As other emerging economies reliant on tourism (about 25 percent total contribution of tourism-related industries in GDP and employment), Croatia has been hit hard by the pandemic and two devastating earthquakes, leading the economy to contract by 8.0 percent in 2020. Vaccinations have been rolled out to about 38 percent of the population (end-June 2021). Staff projects growth to bounce back to 5.4 percent in 2021, driven by a rebound in the services sector and investment, aided by fiscal and monetary policies, and bolstered by large EU grants over the medium-term.
authorities expect the deficit to halve in 2021. On the back of the strong growth momentum, public debt would be expected to resume its pre-pandemic downward trajectory reaching 76.8% at end-2024.
Monetary Policy and Financial Stability
The targetedmonetarypolicyresponse successfully mitigated the negative effects of the pandemic . The CNB introduced a series of monetary policy measures to ensure a stable exchange rate, sustain lending to domestic banks and stabilize the government securities market. The line of FX interventions and the 2 billion EUR swap