The Croatian economy will fall by 8.5 percent this year due to the corona crisis, the European Bank for Reconstruction and Development (EBRD) estimated in its latest report, predicting a return to pre-pandemic levels at the end of 2022.
This is a more pronounced decline than in the Government's guidelines for drafting the state budget, which projected an 8 percent drop in GDP for this year.
The latest EBRD estimate predicts a deeper decline in Croatia's GDP this year than in May, when the bank forecast activities to decline by seven percent.
In 2021, the Croatian economy is expected to grow by 3.5 percent, significantly weaker than the EBRD forecast in May, when it expected 6 percent growth.
Forecasts for the Croatian economy next year are based on the assumption of gradual normalization of economic activity in the country itself and in its main economic partners, the EBRD emphasizes.
They also warn that the estimates for next year are largely outweighed by risks that could stifle growth, given the possible stronger second wave of Covid-19.
The return of the Croatian economy to the level of 2019 is projected by the EBRD in the fourth quarter of 2022.
The pandemic could cause permanent damage in some sectors, the bank warns, highlighting tourism. The economic downturn this year will be the deepest in countries heavily dependent on external sources of income, such as Croatia, Albania, Cyprus, Greece and Montenegro, which lost most of the tourist season this year, the bank said.
Other sectors, such as online retail, could benefit from accelerated digitization, they added.