As Coronavirus Crisis Rocks Economy, 5 Croatian Sectors Hardest Hit

Lauren Simmonds

December the 12th, 2020 – The ongoing coronavirus pandemic has shaken the Croatian economy in a way that is difficult to believe could happen in this day and age. Five Croatian sectors have been hit the hardest by the pandemic and all of the restrictions that have come with it.

As Jadranka Dozan/Poslovni Dnevnik writes, in addition to belonging to Croatian sectors whose business is more exposed to the impact of limited mobility during the continuing pandemic, the extent of damage caused by this public health crisis within the realm of entrepreneurship also lies with the size of business entities in terms of their number of employees and the levels of their income.

Such a conclusion is imposed, among other things, from the structure of paid aid for the preservation of jobs from the government back during the first wave of the pandemic, which sought to weaken the blow to the economy in as much as was possible at the time.

According to an analysis done by the Fininfo portal, of the total grants paid out by the government so far, it is estimated that in the first three months of those measures, when they included the largest number of employees, around six billion kuna was paid out, after which the grants focused on the most exposed Croatian sectors, activities and entities.

Fininfo states that as much as 87 percent of the aid was paid to micro, small and medium-sized enterprises, which, they say, indicates their significantly higher exposure to damage caused by the current pandemic when compared to more resilient, larger enterprises.

To confirm this assumption, the relative exposure of a particular size of enterprise or company was also analysed, putting in the ratio of the number of employees and operating income of companies that received support in relation to those of the same rank in terms of size that didn’t receive it.

The analysis included Croatian companies that submitted their annual financial reports for 2019 (which account for 84 percent of total aid received), and the findings confirmed a significantly stronger relative exposure for micro, small and medium-sized enterprises when compared to larger companies.

A significantly higher number of employees working for micro, small and medium-sized enterprises received grants compared to those who didn’t, while in large companies, the situation is the other way around, say analysts led by the director of EL Koncept, which is behind the portal.

The situation looks remarkably similar when operating revenues are taken into account as a parameter. Thus, a larger part of business revenues generated by micro, small and medium-sized enterprises received grants than those who didn’t and for larger companies, the situation is the other way around yet again.

“We can conclude that the current crisis has affected more than 60 percent of micro, small and medium-sized enterprises compared to 44 percent of large ones, and if we look at the entire economy, the total exposure to the pandemic stands at about 55 percent. Relatively, the most affected by it all are small and medium-sized companies, small in terms of their number of employees, and medium-sized in terms of their income,” the analysis states.

These findings, however, suggest that in the forthcoming period, greater problems in the payment of obligations can be expected from micro, small and medium-sized enterprises. Regarding the exposure of certain Croatian sectors, it is already very clear that the hardest hit are primarily those related to tourism, as they’re based on mobility which is currently difficult.

However, Fininfo also addressed a more detailed examination of the relative exposure, given the number of workers, income and the number of entities, because, they say, this provides a better insight into the actual impact of a particular sector with the pandemic. Of the five most affected sectors, four are actually directly or indirectly related to tourism.

In addition to travel agencies and travel organisers, accommodation and catering services (the preparation and serving of food and beverages), these include wholesale and retail of motor vehicles, due to the large share of sales to car rental companies which have had very little business from tourism in 2020.

The only one of the five relatively most affected Croatian sectors not related to tourism is the category of processing of wood and wood products (with the exception of furniture). The average combined impact of the crisis on these five Croatian sectors exceeds an extremely concerning 80 percent in terms of operating income and number of employees.

In contrast to those Croatian sectors which have been the most deeply affected, back during the first wave of the pandemic, the crisis had the least impact on enterprises in computer programming and consulting, telecommunications, pharmaceuticals, waste collection, treatment and disposal, and electricity and gas supply. The average combined exposure of the least affected Croatian sectors to the crisis stands at 15 percent and is far lower than the most affected sectors or the average impact that the pandemic had on the domestic economy as a whole.

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