Reuters, February 01, 2010
Croatia to suffer another recession year -institute
ZAGREB, Feb 1 (Reuters) - Croatia's economy is likely to suffer another contraction in 2010 despite an expected mild recovery in the second half, the country's leading economic institute said in its outlook on Monday.
"Due to negative trends still present in the first half of the year, we expect a 0.7 percent contraction in 2010," the Zagreb Economic Institute said in the quarterly report.
The institute is partly financed by the government and some of its experts are involved in providing proposals to monetary and fiscal authorities.
The economy of the European Union candidate country, which hopes to complete entry talks this year and join in 2012, suffered a 5.9 percent contraction in 2009, according to the institute's estimates.
The first preliminary official data are expected at the end of February.
The government and the central bank forecast a mild recovery for this year of about 0.5 percent.
In a Reuters poll, released last week, local analysts' median forecast for 2010 was a 0.5 percent contraction.
"Gradual recovery of the global economy, and particularly that of the EU, should together with the fresh fiscal and monetary policy measures bring a mild recovery in the economy, but not before the second half of the year. Negative trends from the first half will prevail," the institute said.
The government, with the help of the central bank, launched new liquidity-boosting measures last month aimed at overcoming credit crunch and enabling local firms borrow at lower interest rates. The first such more favourable loans are expected to be approved in mid-February.
The institute forecast that the economy would grow three percent in 2011.
On the fiscal front, the institute saw this year's budget gap at 3.5 percent of gross domestic product, noticeably up from the government's target of 2.5 percent.
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