Economic activity in Croatia continues to show resilience, with a GDP growth of 2.8% in 2023, remaining well above the European Union average, reports the World Bank. This is primarily due to the rapidly growing tourism sector and strong inflows of funds from the EU, supportive fiscal policy, a strong labor market, and a significant influx of remittances from workers abroad, which has stimulated stable growth in personal consumption, according to today’s World Bank report on emerging and developing countries in Europe and Central Asia.
Growth is expected to accelerate to 3% in 2024, primarily as a result of the spillover of positive trends from 2023, strengthening external demand, and expansive fiscal policy. Additionally, a strong labor market, with a relatively high share of companies reporting labor shortages and a significant increase in wages, will further contribute to the growth of real income. Inflation will continue to decline and gradually approach the ECB’s target level of nearly 2% by early 2025, but risks remain due to pressure on wage growth.
Slowing Growth in Emerging Markets
Economic activity in emerging and developing markets in the region Europe and Central Asia is likely to slow this year as a weak global economy, tightened monetary policy, a slowdown in the Chinese economy, and lower commodity prices reduce growth prospects, according to the World Bank’s Economic Update report published today for this region.
Growth in the region is likely to slow to 2.8% this year after a significant increase to 3.3% in 2023, when the economies of Russia and war-torn Ukraine began to grow again, aided by a stronger recovery in Central Asia. Regional output is likely to remain largely unchanged in 2025.
Several unfavorable circumstances are affecting the outlook. Weaker-than-expected recovery of key trading partners, particularly in the euro area, restrictive monetary policies, and worsening geopolitical developments could further slow growth.
– Countries in Europe and Central Asia continue to face multiple crises, exacerbated by the slowdown in global economic growth. Reviving productivity growth by fostering business dynamism and increasing resilience to climate change risks can protect the region’s population and accelerate economic growth – said Antonella Bassani, Vice President of the World Bank for the Europe and Central Asia region.
Weak growth will further slow the region’s recovery from recent shocks such as the ongoing Russian invasion of Ukraine, the pandemic, and the cost-of-living crisis in 2022.
In emerging and developing markets in the region Europe and Central Asia, inflation has decreased faster than expected, mainly due to a sharp decline in energy and food prices. The median annual inflation rate of consumer prices in the region fell from 15% at the beginning of 2023 to 4.2% by February 2024. Nevertheless, the cost-of-living crisis from 2022 continues to affect households, even though real income increased last year.
