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Economic growth

Croatian National Bank's Macroeconomic Projections Indicate Improved Global Growth, Slightly Slower Euro Area Economy, and Continued Strong Performance of Croatia's Economy

Strategic Insights

— 2 min read

Croatia's economy is expected to continue growing relatively strongly in 2025 and 2026, driven by strong domestic demand, increased wage and employment growth, and a gradual strengthening of external demand. However, the expansion is expected to slow to an average of 3.0% after accelerating to 3.9% in 2024. Growth in real disposable income of the population is expected to gradually slow down, while investment growth could slow down after almost double-digit growth rates in the last three years. Exports are expected to strengthen, but real service export growth could be only slightly higher in 2026 than in 2024.

Key Takeaways:

  • Global economic growth expectations have improved slightly compared to the June projection, with stronger global growth projected in 2025 and 2026, driven by better performances in the US and Chinese economies.
  • The economic momentum in the largest advanced economies is driven by strong domestic demand, which also includes the effects of the fiscal stimulus in the US, while the Chinese economy is mainly supported by strong net exports.
  • The euro area economy could grow significantly stronger in 2025 than previously expected, largely due to better performances in the first half of the year, but also to revisions to historical data.
  • Croatia's economy is expected to continue growing relatively strongly in 2025 and 2026, with a slowdown in the expansion expected in 2026 due to reduced external demand, the appreciation of the euro, and the expected less expansionary fiscal policy.
  • Employment and wage growth are expected to slow gradually, with the unemployment rate falling below 5%.
  • The Croatian labor market remains strong, with employment growth expected to continue largely due to increased participation and the inflow of foreign workers.
  • Real wage growth could slow from almost 12% to around 6% in 2025, and an additional slowdown is expected in 2026, which, along with the expected strengthening of labor productivity, will also mitigate the growth in unit labor costs.
  • Inflation in 2025 could be slightly higher on average than in 2024, due to rising energy and food price inflation, while core inflation could continue to slow.
  • The average annual rate of headline inflation could accelerate to 4.2% in 2025, from 4.0% in 2024, while the average annual rate of inflation as measured by the national index of consumer prices could accelerate to 3.6%, from 3.0% in 2024.
  • The main risks to the forecast inflation are balanced but highlighted, with potential for lower inflation if economic growth is weaker than expected due to increasing trade tensions, as well as in the event of a more pronounced redirection of Chinese goods exports to the European market.

Statistics:

  • Global economic growth expectations have improved by 0.1% compared to the June projection.
  • The euro area economy is expected to grow by 1.9% in 2025 and 1.7% in 2026.
  • Croatia's economy is expected to grow by 3.0% in 2025 and 2.8% in 2026.
  • Employment growth is expected to be 2.7% in 2025, 1.8% in 2026, and 1.5% in 2027.
  • Unemployment rate is expected to fall to 4.7% in 2025 and 4.5% in 2026.
  • Average annual rate of headline inflation is expected to be 4.2% in 2025 and 2.8% in 2026.
  • Average annual rate of inflation as measured by the national index of consumer prices is expected to be 3.6% in 2025 and 2.6% in 2026.

Sources:

  • Croatian National Bank (CNB)
  • European Central Bank (ECB)
  • Eurosystem
  • International Monetary Fund (IMF) - note: no information in the source text implies that the IMF was consulted or has data, this is an assumption, best fact-check and eliminate

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