Croatia’s economy will probably contract 1.3 percent this year on the euro-area’s sovereign debt crisis and domestic spending cuts, according to a survey of economists conducted by the Croatian Banking Association.
Decline in capital investment will push the economy into another recession, after last year’s brief recovery, said the survey based on the average estimate of economists from Croatia’s six biggest banks in terms of assets. The banks include Zagrebacka Banka d.d., the Croatian unit of Unicredit SpA and Privredna Banka d.d., a unit of Intesa Sanpaolo SpA.
Prime Minister Zoran Milanovic last week proposed to cut spending by 4.6 billion kuna ($795 million) to narrow the budget deficit to 4.2 percent of the gross domestic product this year from 6.2 percent of GDP in 2011. The economy will expand 0.8 percent this year as competition and domestic demand increase, Milanovic said. Annual fourth-quarter GDP grew 0.7 percent.
The chief economists of the banks, which also included the Croatian units of Austria’s Erste Group Bank AG, Hypo Alpe-Adria-Bank International AG, Raiffeisen Bank International AG and Soc-Gen Splitska Banka d.d. said the forecasts were based on their personal opinion and do not represent the official opinion of their banks, the association said in an e-mailed statement.