Given the unfavourable structure dominated by tourism, Croatia's economic recovery after the coronavirus crisis will take longer and be more painful, which is why the latest forecast by the European Commission comes as no surprise, analysts told Hina on Tuesday.
The European Commission's interim summer forecast estimates that Croatia's economy will contract by 10.8% in 2020 before partially recovering at a rate of 7.5% in 2021.
Croatia is among the three most affected countries in the European Union. The Commission forecasts that Italy's GDP will contract the most (-11.2%), followed by Spain (-10.9%) and Croatia (-10.8%). As the report notes, the coronavirus pandemic has impacted all EU countries but not equally and the most affected countries are those that largely depend on tourism.
In its spring forecast the Commission had estimated that Croatia's GDP could fall by 9.1% in 2020 and grow by 7.5% in 2021.
Professor Luka Brkic of the Faculty of Political Sciences in Zagreb, said that the latest forecast is not unexpected, adding that given its economic structure and significant share of the services sector, primarily tourism and related activities, Croatia would suffer additional hardship.
"Our recovery could take longer and be more problematic and painful," Brkic said.
He added, however, that generally when it comes to forecasts there is a lot of off the cuff commentary based on numerous presumptions that leave too much room for speculation considering that there are no "bare facts" that need to be connected and placed into a model.
Hence it is difficult to say what will happen in the autumn and how much employment will grow. There are a lot of "ifs", said Brkic with regard to shortfalls in the tourism season and the possible occurrence of a second wave of the coronavirus along with the fact that Croatia does not have the fiscal or monetary capacity to once again lock down its economy.
"It will be a difficult, uncertain and bumpy ride but just to what extent is yet to be seen," Brkic concluded.
Advantages of EU membership
Economic analyst Damir Novotny said that EU economies were certain to recover next year, but that the situation differed from country to country, citing Croatia's unfavourable economic structure and dependence on trends in the tourism industry.
He said that tourism had a dominant role in creating Croatian GDP and jobs, adding that the Croatian economy would certainly contract by more than 10% this year, while next year it could see a "good growth", but certainly not at 2019's level.
"We will take several year to recover," Novotny said.
He supports the government's jobkeeping scheme, but says that it cannot last long. "Already in autumn we will have a problem with keeping these jobs, first and foremost in tourism and related sectors," he warned.
Compared with 2009, when Croatia lost about 150,000 jobs, the big difference is that Croatia is now an EU member, Novotny said and recalled that the EU is preparing a recovery package under which Croatia should get about €10 billion.
"Now is the right time for the government to carry out the reforms so that the economy can emerge from this crisis stronger and not weaker as was the case in 2009," Novotny said, calling for restructuring of the public sector to cut costs and increase efficiency.
He said that the government also faced a challenge of launching a new investment cycle that would have a long-term impact on the structure of the economy in order to diversify the economy and make it less dependent on tourism.
Novotny said that Croatia would recover faster if it were a member of the euro area because it would be able to use a wide range of instruments that are now available to the euro area members.
(Hina)
News
