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2021/09/09 / Erste Group Research

GDP outlook becoming more V-shaped

The rebound gained strong traction in 2Q21, as the broad-based recovery allowed for 16.1% y/y GDP growth. As far as domestic demand goes, the private consumption rebound has been particularly impressive, while investments confirmed robust momentum from earlier quarters. As far as external demand goes, services showed a solid recovery from the low 2020 base, but the star of the show was goods exports, at a level trending approx. 20% above pre-COVID-19 levels. Accounting for robust 2Q GDP and an improving 2H21 outlook (tourism, plus strong domestic demand footprint), we substantially revise our FY21 outlook to 7.3% (from a conservative 5% call), with the risks to the forecast remaining at least balanced.

Inflation pressures remain predominantly driven by supply-side factors, although the more aggressive pattern suggests average inflation in 2021-22 at close to the 2% region. The nature of inflation pressures and steady FX outlook should keep monetary policy equally accommodative going forward. The fiscal and rating outlooks are being supported by outperforming GDP; we are seeing an increasing likelihood of positive rating actions. Yields were trending lower, supported by benchmark developments, but also reflected by anticipated spread tightening.

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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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