ZAGREB, January 1, 2021 – The rebound of the corona crisis, the improvement in the country’s credit rating as well as a rise in inflation marked the economic trends in Croatia in 2021.
After 2020, which will be remembered for the efforts to stem the COVID-19 pandemic and for the devastating earthquakes that hit the capital Zagreb on March 22 and Sisak-Moslavina County on December 28 and 29, the year outgoing has been marked by a high growth rate.
In 2020, the economy contracted by 8% and is expected to rebound to a rate of 8.1% in 2021, according to forecasts by the European Commission, while rating agency Fitch predicts a recovery in Croatia at a rate of 8.9% in 2021.
In mid-December, analysts from four major commercial banks presented Croatia’s growth projections at a rate of 9.5%, and the Croatian National Bank is forecasting a recovery of 10.8%.
Croatia’s credit rating hits record high
On November 13, Fitch upgraded Croatia’s rating from BBB- to BBB, the best in Croatian history, with a positive outlook.
Fitch expects that “Croatia will be able to join the euro in January 2023 due to its significant progress in meeting the convergence criteria and structural reform, despite the pandemic shock, and political support at the level wider area of the euro zone for Croatia’s accession “.
The adoption of the euro will support Croatia’s rating, “because it would provide the sovereign with reserve currency status, reduce transaction costs and limit the exchange rate risk for the balance sheets of companies and households”.
Commenting on this improvement, the Minister of Finance Zdravko Marić recalled that the credit rating is important for the price of loans for the state, companies and citizens because its upgrade reduces the risk premium, which has an effect favorable on the price of capital.
Increase in inflation
The past year was marked by accelerating inflation rates.
In early 2021, inflation was subdued, but accelerated in the fall and November was 4.8%, a record high since February 2013, with analysts predicting that the inflation rate in December should have increased. exceeded 5%.
In the EU, record inflation rates of 9.3%, 8.6% and 7.5% were recorded in Lithuania, Estonia and Hungary, respectively, in November.
In Croatia, the November inflation rate was fueled by a 12.9% increase in transport prices, which was boosted by a 26.6% annual increase in fuel prices.
In mid-November, Marić said that this effect was not surprising given all the circumstances, mainly at the global level. However, the headline inflation rate in Croatia does not deviate from the EU average, which is good, he added.
According to Eurostat, the statistical office of the European Union, EU inflation in November reached 5.2% and the euro area recorded inflation of 4.9%.
The Maastricht criteria for price stability provide that the inflation rate of a candidate for the euro area cannot be 1.5 percentage points higher than the rate of the three best performing Member States.
Andrej Plenković’s cabinet predicted an inflation rate of 2.5% in 2021 and 2022.
Tourism trade is once again pulling the economy from the lows
In 2021, the economy affected by the pandemic rebounded thanks to trends in the tourism sector.
Financial and physical indicators point to a successful season.
From January 1 to December 20, 2021, tourism turnover was equivalent to 77% of tourism trade in the 2019 pre-pandemic.
The tax revenues of this sector reached 85% of the recorded value during the corresponding period in 2019.
Rimac takes over Bugatti
In July Rimac Automobili, the Croatian automaker based in Sveta Nedelja west of Zagreb, acquired Bugatti.
Rimac Automobili has decided to team up with car brand Bugatti Automobiles “to create a new automotive and technology powerhouse” called Bugatti Rimac doo (LLC), the Croatian company reported on July 5.
As part of the agreement, the newly formed Rimac group became the majority shareholder with a 55% stake.
Croatia’s National Recovery and Resilience Plan
The government has developed Croatia’s National Recovery and Resilience Plan (NRRP), which includes 77 reforms and 152 investment plans. Croatia’s NRRP 2021-2026 was officially adopted by the EU in July.
Under the EU’s Recovery and Resilience Mechanism (FRR), Croatia has € 6.3 billion in grants and 3.6 billion in advantageous loans.
Croatia plans to set aside 40.3% of that money for climate goals and 20.4% for digital transformation. Much will go to post-earthquake reconstruction.
On September 28, the European Commission disbursed € 818 million to Croatia in the form of RRF pre-financing, which was equivalent to 13% of the country’s total financial allocation under the RRF.
The pre-financing will help kick-start the implementation of key investment and reform measures outlined in Croatia’s NRRP.
The implementation of the NRRP is expected to contribute 1.4 percentage points to Croatia’s GDP growth in 2022 and as much in 2023.
Pelješac Bridge built
At the end of July, the Pelješac Bridge was fully reunited, with the installation of the last, 165th segment of its steel span, and it now stretches from Komarna on the coast to Brijesta on the Pelješac peninsula.
The 2,440-meter bridge has 13 spans, of which the five central spans are each 285 meters long, six reinforced concrete pylons 33 meters high installed in the center and two lanes, plus an emergency lane for the maintenance of the bridge.
The navigation profile under the bridge is 200 meters by 55 meters.
The bridge was designed by Marjan Pipenbaher and built by the China Road and Bridge Corporation. The Chinese company secured the position in 2018, offering a price tag of HRK 2.081 billion, excluding VAT, and a completion time of 36 months.
Work on the bridge officially began on July 31, 2018.
The bridge and its access roads should be open to traffic in June 2022, before the start of the high tourist season.
The decision to fund the project was taken by the government in 2017.
Krk LNG terminal begins to operate
The island of Krk floating liquefied natural gas (LNG) terminal began commercial operations on January 1 when the first LNG carrier, the Tristar Ruby, carrying 143,000 cubic meters of liquefied natural gas arrived in Omišalj, marking the launch marketing of the operations terminal
The terminal’s annual capacity is 2.6 billion cubic meters of gas. The entire capacity of the terminal is leased for the next three years, 80% of its capacity until 2027 and approximately 50% until 2035.
The Omišalj floating LNG terminal and the Zlobin-Omišalj gas pipeline which will deliver LNG to Croatia’s gas transportation system and consumers were officially opened in a ceremony at the end of January.
The LNG Croatia project is worth 234 million euros. In 2017, Croatia signed a grant agreement with the European Commission totaling € 101.4 million for the construction of the terminal.
Gas transport operator Plinacro said the Zlobin-Omišalj terminal and gas pipeline provide Croatia with a new supply route ensuring energy stability and gas supply.
A compressor station was built in January 2020 to allow two-way gas flow between Croatia and Hungary. With the reconstruction of the Rogatec-Zabok gas pipeline between Slovenia and Croatia, all requirements have been met to bring gas from the LNG terminal to Central and Eastern Europe and Croatia’s gas transport system has been integrated with European supply routes.
LNG Croatia has invested HRK 1.7 billion in the project, while Plinacro has invested HRK 430 million.
The Zlobin-Omišalj pipeline, 16.7 kilometers long, completed in mid-November 2020, is worth HRK 430 million, of which EUR 16.4 million comes from European funds.
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