Photograph: hypo-alpe-adria.hr

Hypo Alpe Adria Bank (HAAB) has projected this year's GDP growth rate at 1% and expects the growth rate in 2017 to be 1.5%.

"We forecast an average growth rate of 1-1.5% in the next two years," the head of the HAAB Economic Research Department, Hrvoje Stojic, said in Zagreb this past week.

Stojic said that the forecast was low but that one should note positive changes in the growth structure, with net exports increasingly contributing to growth.

Stojic said that Croatia had reduced the share of interest expenditure in GDP from 4% to 3.5% of GDP, but that the share was still high and made the country rather vulnerable in the event of a possible increase of interest rates.

The good thing is that interest rates are not likely to go up, and their increase will not happen at least in the next two years, he said.

Commenting on the state budget, Stojic said that it was good news for Croatia that it would have two consecutive years of "relatively decent fiscal consolidation."

"A certain level of fiscal consolidation was achieved in 2015, and by all accounts, it should resume. The deficit should certainly be lower, and whether it will be closer to 3% or 4% of GDP will depend on economic growth, inflation, and the wage budget. Talks with trade unions are yet to be held and we should wait for the final report on the execution of the 2015 budget," said Stojic.

If the wage budget remains frozen, it will be a success, and a government that tackles that challenge will do a big job, said the bank official.

He noted that emphasis should be put on corporate competitiveness and on attracting foreign investments.

Asked if the budget was development-oriented, Stojic said that it was largely determined by policies from the previous period.

"The government's true fiscal credibility is yet to be seen in the budget for 2017, or better yet, in talks with the European Commission, which come before that," said Stojic.

Better performance in the tourism sector this year could be a positive contributor to economic growth, Stojic noted.

Related stories

Proposed 2016 budget not reform-oriented, analysts say

EIZ: GDP growth of 1.5% forecast for 2015

HGK: Growth insufficient to reach EU average at faster pace

Croatian economy: Positive trends expected to continue

Addiko upgrades Croatia's GDP projeciton to 2% in 2016

Croatian GDP has grown over 2 pct again?

Latest news

Two charged for racially insulting actor Jamie Foxx in Dubrovnik

Dubrovnik police will bring misdemeanour charges against two men for disturbing the peace on Sunday night in a local restaurant when they racially insulted African American actor Jamie Foxx, who is currently in Dubrovnik filming "Robin Hood: Origins".

Opposition youth leader arrested in Zimbabwe

Zimbabwean police on Monday arrested an opposition youth leader on charges of inciting public violence against the government of President Robert Mugabe, the youth leader’s lawyer said.

Turkey dismisses 227 judges and prosecutors

Turkey's top judicial body on Monday dismissed 227 judges and prosecutors who are accused of having links to a cleric blamed for last year's coup attempt, the state-run Anadolu news agency reported.

Germany vows to do all it can to free journalist detained in Turkey

The German Foreign Ministry on Monday hailed German-Turkish journalist Deniz Yucel as a symbol of free speech as it vowed to treat his case with the "utmost importance" in order to secure his release.

Minister: State of education system not disastrous, Croatia leads in some indicators

Croatian Science and Education Minister Pavo Barisic has opposed assessments that the situation in the education system is disastrous, underlining that according to some indicators, Croatia is among the best European countries, as evidenced by the fact that as many as 97% of teachers attend seminars and lectures, a rate much above the European average.

Le Pen says al-Assad is better solution for Syria than Islamic State

France's far-right leader and presidential candidate Marine Le Pen said Monday that Syrian President Bashar al-Assad remains the more reassuring solution for France than Islamic State.

Residents in northern Greece oppose refugee children attending school

There were renewed clashes between angry residents and police in the northern Greek town of Oreokastro on Monday, where some locals have for months opposed children from a nearby refugee centre being taught at the local school.

Germany, France slam Russia's acceptance of Ukrainian rebel passports

EU member states Germany and France, which have been seeking to mitigate the conflict between the Ukrainian military and Russian-backed rebels in eastern Ukraine, on Monday broadly condemned Russia's recognition of rebel-issued passports.

Stier says Croatia strongly supports Kosovo, calls for enhancing economic cooperation

The Croatian minister announced a closer economic cooperation with Kosovo.

Afghanistan demands Pakistan hand over militants, shut training camps

The Afghan government has demanded that Pakistan hand over terrorists operating on its soil and close tens of terrorist training camps, the Foreign Ministry in Kabul said Monday.

Four Russian servicemen in Syria killed in vehicle bombing

Four Russian servicemen were killed and two others injured when a remote-controlled bomb exploded under their vehicle in Syria's western Homs region, Russian state media reported Monday, citing the Defence Ministry.

Iraqi forces advance in Mosul as US Defence Secretary visits Baghdad

Iraqi forces pressed on with their offensive to dislodge the extremist Islamic State militia from their stronghold in northern Iraq, as US Defence Secretary Jim Mattis landed in Baghdad on an unannounced official visit.