ZAGREB, February 28, 2019 – Finance Minister Zdravko Marić said on Wednesday the government had anticipated the slowing down of economic growth in the last quarter of 2018, adding that industrial production and high imports gave cause for concern, while the growth of consumption and investment reflected good economic sentiment.
Speaking to Hina, Marić said the government had expected the slowing down of economic growth in Q4 to 2.3%, as had the central bank and leading analysts given the available analyses of macroeconomic indicators, notably industrial production and net exports. “The total growth in 2018 of 2.6% is in line with our expectations,” he said, recalling that the last government projection was that the economy would grow 2.7% last year.
Marić said the 2.5% annual decline in the manufacturing industry and the 1.3% rise in exports in Q4, slower than in the previous quarters, were cause for concern. He said “that’s not just due to shipbuilding… but other industries and the export of commodities.”
He said the dependence on imports remained high. In Q4 2018, they went up 6.6%, with the import of commodities rising 9% and the import of services falling by 2.8%. “We have to do everything in our power to additionally boost the domestic economy so it can perform better and reduce its dependence on imports.”
As for the good indicators, Marić said personal consumption went up 3.9% on the year thanks to the positive sentiment among citizens and in the economy. He said the latest tax cuts had managed to increase citizens’ disposable income, resulting in higher consumption.
GDP was also supported by a 6.1% rise in investments, which points to good economic sentiment thanks to tax cuts and better absorption of European Union funds, he said, adding that both the private and public sectors had done their share.
“The total real annual growth rate in 2018 of 2.6% is mildly higher than the potential growth rate, which is not satisfactory in the middle term. We should all strive for higher growth rates which will contribute to sustainable growth, which the European Commission too highlighted today in its European semester report.”
The Commission said Croatia was no longer recording excessive economic balances but economic imbalances. “We expected to come out of the group of countries with excessive imbalances because we are working on reducing and eliminating them,” said Marić.
The Commission too says domestic demand is the main economic growth driver in Croatia but that there are certain challenges to be dealt with, first and foremost domestic production, he said. On the other hand, one should take into account the neighbourhood as some countries, primarily Italy, do not have the best economic results, yet are major trade partners to Croatia, he added.
Those are objective circumstances one should consider and the Commission too concludes that it is necessary to improve the domestic business climate and conditions for doing business so that the economic growth rate could be higher, Marić said.
“I’m glad this report too concludes that we are pursuing a sensible fiscal policy, which means that it acknowledges everything the government has been doing for three years in a row to reduce the public debt, to reduce interest rates, to improve borrowing conditions, to successfully reschedule the debts of the road sector, to step up reforms.”
He voiced hope and confidence that the Commission’s latest report would send a positive signal to financial markets and rating agencies, also in light of plans to reschedule the domestic and dollar debts due in November.
More news on Croatia’s economic growth can be found in the Business section.
