Country Forecast Croatia Updater
The Economist Intelligence Unit, May 2013, Pages: 17
A coalition led by the Social Democratic Party (SDP) has been in power since December 2011. The government's commitment to fiscal consolidation, which has included spending cuts, tax increases and public-sector rationalisation, is wavering. In view of this, coupled with rising public debt, The Economist Intelligence Unit forecasts that the budget deficit will stagnate at 3.5% of GDP in 2013. EU membership will remain the main policy anchor, with entry scheduled for July 2013. The euro zone recession is expected to have a negative impact on Croatian growth in 2013; we forecast a further real GDP contraction of 0.3% this year. The current account is estimated to have recorded a small surplus in 2012, but is forecast to return to small annual deficits averaging 1.5% of GDP in 2014-17.
Public discontent with the government is growing, and we foresee increased conflict between the government and public-sector trade unions. However, we do not expect social unrest to unseat the government, especially as EU accession in mid-2013 will provide a temporary political boost.
The threat of public-sector strikes, increased public dissatisfaction with slow growth and budget austerity will make it difficult for the government to meet its budget deficit target, even though it has decided to raise this by 0.3 percentage points, to 3.8% of GDP. We forecast a budget deficit equivalent to 3.5% of GDP for 2013, although the overrun may turn out to be larger, given the possibility of an even sharper recession than we currently forecast and some major expenditure.
Country Forecast Croatia Updater
Croatia at a glance: 2013-17
OVERVIEW
Key changes from last month
Political outlook
Economic policy outlook
Economic forecast
Country forecast overview: Highlights
Country forecast overview: Key indicators
Country forecast overview: Business environment rankings
Country forecast overview: Croatia's business environment at a glance
Policy towards private enterprise and competition
Policy towards foreign investment
Foreign trade and exchange controls
Taxes
Financing
The labour market
Infrastructure
Fact sheet
Outlook for 2013-17: Political stability
Outlook for 2013-17: Election watch
Outlook for 2013-17: International relations
Outlook for 2013-17: Policy trends
Outlook for 2013-17: Fiscal policy
Outlook for 2013-17: Monetary policy
Outlook for 2013-17: Economic growth
Outlook for 2013-17: Inflation
Outlook for 2013-17: Exchange rates
Outlook for 2013-17: External sector
Data summary: Global outlook
Data summary: Gross domestic product, current market prices
Data summary: Gross domestic product, at constant prices
Data summary: Gross domestic product by sector of origin
Data summary: Growth and productivity
Data summary: Economic structure, income and market size
Data summary: Fiscal indicators
Data summary: Monetary indicators
Data summary: Employment, wages and prices
Data summary: Current account and terms of trade
Data summary: Foreign direct investment
Data summary: External debt
Data sources and definitions
Global data
Domestic data
Abbreviations
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