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Croatia Output growth is expected to remain broadly resilient, picking up slightly from 2.5% in 2023 to 2.6% in 2024 and 2.7% in 2025. Rising public sector investment and resilient private consumption are projected to support demand, offsetting subdued exports. Inflation, which remains high, will decline gradually as labour inputs and excess capacity will remain relatively scarce. Tighter euro area monetary policy is tempering lending growth and raising interest rates. A small government budget deficit is expected in 2023 but plans for tax cuts and higher spending on investment, wages and pensions are expected to contribute to a wider deficit in 2024. Rising revenues are projected to enable a modest improvement in the budget balance in 2025. Public debt is expected to fall below 60% of GDP by 2025. Ending poorly-targeted price caps and energy and home loan subsidies would help growth to remain sustainable, improve the economy’s efficiency and build fiscal buffers for future shocks. Robust services exports and rising real incomes are buttressing growth Output growth has been buoyed this year by recovering consumer spending, as rising wages and employment lifted households’ incomes. Robust tourism activity, boosted in part by integration into the euro and Schengen areas, has supported demand in employment-intensive services, helping to reduce the unemployment rate. This has offset weaker industrial production and goods exports, which have been affected by higher energy and other input costs and softer external demand, as well as slowing construction activity. After strong house price rises in 2022 and the first half of 2023, housing demand has moderated with higher borrowing costs and the expiry of a government home-loan subsidy.
Croatia
1. The fiscal balance corrected for the business cycle measures the government’s fiscal stance once cyclical variation in revenues and spending are taken into account. Source: OECD Economic Outlook 114 database; and Eurostat. StatLink 2 https://stat.link/tc3dg1
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 2: PRELIMINARY VERSION © OECD 2023