Croatia Outlook | Stage set for another solid year
CEE Macro Outlook , 13. Dez.
Fresh GDP data confirmed that the solid economic momentum extended into 2H24 (3Q GDP at 3.9% y/y), as growth remained dominated by the strong domestic demand. Looking into 2025, the outlook remains solid, with GDP growth anticipated to moderate only slightly to around 3%. The growth mix continues to point to steady domestic demand support, reflecting disposable income gains on the consumption side and still strong EU backing on the investments side. External demand is seen delivering only modestly stronger support, but it remains a risk to the forecasts amid ongoing uncertainties related to EA recovery dynamics.
Following moderation and inflation averaging just below 3% in 2024, a similar print is expected for 2025. Growth dynamics are pointing to ongoing domestic demand pressures, while supply side factors are seen keeping a relatively steady trajectory.
Recent budgetary documents signaled that the MoF is targeting a 2024 budget gap closer to 2% of GDP (vs. 2.6% of GDP earlier). Also, the 2025 budget draft is eyeing a budget gap at similar levels (2.3% of GDP) ,suggesting that the 2024 election-driven deterioration of the fiscal stance has not been a one-off and the cabinet is content with a somewhat looser fiscal stance. Despite less room for maneuver, we see the budget remaining within the EDP limits and public debt continuing to trend slowly down, further away from the 60% mark.
After Moody's delivered a surprising two-notch rating upgrade, we see rating agencies remaining on hold in 2025 as the most likely baseline. Yields are back below 3% after a while, reflecting overall general market developments and anticipation of the ECB cutting towards 2% (or below) in 2025, and spread tightening closer to 80bp, amid supportive local specifics. Spread levels within 80-90bp on the long end should prevail in 2025.
Following moderation and inflation averaging just below 3% in 2024, a similar print is expected for 2025. Growth dynamics are pointing to ongoing domestic demand pressures, while supply side factors are seen keeping a relatively steady trajectory.
Recent budgetary documents signaled that the MoF is targeting a 2024 budget gap closer to 2% of GDP (vs. 2.6% of GDP earlier). Also, the 2025 budget draft is eyeing a budget gap at similar levels (2.3% of GDP) ,suggesting that the 2024 election-driven deterioration of the fiscal stance has not been a one-off and the cabinet is content with a somewhat looser fiscal stance. Despite less room for maneuver, we see the budget remaining within the EDP limits and public debt continuing to trend slowly down, further away from the 60% mark.
After Moody's delivered a surprising two-notch rating upgrade, we see rating agencies remaining on hold in 2025 as the most likely baseline. Yields are back below 3% after a while, reflecting overall general market developments and anticipation of the ECB cutting towards 2% (or below) in 2025, and spread tightening closer to 80bp, amid supportive local specifics. Spread levels within 80-90bp on the long end should prevail in 2025.