IMF downgrades Croatia’s economic forecast and raises inflation projection

The International Monetary Fund has lowered its forecast for Croatian economic growth in 2026 by ten basis points to 2.6%. It has also significantly raised its forecast for inflation, from 2.8% to 4.4%.

Asked to comment on the IMF’s latest forecasts, Economy Minister Ante Šušnjar said that Croatia’s growth has been consistent and stable, but acknowledged that things were contingent on the situation in the Strait of Hormuz: "A lot will depend on disruptions at the global level related to energy supply. However, when you look at our GDP growth, it has been continuous and stable for many quarters in a row and is significantly higher than the average of both the European Union and the Eurozone. So we can be satisfied with these numbers. But, we will also definitely work to suppress inflation and inflationary pressures."

Minister Šušnjar also questioned the statistical data, saying that it remained to be seen if the all of the numbers were being interpreted correctly: "The Statistical Office has announced that Croatia has one of the most expensive electricity costs for the economy in the EU and the Eurozone, and by analyzing this data, which we at the Ministry of the Economy also warned about, we saw how this averaged out in the latest Eurostat report. Statistics is a very interesting discipline and how it is interpreted and calculated. I hope that we will soon have a meeting with them so that we can see on what basis this inflation is calculated and how they understand it."

According to the Croatian Employers' Association (HUP) Croatia's GDP will grow by 2.5% this year and next, while inflation will hover at around 5%.

"The main macroeconomic risk is that inflation exceeds expectations. In part we cannot control external factors such as geopolitical risks, how long the war will last, and how long the flow of energy or food goods will be disrupted. However, what we can control is the total gross amount of public sector wages," the association's Chief Economist Hrvoje Stojić said.

"Right now we have a record high disparity between the average wage in the public and private sector, with the average public sector salary being roughly 600 euros more than the average private sector salary," added HUP Director General Irena Weber.

Source: HRT