The government has reduced its growth forecast for 2019 to 2.5% from the projected in November 2018 2.9% pace of expansion, FinMin Zdravko Maric said. Maric explained that the government was prompted to cuts its forecast that markedly because of the uncertainties in the global economy related to the Brexit and trade tensions between the biggest global economies as well as economic developments in some euro area members. The finance minister underlined that the authorities must continue their work on improving the business climate and must insist on keeping the public finances stable and admitted that there were factors beyond its influence like the situation in some euro zone members, that made the government revise mildly downwards its growth projection for this year as well. Maric will present the finance ministry’s GDP projections for this and next year at a government session on Thursday, Apr 18.
In the meantime, HNB Governor Boris Vujcic, speaking in Washington, underlined that the central bank will continue to implement a monetary policy that enables growth of investment, production and employment, while aligning it also with the fiscal policy. Vujcic highlighted that while the healthy macroeconomic environment is expected to be preserved this and next year, for a faster economic expansion to be achieved are needed structural reforms. The Governor, who also expects certain slowdown of the economic activity this year, said that as the average of the GDP growth projections for this year was above the average growth for several previous years, it could not be talked about some sort of risk for recession.
The economy expanded by 2.6% in 2018. The newly projected by the government slower economic expansion this year is not surprising given that the country’s main trading partners Italy and Germany are already in or are on the brink of recession as seen in latest data, as well as in view of the markedly reduced projections for their economic expansion this year as seen in the latest forecasts of the IMF. Note that the IMF kept its 2019 growth projection unchanged against October 2018 at 2.6%, probably relying on robust household consumption and investments as well as strong tourism to counterbalance the projected to falter external demand. Thus, Maric’s new GDP growth forecast coincides with that of the central bank HNB, WB (downwards revised in April by 0.3pps against January), the EBRD, S&P and Fitch.