Croatia’s GDP to shrink by 9.4% in 2020, and rebound by 6.1% in 2021, says govt

ZAGREB, April 30 (Hina) – The government forecasts that this year Gross Domestic Product (GDP) will fall by 9.4% while in 2021, recovery is expected at a rate of 6.1%.

The government session on Thursday discussed the 2020 National Reform Programme and Croatia’s Convergence Programme for 2020 and 2021.

The convergence programme projects the contraction of the national economy by 9.4% in 2020 while in 2021 the government expects a recovery and growth rate of 6.1%.

Opening the cabinet meeting on Thursday, Prime Minister Andrej Plenkovic said that with reference to economic policies the National Reform Programme rests on three existing objectives that the government had set at the outset of its term.

That is sustainable growth and development, connecting education with the labour market and the sustainability of public finances.

Under a baseline scenario, the main adverse impact on the domestic, and the global economy will be of a short-term nature.

It is expected that the general government budget will record a deficit of 6.8% of GDP or HRK 24.8 billion in 2020 while in 2021 the general government budget deficit is expected to be reduced to 2.4% of GDP, he said.

The public debt to GDP ratio in 2020  is expected to grow by 13.5 percentage points compared to 2019 and will amount to 86.7% of GDP, mostly due to increased needs for borrowing as a consequence of the negative fiscal effects caused by the coronavirus pandemic.

In 2021, subsequent to reducing the general government budget deficit to 2.4% of GDP and strong economic growth it is expected that the public debt to GDP ratio will fall to 83.2% of GDP, which is a drop of 3.5 percentage points compared to 2020.

Consumer prices are expected to drop mildly in 2020 by 0.3% year on year.

The government is counting on job-keeping measures to buffer the shock on the unemployment rate and that the fall in the number of people employed will drop by 3.3% in all of 2020, and the average surveyed unemployment rate in 2020 will amount to 9.5% and 9% in 2021.

As far as fiscal trends are concerned, direct aid from the budget is estimated at HRK 14.9 billion which includes deferments on taxation and contributions, writing-off direct taxes and contributions, deferring profit tax for 2019, job-keeping incentives and the procurement of medical protective equipment in the fight against COVID-19.

An additional HRK 15 billion has been secured for favourable loans for entrepreneurs under schemes provided by the development bank HBOR and the HAMAG BICRO agency, as well as HRK 17 billion for a moratorium on loans.

(€1 = HRK 7.552616)