As Poslovni Dnevnik writes on the 10th of May, 2020, in Croatia, the second quarter is the one in which unemployment traditionally falls the most. With the coronavirus pandemic having thrown a spanner in the works, let’s have a look at what the end of 2020 might look like in terms of unemployment.
“On the one hand, we’re very happy that the health and epidemiological situation is good and that we can start working again, but on the other hand, we’re very worried about the future of our business, especially with the uncertain tourist season,” said Hrvoje Bujas, the president of the Voice of Entrepreneurs (Glaz Poduzetnika).
”As many as 47 percent of our members, according to the survey we conducted, will be forced to reduce the scope of their businesses if they want to survive.
This means opening a business with or fewer workers, especially fewer seasonal workers when it comes to tourism workers or those in the hospitality industry, or with lower wages for workers. Unfortunately, as many as 29 pecent of small, micro and medium-sized enterprises don’t have enough funds to restart their businesses and will be forced to either close or lay people off. Instead of concentrating on the economy and letting us work, the government is making strange decisions to ban work on Sundays and preparing for elections while it still has a good rating, before the peak of the crisis and the wave of unemployment that will hit us arrives,” stated Bujas.
As stated, here in Croatia, traditionally, the second quarter is the one in which unemployment tends to fall the most. The pre-season is a time of stronger economic activity and increased employment as employers seek out their seasonal staff and the tourist season approaches. In 2020, we can already see that such a trend in the second quarter is going to continue to simply grind to a halt, and in actual fact, that trend will be completely reversed – instead of the expected strong drop in unemployment in the second quarter, Croatia will have a strong rise in unemployment.
In March 2020, the unemployment rate broke the downward trend seen in previous years and grew by four percent, although in the first two months of 2020, it moved identically as it did in previous years. In April 2020, the situation got even worse; instead of the expected 10 percent drop in unemployment that April typically brings with it, this year, we have unemployment growth in April of over 10 percent.
“As the restrictive measures only covered half of the month of March and already generated the effect of a strong break in this trend, in April, in which the restrictive anti-coronavirus measures were fully in place for the entire month, the trend was completely reversed. The further growth of unemployment can be expected in May, which will also have measures of limited movement continuing until the middle of the month, and by the end of the month, we can expect a change in consumer behaviour, despite the lifting of the anti-coronavirus restrictions,” said Vuk Vukovic.
“In May in the last three years, unemployment has fallen by about 11 percent each time. After the first week of May of 2020 alone, unemployment has continued to rise, albeit slightly less than back at the beginning of April. What is certain is that the effects of the coronavirus pandemic will completely nullify the effect of the three traditionally most successful months of the year when unemployment in Croatia typically declines. Moreover, unemployment will rise by about as much as it normally falls in the second quarter.
Unfortunately, this trend will continue. From the 1st of June, 2020, the Croatian Government’s measures to help the domestic economy will cease and it can be expected that the unemployment curve will not escalate until later on in June, and non-working Sundays will certainly further contribute to this growth in unemployment. According to the Glas Poduzetnika association’s members, between 10,000 and 15,000 people will lose their jobs by the end of the year unless this decision is changed.
The drop in demand, which will continue due to the high level of coronavirus-induced uncertainty, as well as the certainly poor tourist season for a large number of small businesses, unfortunately means additional difficulties in doing business in the coming months. Taking all of this data into account, but also the fact of the termination of the second package of Government measures, new estimates for Croatia’s unemployment trends by the end of 2020 have been developed.
According to the optimistic scenario, we expect that by the end of 2020, another 160,000 people could lose their jobs. This trend would slow down somewhat in 2021, but even then, we can’t expect a sharp decline in unemployment but a slight increase of an additional 15,000 people, which would mean that unemployment will reach its peak with about 315,000 people in 2021. This scenario assumes rapid economic recovery in 2021 and weaker growth in terms of the unemployment rate this year, and concrete and effective reform actions from the government aimed at economic recovery, which aren’t in sight at the minute.
This pessimistic scenario assumes the continuation of the negative trend of unemployment growth throughout the year and predicts that as many as 240,000 people in Croatia could lose their jobs by the end of 2020. The effect will continue into 2021, when an additional 51,000 people can be expected to lose their jobs. That would raise the total number of unemployed people in Croatia to as many as 430,000 people in 2021 before it starts to fall again as things recover. The blackest of all of these scenario is certain in the absence of the necessary reforms, as well as due to the Croatian Government’s holding of the elections and the formation of a new government in the next four to five months, which will see any economic recovery distorted and lose its pace.
The realistic scenario would move between optimistic and pessimistic: a total of 340,000 unemployed people in Croatia by the end of 2020, and a total of 370,000 unemployed in 2021 before the start of the country’s economic recovery.
“All three scenarios will depend on the depth of domestic structural and institutional reforms undertaken in the wake of strengthening the entrepreneurial climate and the rule of law, the government’s commitment to economic recovery, the recovery of our most important economic partners and health measures to control the coronavirus epidemic,” stated Vukovic, concluding his analysis.
Data sources: The Central Bureau of Statistics and the Croatian Employment Service
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