Oil prices exceeding USD100 would halt Croatian economic growth

If oil prices exceed USD100 per barrel, the expansion of the Croatian economy would practically halt, an analysis of the HNB has shown. The central bank has made three scenarios, in addition to the baseline, that depict the impact of crude oil prices developments on the economic activity and consumer prices. The pessimistic scenario assumes rise of oil prices to USD112 per barrel, which would result in deceleration of GDP growth against the baseline (assuming crude oil price in line with the futures price from March 2018) by 2.5pps. In the neutral scenario – assuming crude oil price in line with the futures price from May 2018, GDP growth is to slow down by 0.5pps against the baseline. The third, optimistic scenario, which assumes crude oil price gradually falling to USD50 per barrel, GDP growth is to speed up by 0.5pps. Note that according to the HNB’s July forecasts, GDP growth is projected at 2.8% in 2019 and 2020, which means that the realization of the pessimistic scenario would result in practical stagnation of the economy.

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