Banks revise upwards Croatia’s GDP growth forecast

Intesa Saopaolo has revised upwards its forecast for Croatia’s GDP growth in 2015 from 0.3% to 0.9% on the back of GDP growth in Q2, which was faster than expected, and Hypo Alpe Adria Bank (HAAB) has revised its growth forecast for Croatia from 0.5% to 1%.
GDP growth of 1.2% in Q2 exceeded all expectations and was the highest since Q3 2008, Intesa Saopaolo, the owner of Privredna Banka Zagreb (PBZ), said in an analysis published on Wednesday.
Domestic demand continued growing in Q2 and the investment growth of 0.8% on the year, the first increase in investments since Q3 2013, was the biggest positive surprise, the analysts said.
They noted that economic growth could continue in the second half of the year as well considering that figures for July signal a strong growth in the real sector, with industrial output having gone up 3.9% and retail trade by 4.5% on the year.
Commodity exports and excellent results in the tourism sector will continue to support economic growth, the analysts said and therefore revised their forecast of Croatia’s GDP growth to 0.9%.
The economic growth forecast for 2016 remains unchanged at 1.5%, mostly due to uncertainties regarding the budget, given that because of coming parliamentary elections only temporary financing for the first quarter of 2015 will be adopted.
The analysts warned that the recently adopted solution for the conversion of loans pegged to the Swiss franc to euro loans would cause losses for the banking sector of around one billion euros, which could result in negative risks for credit activity, which, in turn, could pose a risk for the continuation of the restrained economic growth, said the bank.