July 8, 2019 / 11:16 AM / in 11 days

Croatia's top banks lift 2019 growth forecast in cautious revision

ZAGREB, July 8 (Reuters) - Chief economists at Croatia’s five top banks have raised their growth forecast for 2019 after the country achieved higher-than-expected growth in the first quarter.

The average forecast rose to 3% from 2.8% in December, the Croatian banking association HUB said on Monday. This compares with the government’s growth forecast of 2.5%..

“The revision is more cautious than would have been expected. A rise in investments, largely due to the reliance on the European Union development funds, and consumer spending will remain key growth drivers,” HUB said in a statement.

Croatia’s economy expanded 3.9% year-on-year in the first year.

HUB represents most Croatian lenders, around 90% of which are owned by foreign banks mostly from Italy, Austria and Hungary.

The five chief economists expect on average growth to slow down to 2.5% in 2020, while predicting a balanced budget this year and a deficit of 0.4% of gross domestic product in 2020.

In 2017 and 2018 Croatia had a general budget surplus of 0.8% and 0.2% of GDP, respectively. For this year the government projected a gap of 0.3% of GDP.

A positive fiscal performance is important for Croatia as it strives to adopt the euro in the next four to five years.

Last week, Zagreb formalised its bid to enter the European Exchange Mechanism (ERM-2), the waiting room for euro adoption. (Reporting by Igor Ilic; Editing by Alexander Smith)

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