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2022/06/10 / Erste Group Research

Croatia to become 20th member of currency bloc

The strong entry into 2022 (1Q GDP at 7.0% y/y) and intact tourism outlook allowed for a modest FY22 GDP upgrade – now at 3.3%. Private consumption, while losing some momentum due to the inflation drag, should reflect the tight labor market and fairly resilient sentiment, while investments being additionally backed by EU related flows. Net exports should have a more adverse impact, as the export outlook faces headwinds from slowing EU growth. Uncertainty remains amid the lack of clarity concerning the war, commodities and supplychain shocks and persistent inflation. We have hence trimmed our 2023 outlook marginally, with risks skewed to the downside.

Euro adoption from 2023 as a baseline received confirmation from the ECB and EC as the Convergence Report concluded that Croatia is ready to join. The inflation outlook continued to deteriorate further, as supply-side shocks dominate. We now see average 2022 CPI around 9%, with upside risks still prevailing. As for monetary policy, eyes are increasingly on the ECB, where ever-more hawkish rhetoric suggests that yields should remain under pressure from benchmark developments. The positive fiscal outcome in 2021, steady outlook for 2022 and pending positive news from rating agencies should anchor the pressure as fat as the spread is concerned, at least.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusCroatia
Currency in focusCroatian Kuna
Sector in focus-


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