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Croatia Output growth is expected to moderate to 2.1% in 2023 and 2.5% in 2024. Rising wages and jobs growth will support households’ real spending. Croatia’s integration in the euro and Schengen areas plus higher disbursement of European funds are expected to bolster investment and exports. Inflation will gradually abate from current high rates following the retreat in energy and other international prices. The government plans to shift the budget balance from a small surplus in 2022 to a modest deficit in 2023 and a larger deficit in 2024. It has extended substantial energy price subsidies, alongside more modest support for incomes and expanded energy efficiency investments. Curtailing spending on untargeted energy price subsidies sooner, while further addressing Croatia’s structural challenges, such as by boosting adult education, family support and investments in energy efficiency, would help make the recovery more sustainable and inclusive. The surge in prices slowed Croatia’s recovery GDP growth slowed following the surge in energy prices and uncertainty following Russia’s war of aggression in Ukraine, although the mild and late winter supported construction activity and reduced the drag from high energy prices, moderating the slowdown. Harmonised consumer price inflation peaked at 13.0% in the year to November 2022, before gradually abating to 8.9% in the year to April 2023 as energy prices fell by 6.6% from their 2022 peak. However, inflationary pressures have broadened. Price growth has lowered households’ purchasing power, especially those with low incomes. Households are reducing their savings while maintaining consumption. Employment continued to expand, reducing the unemployment rate to 6.5% in April 2023. This, and the government’s 12% minimum wage rise for 2023, are contributing to rising wages. Exports of both goods and services grew robustly in late 2022 and early 2023. Early indicators point to a strong start to the 2023 tourism season.
Croatia
1. Weighted median harmonised inflation has been computed using harmonised consumer prices of 222 products. 2. Maastricht definition. Source: OECD Economic Outlook 113 database; Eurostat; and OECD calculations. StatLink 2 https://stat.link/a0g1jz
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023