September 25, 2019 / 10:00 AM / 2 months ago

Croatia central bank expects 2020 growth slowdown on export fall

ZAGREB (Reuters) - Croatia’s economy is expected to grow at between 2.5% and 3.0% in 2020, slightly below this year’s level of around 3.0%, as external risks may hit the country’s exports, a senior central bank official said on Wednesday.

“We have reasons for optimism amid solid growth prospects, low inflation and a positive current account balance. However, the external uncertainties are immense and a share of exports in growth structure is expected to fall,” deputy central bank governor Sandra Svaljek told a business conference.

She said the main worries about exports came from economic slowdown in Croatia’s key trading partners Italy and Germany.

She also said that the average annual inflation this year is seen at 0.7%, rising slightly to 1.1% in 2020.

“The biggest inflationary pressure comes from faster increase in labor costs in comparison with productivity growth,” she said.

Croatia is expected to maintain a current and capital account surplus this year, but it is expected to fall to 3.1% of gross domestic product from 3.8% in 2018. In 2020 it is seen falling further to 2.2% of GDP.

“It is mostly due to an expected slowdown in exports,” Svaljek said.

She said that the central bank would continue with its expansive monetary policy in 2020. The current liquidity surplus amounts to some 10% of GDP or more than 30 billion kuna ($4.46 billion).

Reporting by Igor Ilic; Editing by Alexander Smith

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