Croatia: Improving fiscal deficits lower overall external liquidity risk

Country Report

Growth set to remain robust

Following a six-year lasting recession, real GDP grew by +2.2% in 2015, +3% in 2016 and +2.5% y/y in Q1 2017 (calendar-adjusted by +0.6% q/q and +3.4% y/y). Growth in 2016 was broad-based, with private consumption up by +3.3%, government consumption +1.3% and rebounding fixed invest-ment +5.4%. Exports expanded by +5.7% and imports +5.8% so that net exports were nearly neutral. That pattern broadly continued in Q1 2017. Troubles facing Croatia’s largest private company, Agrokor, are likely to weigh on growth, but the company’s operations are expected to continue. We forecast full-year GDP growth to ease slightly to +2.9% in 2017 and +2.7% in 2018.