World Bank Revises Down Croatia’s Growth Prospects

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The World Bank says in its latest report that Croatia’s economy is likely to slow down in 2019 and 2020, warning that emerging economies in Europe and Central Asia are especially exposed to the risk of a slowdown of the activities in the euro area.

Croatia’s economic activity is likely to grow at a rate at 2.5% in 2019 and 2020, according to the World Bank’s Economic Prospects. Thus, Croatia’s growth in 2019 and 2020 is expected to decelerate by 0.3 percentage points in comparison to the bank’s report issued in January.

The initial prospects of a 2.6% rise in Croatia’s economic activity in 2021 have also been revised down by 0.2 percentage points to 2.4%. “Growth in Europe and Central Asia is estimated to have slowed to 1.6% in 2019, a four-year low, partly reflecting a sharp weakening of activity in Turkey.

“Trade continues to weaken across the region, as goods trade volumes have slowed in parallel with sluggish activity in the Euro Area, the region’s largest export destination,” reads the report, headlined “Heightened Tensions, Subdued Investment”.

The WB says that the region’s outlook remains subject to significant downside risks. It also notes that “countries with large current account deficit, heavy reliance on capital inflows, or sizeable foreign-currency denominated debt – Belarus, Croatia, Georgia, the Kyrgyz Republic, Moldova, Tajikistan and Ukraine – could be subject to sudden shifts in investor sentiment. Increases in policy uncertainty could undermine business and investor confidence in the region.”

 “Policy disagreements between some Central European countries and the European Union, election outcomes, an escalation of international trade restrictions, and backpedalling on structural reforms could also unsettle business and investor confidence. A substantial increase in private-sector debt in the region also raises the possibility of significant contingent liabilities for the public sector.”

The World Bank has also revised down forecasts for the global economy in 2019, by 0.3 percentage points, to 2.6%.

In 2020, the global economy is expected to grow at a rate of 2.7%, which is slightly lower than the January forecast. A 2.8% forecast for 2021 has been confirmed.

The Global Economic Prospects (GEP) is a twice-yearly World Bank Group flagship report that examines global economic trends and how they affect developing countries.

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