In the first quarter of this year the economy grew strongly, primarily because of investment expansion, stronger export and a stable growth of personal consumption, reads a statement released on the occasion of the publishing of the first issue of the Croatian Economic Outlook Quarterly.
A gradual slowing down of dynamic trends is still expected, which should secure a 4.7 percent growth this year and a 4.2 percent growth next year.
The expansion of the monetary and fiscal policy is expected to decrease so that the current account deficit could remain within sustainable limits.
The strongest generators of growth will be investments and personal consumption, and exports will continue to grow.
Positive labour market trends are expected to continue, the unemployment rate is expected to drop and salaries to go up.
The inflation rate is expected to decrease to around 3% in 2007, with significant risks being related to the movement of oil prices and possible growth of administratively regulated prices.
It is estimated that the main economic risks are related to maintaining high growth in conditions of relatively strong foreign trade imbalance, appreciation of the kuna and a rather unambitious plan of reduction of the fiscal deficit.
In this year's first quarter the economy saw a 6% growth in relation to the same period last year, reflecting very positive trends in investment (up 18.1%) and export (up 14%), and stable trends in personal consumption (up 4%).
The inter-annual growth of activity was reported in almost all major economic sectors, but mostly in the industry and the construction sector.
In the first five months employment grew by 0.7 percent in relation to the same period last year. In June unemployment was 7.8 percent down from the previous year.
Economic growth was accompanied by a relatively strong monetary expansion, the inter-annual loan growth in May was 22.9 percent and housing loans grew by 38.3 percent.
The inflation rate in June remained relatively high, 4%, primarily due to the growth of oil prices.
The strong economic activity has had a positive effect on the state budget which has seen a relatively high revenue growth, which along with spending control has resulted in fewer debts than planned.
According to the analysts, the national economic policy will be oriented towards reducing the external vulnerability of the economy and continuing fiscal consolidation, which is expected to be achieved through health reform, cuts in subsidies, and the reform of the public administration.
Investment growth will decrease from 10% this year to some 4.5% next year.
The tourist season is expected to yield good results, exports are expected to grow at a relatively high rate, as are imports, which will lead to an increase in the current account deficit to some 7% this year. Less intensive investment and a somewhat slower growth next year are expected to lead to a slowing down in import growth and a decrease in deficit to some 6%.