Croatia’s speeding convergence

On the radar

• Croatia will release final inflation footprint at 11 AM CET.

• Poland will publish core inflation in the afternoon.

• Otherwise, there are no releases scheduled.

Economic developments

Stellar post pandemic recovery helps Croatia’s in convergence. Croatian economy has surprised to the upside in recent period, frequently toping EU growth rankings. In the latest special report What’s behind Croatia’s economic acceleration? the factors behind this outstanding outperformance are discussed in more detail. Consumption, exports and EU funds are highlighted underpinning the convergence. Croatia ranks 3rd in the EU when assessing household consumption growth in post pandemic period. On the other hand, we can’t look past the negative demographic trend and its effect on overall ratios as over last decade, Croatia lost almost 10% of its population. Hefty EU fund tailwinds in the near-term suggest further convergence might be coming, although more structural progress will be needed to escape the middle-income trap in the long run.

Market developments

The European Commission disbursed to Poland the first payment for EUR 6.3 billion (net of pre-financing) with EUR 3.6 billion in loans and in EUR 2.7 billion grants under the Recovery and Resilience Facility (RRF). Poland plans to submit two other motions by September and receive the payments by the end of the year that could be worth in total as much as EUR 10 billion. Poland's recovery and resilience plan will be financed by a total of €59.8 billion in grants and loans. EURHUF moved up to 394 and EURPLN increase to above 4.30. On the other hand, the Czech koruna gained against the euro on Monday. The long-term yields keep moving up. Romania successfully sold RON 512.6 million of 2028 bonds as demand was solid. Slovakia also enjoyed high demand during the auctions of 2026, 2028, 2034 and 2047 bonds and placed on the more than was planned.

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