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2021/06/11 / Erste Group Research

Recovery shaped by tourism and boosted by RRF potential

The beginning of the year brought further downturn moderation, with GDP growth slowing to -0.7% y/y. Domestic demand confirmed its solid shape, as investments kept up a positive note, while private consumption played a far more neutral role than in the previous quarter. On the exports side, services remained a strong drag, while merchandise exports continued to recover vividly. We upgraded our call for 2021 to 5%, seeing risks mostly to the upside. Headline figures should gather stronger support from both private consumption and investments, while the acceleration of vaccination supports the tourism outlook at approx. 65-70% of pre-pandemic levels.

Inflation accelerated on transitory factors and an unwinding of the energy-related base effect, although the move has been somewhat more aggressive than anticipated. We revised our inflation forecast upwards to 1.6-1.7% for 2021-22, while we keep our call that monetary policy would remain accommodative going forward. The fiscal gap in 2021 should narrow towards the 4.5% of GDP region, allowing for a public debt trajectory reversal, though being higher than initial MoF targets. Global factors remain the driving force on the bond market, while local factors continue to support LCY yields at present levels.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusCroatia
Currency in focusCroatian Kuna
Sector in focus-


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