Economic activity in the second half of 2012 stagnated at a low level after a sharp decline at the end of 2011 and the beginning of 2012, analysts from HNB emphasize in the December Bulletin.
-Economic developments in 2013 will be influenced by a gradual improvement in the international environment. In 2013, a gradual recovery is expected driven by the growth of investments, primarily in the public sector, and exports, so the annual GDP growth could reach
0.3 percent, despite prevailing negative risks. During 2013, a continuation of unfavorable trends in the labor market is expected, the central bank warns.
Furthermore, they point out that consumer price inflation was significantly higher in 2012 due to short-term factors (increase in VAT, drought, and administrative decisions related to energy price increases), so a slowdown is forecasted for 2013. The risks of achieving inflation are symmetrical but more widely dispersed.
The deficit on the current account continued to decrease in 2012, so for the entire year it could amount to 0.4 percent of GDP, analysts predict.
-The trend of contraction of the deficit could continue in 2013. The inflow of capital could increase based on significant state borrowing abroad, in conditions of reduced risk premium in international markets.- states the Bulletin.
They emphasize that financing conditions for domestic sectors remain unfavorable, and overall financing of the private sector has slowed down. Monetary policy will continue to maintain high kuna liquidity in the banking sector and relative stability of the kuna exchange rate.
-In 2012, a reduction in the overall fiscal deficit is expected due to increased revenues,
but when looking at the state budget, further fiscal consolidation has been abandoned in 2013.
It is necessary to implement structural reforms and measures to increase the rate of sustainable growth.- warned HNB.
