The Government forecasts a GDP growth of 2.2 percent for this year, which is 1.5 percentage points higher than its last estimate, and has also raised the inflation growth forecast to 6.6 percent, it was announced on Thursday at the Government session where the Stability Program and the National Reform Program were adopted.
The Stability Program of the Republic of Croatia for the period 2024 – 2026 and the National Reform Program for 2023 were adopted within the framework of the European Semester, an instrument of fiscal oversight and coordination of economic policies of member states with the economic policy of the European Union, and will be officially submitted to the European Commission by the end of April.
Namely, with the entry into the eurozone, instead of the Convergence Program, a Stability Program is being prepared, which also defines the basic principles of macroeconomic and fiscal policy.
Regarding the update of the most important macroeconomic projections, the Government forecasts economic growth in 2023 of 2.2 percent, 2.6 percent in 2024, 2.5 percent in 2025, and 2.2 percent in 2026.
The Government originally projected a growth of Croatian GDP this year of 0.7 percent, on which the preparation of the state budget for this year was based.
Growth in 2023 is twice as high as the EU average
Finance Minister Marko Primorac emphasized that this year’s growth of Croatian GDP should be twice as high as the average growth at the EU level, given that it is projected at around 0.9 percent.
He also noted that the growth of Croatian GDP in all years of the projection period is almost entirely determined by the movement of domestic demand.
Furthermore, the Government forecasts that the inflation rate in 2023 will reach 6.6 percent, while in the coming years it should significantly slow down – to 2.8 percent in 2024, to 2.4 percent in 2025, and to 2.2 percent in 2026.
The Government had previously forecasted an inflation growth in 2023 of 5.7 percent.
Primorac emphasized that special attention is paid to the permanent reduction of the share of public debt in GDP, as well as maintaining the budget deficit below the reference level of three percent of GDP by the end of 2026.
Further reduction of the share of public debt in GDP
After achieving a consolidated general government surplus of 0.4 percent in 2022, the general budget deficit in 2023 is expected to amount to 0.7 percent of GDP. Furthermore, the deficit is expected to reach 1.5 percent of GDP in 2024, 0.8 percent in 2025, and 0.6 percent of GDP in 2026, according to the Government’s forecasts.
“All of this will contribute to the reduction of the share of public debt in GDP,” said Primorac.
Thus, after a ten percentage point decrease in the share of public debt in GDP in 2022, to 68.4 percent, its further reduction is projected – to 62.6 percent in 2023, to 59.8 percent in 2024, to 57.5 percent in 2025, and to 55.6 percent in 2026.
In conditions of continued employment growth and further acceleration of gross wage growth, Primorac stated that the disposable income of the population this year will record a strong recovery, expressed in real terms, as evidenced by statistical data on wage growth in the first three months of this year.
Employment is expected to increase by two percent in 2023, by 1.5 percent in 2024, by 1.2 percent in 2025, and by one percent in 2026, reported the finance minister.
Reforms from the NPOO adopted in the National Reform Program
Primorac stated that the National Recovery and Resilience Plan (NPOO) has already defined key reforms for the period from 2021 to 2026, so the National Reform Program is defined in such a way that measures from the NPOO are adopted for a certain period, and measures that are primarily provided for in the budget are added.
In the National Reform Program for 2023, reform activities from the NPOO that are due in the period from April 2023 to March 2024 have been adopted. This includes 56 measures, categorized into six key areas – economy, public administration, judiciary and state property, education, science and research, labor market and social protection, health care, and building renovation.
There are also 29 additional measures that contribute to goals related to the challenges of climate change and energy sustainability, prevention and combating corruption, ensuring conditions for further improvement of public administration efficiency, capital market development, improving the accessibility of the health care system, and disease prevention, etc.
