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Unicredit lifts Croatia’s 2024 GDP growth forecast, cuts 2025 projection

Jul 10, 2024, 2:28:03 PMArticle by Annie Tsoneva
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July 10 (SeeNews) - Italy's UniCredit Group said on Wednesday it has improved its economic growth forecast for Croatia for this year and has slightly reduced its projection for the next year due to the higher base in 2024.

Unicredit lifts Croatia’s 2024 GDP growth forecast, cuts 2025 projection
Hrvoje Dolenec, the chief economist at Zagrebacka banka. Source: Zagrebacka Banka

"We have raised our 2024 GDP growth forecast from 2.5% to 3.2% due to a stronger investment contribution early in the year, stimulated strongly by public infrastructure capital spending ahead of the 2024 elections," Hrvoje Dolenec, the chief economist of UniCredit’s Croatian arm Zagrebacka Banka, said in UniCredit's macro research CEE Quarterly. Croatia held parliamentary and EU elections in April and June, respectively.

Investment is likely to decelerate or even decline in the second half of 2024 as result of base effect from the second half of 2023, but then accelerate again in 2025, according to the lender.

"However, we are lowering our growth forecast for 2025 to 3.3% from 3.5%, primarily based on expectations of stronger growth in 2024," he added.

UniCredit sees Croatia’s GDP growth next year continuing to be driven by domestic demand, with a smaller drag from net exports as growth in the country’s main trading partners improves.

"Within domestic demand we expect a smaller contribution from personal and public consumption and a greater contribution from investment," the report added. Investment should increase its contribution as the implementation of projects funded by European Union funds gather pace.

Last year, Croatia’s economy expanded by 3.1%.

The bank sees inflation in the Adriatic country falling below 3% in the second half of 2024 and moving in the 2.5-3.0% range in 2025. However, a double-digit wage growth, which recently accelerated again due to the hikes in public sector wages, and tourism demand pose upside risks to that forecast.

"We still presume the strong influence of decelerating inflation in the eurozone will outweigh these impacts, assuming no new external supply shocks enter the equation," Dolenec explained.

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