The central bank said in information it published on economic trends last Thursday that the Croatian public finance would keep deteriorating in 2011 with the general government deficit reaching 5.8% of Gross Domestic Product.
This is ascribed to a further decline in income and rise in the state investment activities, all of which can result in the continued growth in public debt, with a one-off rise due to the government's takeover of outstanding liabilities of shipyards during their privatisation.
The total fiscal gap is expected to be reduced to 4.4% in 2012, but the public debt will keep rising, the HNB said in its publication.
More favourable economic trends in its main trading partners are likely to have positive impacts on Croatia in 2011 when it comes to exports of goods and services.
In the beginning of 2011 domestic demand continued contracting but its gradual recovery could be expected by the end of this year.
Stopping negative trends in employment with consumer optimism perking up should lead to a rise in household consumption by the end of this year.
A rise in investments, mainly generated by the public sector, is also expected, while the government spending is to be further reduced.
The HNB projects annual inflation rate this year at 2.8% with a higher rise possibly towards the end of the year.
It warns that the main reason for sluggish recovery are Croatia's long-term structural vulnerabilities