Crisis-Resilient Economy of Agrokor: Erste Raises GDP Growth Estimate to 3 Percent

Analysts at Erste Bank have raised their estimate for the growth of the Croatian economy this year from the previous 2.7 to 3 percent, thanks to a record tourist season and strong domestic demand, while the crisis in Agrokor may have only a limited impact.

After slow growth at the beginning of the year, GDP growth accelerated to 2.8 percent year-on-year in the second quarter. This is primarily attributed to a 3.8 percent increase in household consumption, according to Erste Bank’s analysis.

>>>Eurostat: Stronger Growth of Labor Costs in the EU in the Second Quarter

On the other hand, investment growth slowed in the second quarter to 3.2 percent year-on-year. This, analysts at Erste note, corresponds to a scenario where the crisis in Agrokor somewhat affects investment activity.

However, the acceleration of GDP growth in the second quarter shows that the economy is resilient to the crisis in Agrokor, analysts at Erste Bank state.

For the remainder of this year, they do not expect any major surprises, with healthy domestic demand and a record tourist season potentially leading to modest acceleration in economic growth.

They also expect that investment growth could accelerate to 4 to 5 percent, thanks to private investments in the tourism sector, as well as investments in projects supported by EU funds.

Therefore, analysts at Erste Bank have raised their GDP growth estimates for this year and next year by 0.3 percentage points. Thus, the economy could grow by 3 percent this year and 2.8 percent next year.

Analysts at Erste also indicate that it seems the fiscal position is under control, thus they expect that the budget deficit this year could be close to last year’s levels, when it amounted to 0.8 percent of GDP.

>>>Dalić: Strengthening the Economy and Economic Growth Will Stop Emigration

This supports the trend of further reduction of public debt, which, according to Erste’s estimates, could slide to 80.7 percent of GDP by the end of this year.

And this “supports expectations of positive news from rating agencies in the coming quarters,” analysts at Erste Bank state.