Are things finally beginning to look up for the Croatian economy?
Due to the strengthening of consumption, industrial production and exports, macroeconomists estimate that the Croatian economy grew in the second quarter of this year, which would be the third quarter of growth in a row, reports Jutarnji List on August 23, 2015.
At the end of next week, Croatian Bureau of Statistics will publish the first estimate of the gross domestic product (GDP) growth in the second quarter, and five macroeconomists who have participated in the HINA survey estimate on average that the economy grew by 0.7 percent compared to same period last year. All of them expect growth somewhere between 0.6 and 0.8 percent.
If their estimates are correct, it would be a third consecutive quarter of GDP growth. During the previous quarter, the economy grew by 0.5 percent year on year, which marked the end of the six-year recession.
Macroeconomists explain that the growth of the economy is, among other things, a result of the strengthening of consumer spending, which is the largest component of GDP. This is demonstrated by growth in retail sales in the second quarter by about 2.5 percent compared to the same period last year. In June, retail sales rose for the 11th consecutive month, the longest such uninterrupted streak since 2007.
“It is largely due to the stronger consumption of tourists during the preseason and the increase in real disposable income, which is a result of reduced tax burden and lower fuel prices”, say participants in the survey.
Growth in exports also had a positive influence on the economy. According to data, in the first six months Croatia exported goods worth 41.6 billion kuna, which is 11.5 percent more than in the same period last year. That is largely a consequence of accelerating growth of the economy in the European Union, which is the largest Croatian foreign trade partner. At the same time, imports rose by 4.9 percent, reaching 68 billion kuna.
Some of the macroeconomists expect growth in investments, which have had negative impact on GDP for years. “We expect that the investments will now have a positive impact on GDP, thanks to private investments in equipment and plants, while construction activity has stagnated. It is important to emphasize that this would be the first investment growth since the third quarter of 2013”, says one of the polled macroeconomists.
Thanks to positive developments in the first six months of this year, most economists have increased their estimates of economic growth throughout 2015. The five macroeconomists forecast on average that this year GDP will increase by 0.4 percent, while three months ago they were expecting a growth of 0.2 percent.
Recently, the Croatian National Bank also increased its estimate of economic growth for this year from the previous 0.4 to 0.5 percent. The International Monetary Fund, World Bank and European Bank for Reconstruction and Development also expect growth of the GDP in Croatia by 0.5 percent, while analysts of the Economic Institute Zagreb are forecasting growth by 0.4 percent. In its spring assessment, the European Commission has forecast growth of the Croatian economy by 0.3 percent.
If these forecasts are correct, 2015 would be the first year of economic growth after six years of recession.