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2020/06/12 / Erste Group Research

Tourism in the spotlight

Growth remained positive in 1Q20 (+0.4%), owing to solid pre-COVID-19 domestic demand momentum and the supportive net export footprint. Our current baseline scenario envisages a 9% contraction in 2020, as we continue to expect lockdown measures and the hampered tourism outlook to lead to double-digit GDP drops in 2Q and 3Q. Second-round effects on the domestic demand side (adverse labor market conditions and deteriorated sentiment) as well as the external demand side (EU GDP trajectory) suggest an additional drag in 2H20. Forecast risks remain elevated, with the risks tilted to the downside.

The monetary policy outlook is becoming more comfortable, as the exchange rate outlook stabilizes and ERM II membership looms. The fiscal outlook fits the EU-wide trend, as we see the deficit in the 8-9% of GDP region and public debt heading towards 90% of GDP. The recent positive news flow from rating agencies suggests an increasing likelihood that Croatia will retain its IGR. The sovereign funding profile remains viable, as suggested by the EUR 2bn Eurobond launch. The focus is turning to the July 5 parliamentary elections, with the outcome still hard to predict.

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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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