central and Eastern Europe released last week.
However, the expected absorption of generous European Union allocations should support investment that is mostly linked to publicly driven projects and keep growth in the 1-2% range, even in such challenging environment, according to the bank.
Acceleration of economic growth to 2.6% is projected for 2024, the banking group added.
Croatia’s adoption of the euro and joining the Schengen Area as of January 1, 2023 should help lift overall sentiment and economic growth recovery from the second quarter of 2023 and into 2024. If spent and absorbed in line with contracted and planned amounts, 2023 should see record highs in Croatia’s absorption of EU funds, potentially reaching 5-6% of GDP, Unicredit said.
The bank's inflation outlook for Croatia has not changed since its previous review. With inflation in a range of 12-13% during late 2022 and early 2023, it expect the rise in prices to decelerate below 4% by the end of 2023, thereby following the path of inflation for the eurozone and the base effect of higher inflation during the second half of 2022. In 2024, UniCredit expects inflation in Croatia to remain above 3%.