Lower economic growth in 2018

Published: 20/12/2017

We anticipate that real GDP in 2017 might stand at 3.1%, while the estimate of the growth rate in 2018 is lower, 2.9%, Boris Vujčić said at the CNB management's meeting with media representatives on 20 December 2017. The mild slowdown in economic activity is the result of lower investments, and the deceleration of growth in total exports and personal consumption is also expected. The absence of strong investments is viewed as the largest risk, the Governor added, while further growth of GDP is not possible without structural reforms that would improve the investment climate in Croatia.

Inflation in 2017 will be at the level of 1.2%, and is expected to increase to 1.6% in 2018. The prices of energy and food, which account for a considerable share in the HICP basket, have made the largest contribution to the level of inflation. In 2017, the surplus in the current and capital account was observed, and the surplus is also anticipated in 2018. A better use of EU funds is one of the components of the surplus in the current and capital account, but this increase is still smaller than in comparable countries after the accession to the EU.

The CNB pursued an expansionary monetary policy in 2017, and it will continue pursuing such a policy in 2018, Governor Vujčić said and noted that, the central bank had placed kuna funds at an interest rate of 1.2% for a period of 5 years through a structural repo operation.

The survey on global value chains, which refer to different stages of the production process across different countries, has shown that Croatian partners, in addition to the traditional ones such as Germany, Italy, Slovenia and Austria, also include China and the US.

The second Survey on the access to finance of SMEs, carried out by the CNB, showed that access to finance was the smallest obstacle to doing business by surveyed SMEs. According to the findings of the Survey, complex and inconsistent regulatory environment, subject to frequent changes, was singled out as the greatest obstacle to doing business. The availability of experts or good quality labour force was raised as another obstacle, which points to problems in the labour market and education system. The Governor mentioned the possibility of introducing guarantee schemes for lending to SMEs.

In the third quarter of 2017, the profits of banks decreased by 50% from 2016, resulting from provisions related to the Agrokor Group. However, the Governor emphasised that it will not affect the stability of the financial system.