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World Bank raises Croatia's 2019 GDP growth forecast to 2.9%

Author Iskra Pavlova
World Bank raises Croatia's 2019 GDP growth forecast to 2.9% Photo: Croatian government

ZAGREB (Croatia), October 9 (SeeNews) - The World Bank said on Wednesday it has lifted its 2019 economic growth forecast for Croatia to 2.9% from the previously anticipated 2.5%, on the back of stronger domestic demand.

"Household consumption will make the largest contribution to overall GDP growth, reflecting further growth in employment and wages but also rising household borrowing," the World Bank said in a Migration and Brain Drain report focused on the countries in Europe and Central Asia.

It added that investment activity both in the public and private sector, partly reflecting greater EU funds absorption, will also contribute significantly to the overall growth.

In addition, the World Bank has also revised up its estimate for Croatia's gross domestic product (GDP) growth for next year to 2.6% from the previous 2.5%. The bank's made its previous forecasts in June 2019.

"In the remaining forecast horizon [beyond 2019], growth is set to moderate on the back of weakening external outlook and structural supply-side rigidities. Public finances are expected to remain sound, despite further tax reductions. The poverty rate is set to decline, albeit at a moderate rate, through 2021," the World Bank said.

According to the new estimate, the Croatian economic growth is anticipated to further lose steam to 2.4% in 2021, unchanged from the June forecast.

The general government budget is seen remaining close to balance in the forecast period, posting a 0.2%-of-GDP surplus in 2019, a deficit of the same size in 2020 and ending in balance in 2021.

Public debt could further decline to 64.6% of GDP by end-2021 from the anticipated 67.5% of GDP at end-2020 and 70.4% of GDP at the end of this year.