The Croatian economy will probably contract 0.5 percent in 2012 on the weaker global outlook and the government’s fiscal tightening, UniCredit SpA said in a revision of a 1 percent growth forecast.
There will be no economic growth this year, compared with a September forecast of 0.2 percent growth in 2011, Goran Saravanja, the chief economist of Zagrebacka Banka d.d., a unit of Italy’s UniCredit group, today in an e-mailed statement.
The budget deficit will narrow to 5 percent of gross domestic product in 2012, compared with a forecast of 6 percent for this year and reflecting “expectations from the new government,” according to Saravanja.
The ruling Croatian Democratic Union was dethroned on Dec. 4 by an opposition bloc led by the Social Democrats, which is expected to form the government by the end of the year. Premier-Elect Zoran Milanovic said on Dec. 6 he will introduce fiscal measures within 50 days of taking office to bolster the country’s credit rating and avoid seeking international aid.
“The main focus in the near-term will be the economic policy initiatives the new government announces, given that Croatia’s sovereign credit rating is on the bottom investment grade rung, with two out of three agencies maintaining a negative outlook,” Saravanja said.