According to the latest report carried by the Zagreb-based agency BonLine, D&B expects that Croatia's GDP will rise from 4.2% in 2006 to 4.4% in 2007 and that economic growth will be the result of increased foreign investment and private consumption.
Capital investment will continue to grow fast as a result of the start of EU membership talks, which previously came to a halt following the suspension of talks.
Investment will rise from 9% of GDP in 2006 to 11% in 2007, with most investments being made in the industry and services.
Private consumption, which is also expected to grow, is being linked with the expected drop in unemployment and bank interest rates, which is expected to increase the purchasing power of consumers.
B&D also points to the government's decision to start the payment of the state debt to pensioners as an important factor that will increase private consumption.
Despite the fact that the EU and the IMF insist that the budgetary deficit be reduced to 3.3% in 2006 and to below 3% in 2008, D&B analysts believe that Croatia will not be able to live up to such high expectations.
D&B projects Croatia's deficit at 3.8% in 2006 and 3.5% in 2007. If the projection proves to be correct, D&B envisages another stand-by arrangement for Croatia after April 2006.