IMF Nearly Doubles Growth Estimate for Croatian Economy

The International Monetary Fund has nearly doubled its growth estimate for the Croatian economy this year, which is expected to accelerate further next year, according to the regular spring estimates released on Tuesday.

The Croatian economy is projected to grow by 1.9 percent this year, according to the latest IMF estimates. In the regular autumn forecasts published last October, growth for 2016 was estimated at one percent. The IMF has also doubled its estimate of last year’s growth of the Croatian economy to 1.6 percent, up from a previously projected 0.8 percent, the report shows. For next year, the international lender expects the Croatian economy to grow by 2.1 percent.

Estimates for the surplus in the balance of payments expressed as a share of GDP have also been significantly improved. According to the new estimates, the surplus in the balance of payments this year is expected to be 2.7 percent, compared to the 1.5 percent estimated last autumn. The estimate for last year’s surplus has been raised even more, to 4.4 percent, from the 1.7 percent estimated in the October regular forecasts. In 2017, the surplus in the current balance of payments is expected to slide to 2.1 percent, according to IMF estimates.

The inflation estimate for this year has been more than halved to 0.4 percent, down from the 1.1 percent estimated last autumn. In 2015, prices are projected to have fallen by 0.5 percent according to their new estimates, while the October forecasts estimated a decline of 0.4 percent. In 2017, inflation is expected to significantly accelerate compared to the estimate for the current year, reaching 1.3 percent.

The IMF has also raised its estimate for this year’s unemployment rate by 0.3 percentage points to 16.4 percent. In 2015, the unemployment rate was estimated at 16.9 percent, which is also 0.3 percentage points higher than projected in the October forecasts. For 2017, the IMF predicts an unemployment rate of 15.9 percent.

Romania with the Highest Estimated Growth in the Group

In the broader group of emerging European economies, which the IMF classifies Croatia, Romania is expected to record by far the strongest economic growth this year, at a rate of 4.2 percent. This is followed by Turkey with 3.8 percent and Poland with 3.6 percent. The Hungarian and Bulgarian economies are expected to grow by 2.3 percent each in 2016, while the lowest growth rate of 1.8 percent is projected for the Serbian economy.

This year’s estimate for the entire group of emerging and developing European economies has been raised by 0.4 percentage points compared to the estimate from January, now standing at 3.5 percent. This would mean a steady growth rate compared to 2015. Next year, the pace is expected to slightly weaken to 3.3 percent, which means the international lender has lowered its January estimate by 0.1 percentage points.

The IMF publishes detailed forecasts for all countries in the autumn and spring, as well as additional interim forecasts for the largest economies, country groups, and regions in the winter and summer.

The entire group of emerging and developing economies is expected to grow by 4.1 percent this year according to the latest IMF estimates, which is a reduction of 0.2 percentage points from the winter estimate. The estimate for 2017 has also been slightly lowered to 4.6 percent, down from the previously forecasted 4.7 percent.

In addition to European economies, the group also includes emerging and developing Asian economies, the Commonwealth of Independent States (CIS), Latin America and Caribbean countries, the Middle East, North Africa, Afghanistan and Pakistan, and Sub-Saharan Africa. Within the CIS, the Russian economy, after a 3.7 percent decline last year, is expected to record another decline in activity this year, by 1.8 percent. Then, in 2017, a recovery is expected, with a growth rate of 0.8 percent.

For the Chinese economy, the January estimates have been raised by 0.2 percentage points, so Chinese GDP is expected to grow by 6.5 percent this year and by 6.2 percent next year. This would still mean that growth in activity is slowing compared to last year’s growth of 6.9 percent. For Brazil, the January estimate for 2016 has been changed, so a decline of 3.8 percent is expected this year, the same as last year. In 2017, stagnation is expected.

Slightly Lowered Global Growth Estimates

The IMF has lowered its estimate for the global economy for 2016 by 0.2 percentage points and for 2017 by 0.1 points. This year, it expects growth of 3.2 percent, and next year of 3.5 percent.

– The global economy continues to grow, but at a pace that is increasingly disappointing, thus increasing its exposure to negative risks. Growth has been too slow for too long, commented Maurice Obstfeld in his opening speech, discussing the latest forecasts for the global economy.

Among the risks that cause the greatest concern, Obstfeld highlights financial and non-economic risks. He mentions global financial turmoil, including sudden sell-offs of risky assets, increased risk aversion, and sharp declines in oil and other commodity prices.

– There is a danger that new waves of fluctuations will be felt in the broader economy, notes the IMF official.

Among the non-economic risks, he highlights ongoing instability and violence in several countries, primarily in Syria, and the resulting refugee crisis and the associated challenges for the European Union,

– Related to other economic pressures, the result is a wave of nationalism in Europe, he warns, highlighting among its manifestations the real possibility of the United Kingdom exiting the EU.

Weaker Growth in the Group of Developed Economies

In its latest estimates, the IMF has lowered growth estimates for the group of developed economies in the world, including the United States, the Eurozone, and Germany, by 0.2 percent this year and by 0.1 percent next year. Thus, for this group, growth of 1.9 percent is expected this year and 2 percent in 2017. For the US, growth is estimated at 2.4 percent this year and 2.5 percent next year. In the Eurozone, they also expect uniform growth in both years, at rates of 1.5 percent this year and 1.6 percent next year, and they estimate the same growth rates for the German economy, the largest in Europe. For Italy, the January estimate has been lowered by 0.3 and 0.1 percentage points, so growth of one percent is expected in 2016 and 1.1 percent in 2017.

Among the leading economies of the Eurozone, the highest growth rate is expected in Spain, at 2.6 percent this year, after which it should slide to 2.3 percent in 2017.