EBRD: Decline of Croatian GDP by 1.9 Percent

European transition economies are expected to face another challenging year before a real recovery occurs, economists at the EBRD state in their latest report, in which the estimate of the decline of Croatia’s economy this year has been increased from 1.2 to 1.9 percent.

According to the Regional Economic Forecasts published this morning, the regular quarterly report of the EBRD, growth in the region of European transition economies is expected to be 2.7 percent this year, significantly lower than last year’s 4.6 percent, while in 2013, growth is expected to accelerate to 3.2 percent. These EBRD estimates are the same as in the July report.

The eurozone crisis continues to negatively affect the economies in the region where the EBRD operates. However, thanks to the recent easing of monetary policy and other measures by the European Central Bank to stimulate the economy and curb the debt crisis, as well as new steps by the eurozone to address banking issues and the banking union, the risks to growth have somewhat diminished, according to EBRD economists.

The economies in the region where the EBRD operates performed worse in the first half of this year than in the second half of last year, with growth in Central Europe, the Baltic States, and Southeast Europe noticeably slowing down. As a result, EBRD economists have lowered estimates for Slovenia, Hungary, Serbia, and Croatia, which remain in recession.

According to the latest estimates, Croatia’s economy is expected to decline by 1.9 percent this year, while a decline of 1.2 percent was expected in the report three months ago. In 2013, the EBRD expects Croatia’s gross domestic product to grow by 1.2 percent, while three months ago it was estimated that growth would be 1.5 percent.

– In Croatia, the economic situation remains very difficult. GDP fell by 1.3 percent in the first quarter and by 2.2 percent in the second quarter on a year-on-year basis, which is a result of falling foreign demand and weak domestic demand. Therefore, total growth in 2012 will almost certainly be negative, which also maintains the lack of competitiveness of the economy. Croatia will join the European Union on July 1, 2013, which should contribute to reviving confidence and investments, EBRD economists state in the new report.

They also estimate that the Slovenian economy will decline by 2.5 percent this year and by a further 2 percent next year. Hungary’s economy could decline by 1.5 percent this year, while the decline is expected to be halted next year. In Serbia, a GDP decline of 0.7 percent is expected this year, while growth of 1.1 percent is anticipated next year.