The Commission today released its "Winter Economic Forecast", saying that for "the first time since 2007, the economies of all European Union Member States are expected to grow again this year." Croatia is set to have the weakest growth (0.2%) and Ireland the strongest (3.5%).
"Growth this year is forecast to rise to 1.7% for the EU as a whole and to 1.3% for the euro area. In 2016, annual growth should reach 2.1% and 1.9% respectively," the Commission said.
"Croatia's economy contracted for its sixth year in a row in 2014, but the pace of the recession weakened over the course of the year, bringing real GDP growth for the year to an estimated -0.5%. According to the forecast, positive demand from abroad was not enough to offset the effect of weak domestic demand, which fell as a result of a 3.6% fall in investment and decreases in private and public consumption of 0.6% and 2.1% respectively," the Commission said.
"Croatia's recession is forecast to come to an end in 2015, but real GDP is forecast to grow only moderately by 0.2%. Domestic demand growth is set to remain negative, as a result of a further contraction of investment and government consumption. Private consumption is now forecast to stagnate as the negative impact of the weak labour market and uncertainties related to the final settlement of Swiss-franc indexed loans is broadly offset by the positive impact of the income tax reform and of lower oil prices."
The end of the recession and the "feeble growth set to be achieved in 2015 is set to come exclusively from net exports," which last year jumped 6.1%, "partly reflecting large one-off effects related to Croatia's accession to the EU, the restoration of trade links with former partners from the CEFTA and the recovery of the neighbouring Slovenian economy."
The "exports of goods and services are set to increase at a more moderate rate of 2.8%" this year and 4.7% in 2016.
"Risks to growth projections are mainly negative and related to uncertainties about fiscal policy and structural reforms," the Commission said.
"In 2016, the recovery is expected to attain a tepid 1.0% thanks to an increase in domestic demand, driven largely by EU-linked investments," it noted.
"The general government deficit in 2014 is expected to stand at 5.0% of GDP, while in 2015 it is expected to go up to 5.5% of GDP, as forecast in the autumn, and to 5.6% in 2016."
Since the beginning of 2014, Croatia is in the Excessive Deficit Procedure, which envisages that the deficit should be reduced to 4.6% of GDP in 2014, to 3.5% in 2015 and to 2.7% in 2016.
The public debt is expected to reach 84.9% of GDP this year and 88.7% in 2016. For 2014, it was forecast at 81.4% of GDP.
The unemployment rate for 2014 is set at 17% and set to fall to 16.8% this year and to 16.4% in 2016. These forecasts are better than those made last autumn. The decline in the employment rate was stopped in 2014 after several years. Employment this year is set to stagnate and rise 0.5% in 2016.
Inflation, measured by the harmonised index of consumer prices, is estimated to be 0.2% for 2014 and set to fall 0.3% this year and rise to 1% in 2016.
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#ECForecast for #Croatia: End of recession in sight, but recovery set to be muted http://t.co/jD5X7zwoPg pic.twitter.com/t8MxSClS5S
— DG ECFIN (@ecfin) February 5, 2015