Croatia’s economy is expected to show robust growth in 2021 and 2022, largely thanks to the recovery in the service sector, the International Monetary Fund (IMF) said in a statement following an Article IV consultation with the country.
GDP will grow 5.4% this year and 5.8% in 2022, with tourist arrivals expected this year to be two-thirds of the levels of the pre-coronavirus (COVID-19) pandemic and themselves will recover fully in the next year.
Investments supported in the medium term by substantial EU grants will also support economic growth. In the medium term, economic growth is expected to weaken to around 3%.
The IMF urged Croatia to accelerate the implementation of structural reforms and increase its capacity to absorb EU structural funds, particularly in the area of public investment management.
“Such reforms are essential in order to move closer to the goal of closing the income gap to the EU average and to achieve the desired decarbonisation, digitization and diversification of the economy,” stated the IMF.
Inflation is expected to pick up and stay at 2% through 2023, in line with the European Central Bank’s (ECB) inflation target.
The IMF noted that coronavirus mutations could lead to significant economic scars in the short term. At the same time, medium-term growth would be significantly slower if the pace of recovery among EU trading partners were slower than expected or if the country did not absorb EU funds effectively.