Activity in the Croatian economy is expected to decelerate already in 2025, according to the EBRD's estimate of 3.8% growth in activity in 2024.
In 2026, growth will slow to 2.6%, according to the EBRD.
In the group of Central European and Baltic states, which includes Croatia, activity should increase by 2.7% this year, after 3.2% growth in 2024.
In 2026, the pace of growth should remain at this year's level, with an estimated growth rate of 2.8%.
By far the strongest growth in this group of countries is expected in Poland, with 3.4% this year and 3.2% in 2026.
Lithuania is expected to be the closest to Croatia in this group, with forecast growth rates of 2.8% this year and 2.7% next year.
Activity in the region will grow at a steady pace, supported by resilient labour markets, the EBRD said.
Recovery in developed Europe weaker than expected
Growth forecasts for the region this year are somewhat lower than the EBRD had expected in September, as the recovery in developed Europe is weaker than expected and is holding back production, exports and investment.
"Uncertainty surrounding potential increases in tariffs on US imports and reciprocal measures by US trade partners has increased markedly," the EBRD said in the report.
Increased uncertainty by itself discourages investment, weakens production, and causes disruptions in global supply chains, the report adds.
"Beyond uncertainty, the short-term impact of tariffs and trade restrictions on individual economies would depend on whether such tariffs are universal or apply to selected trading partners," the EBRD points out.
The announced increase in US tariffs on steel and aluminium poses the greatest threat to Bulgaria, Slovenia and Romania, it estimates.
In general, Jordan, Slovakia, Hungary and Lithuania are most vulnerable to increased US tariffs due to "the highest trade exposure to the US".
Weaker external demand in Central Europe and the Baltic states, and in the south-eastern EU countries of Greece, Romania and Bulgaria, will also mean somewhat slower growth in the entire area in which the EBRD operates, of 3.2% this year.
The impact of conflicts and "slow reform progress" will also halt growth in the southern and eastern Mediterranean, it is noted.
The EBRD regions include Central Europe and the Baltic states, the south-eastern EU, the southern and eastern Mediterranean, Central Asia, Eastern Europe and the Caucasus, and the Western Balkans.