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UPDATE 3-Croatia central bank sees stronger 2017 growth -governor
October 19, 2017 / 9:49 AM / in 2 months

UPDATE 3-Croatia central bank sees stronger 2017 growth -governor

* Cenbank lifts Croatia’s 2017 growth forecast to 3.3 pct

* Capital adequacy in the banking system at 23 pct

* No risks for banking system stability from Agrokor crisis (Adds 2018 growth fcst revision, para 7)

By Igor Ilic

ROVINJ, Croatia, Oct 19 (Reuters) - Croatia’s central bank has lifted its 2017 growth forecast to 3.3 percent from 3 percent, governor Boris Vujcic said on Thursday, although he added that structural reforms were needed to help the economy accelerate further.

“It is due to stronger consumer spending and better (than expected) tourism results,” Vujcic told an economic conference in the northern Adriatic resort of Rovinj.

Croatia’s tourism sector accounts for almost 20 percent of the economy.

Vujcic said current rates of growth were still insufficient to help Croatia catch up with more developed economies in the European Union.

“For that Croatia would need to intensify structural reforms,” he said.

Analysts say the economy will struggle to expand by more than 1-2 percent a year over the longer-term without structural reforms to improve the business climate and curb losses in public sectors such as the pension and health systems.

The central bank has also slightly revised upwards its 2018 growth projection to 3.1 percent from 2.9 percent, according to the governor’s presentation at the conference. The new forecast is expected in mid-December.

Vujcic said Croatia’s banking system remains robust, with capital adequacy at 23.2 percent despite the debt and liquidity crisis that has hit Croatia’s largest private firm, Agrokor .

“In the case that all the loans related to the Agrokor crisis were to be written off, the capital adequacy would still remain above 20 percent,” he said.

But a decline in the level of non-performing loans had slowed due to the Agrokor crisis, Vujcic said. NPLs were 13.2 percent of the total loan stock at the end of June, having fallen to 13.6 percent in 2016 from 16.6 percent a year earlier.

Agrokor is currently being restructured by a state-appointed crisis management team.

Vujcic said the central bank was keeping its inflation forecast for this year at 1.1 percent, while slightly revising it upwards for next year, to 1.5 percent from 1.2 percent.

Reporting by Igor Ilic; Editing by Catherine Evans

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