Analysts at the Intesa SanPaolo banking group have revised upward Croatia's economic growth projections from 1% to 1.8%, saying that they do not expect the current political limbo and a snap parliamentary election, likely to be held in September, to jeopardise the short-term economic outlook.
By comparison, in December 2015, analysts of this Italian lender forecast Croatia's growth at 1% in 2016.
"The stronger-than-expected Q1 outturn (+2.7% y/y GDP growth) and continued positive trends in high frequency data (industrial production up 5.0% and real retail trade up 3.2% y/y in April), alongside the forthcoming tourist season and improved labour market conditions, have strengthened our view that the economy will perform at a solid +1.8% y/y growth rate in 2016," the bank's analysts said.
"Even though the country’s political turmoil (no-confidence vote in PM Oreskovic followed by a decision to dissolve Parliament on 15 July) leads to early elections in September, we do not expect it to jeopardise the 2016 growth outlook. However, another weak coalition Government could lead to another lost year in terms of structural reforms, thus jeopardising the mid and long-term growth outlook," according to the comment written in the latest edition of the bank's forecast note.
"Regarding Brexit, we do not anticipate any immediate negative impact as merchandise trade with the UK accounts for less than 2%. The receipts from UK tourists visiting Croatia are slightly more tangible, as they comprise around 4% of the total tourist intake, but we do not expect any radical or immediate changes in their spending behaviour."