Previous forecasts showed that Croatia could reach Austria’s GDP in 26 years. Now it appears that even that was too optimistic.
Prime Minister Plenković and his Finance Minister Zdravko Marić can expect bad news tomorrow when the Central Bureau of Statistics (DZS) will publish the GDP growth data for the last quarter of 2017, reports Večernji List on February 27, 2018.
The Zagreb Economics Institute estimates that, in the last quarter of 2017, the GDP growth rate slowed down to just 1.9 percent, which would, if true, represent a significant slowdown and return to the growth rates Croatia had before mid-2015. In the fourth quarter of 2016, GDP grew by 3.5%, so falling below 2% would be an unpleasant surprise for the government.
Will the fourth quarter bring about bad news? The eight macroeconomists who participated in the regular Hina survey are not sure. The most pessimistic among them expect GDP to grow by 2.1 percent, although there are those who believe that the DZS will announce the growth rate of robust 3.2 percent.
The available data suggest that, at the end of last year, the economy was on the verge of falling below the growth rate of three percent. According to the World Bank’s regional director Arup Banerji, the growth above three percent would enable Croatia to reach the Slovakian GDP in nine years, and the Austrian GDP in 26 years. If the economy were to slow down to the 1.3 percent growth, which he said was a possibility, it would take Croatia 21 years to reach Slovakia and 58 years to reach Austria.
“Seasonally adjusted data suggest that, in the last three months of 2017, the GDP fell by 0.8 percent in relation to the previous quarter. Taking into account the previous three quarters, when real GDP growth rates amounted to 2.6, 3.0 and 3.3 percent, we expect that the GDP grew by 2.7% in the whole of 2017,” says Marina Tkalec, a researcher at the Zagreb Economics Institute, which has developed its own CEIZ economic forecast index. If this assessment is correct, that would be half a percentage point lower than the expectations of the Croatian government and the European Commission.
What went wrong in the last quarter of 2017 that it could have endangered the three percent growth? According to data, everything except tourism. The evidence shows that retail trade and personal consumption have slowed down; exports continued to grow solidly, but they were overtaken by imports; industrial production fell; there were fewer investments than in 2016, and the positive effects of the tax reform have expired.
“In the last three months of 2017, the index recorded a decline in value compared to the previous month, which indicates a slowdown in economic activity,” says the Zagreb Economics Institute. The only good news is that the slowdown did not extend to the labour market. Demand for workers is growing, and after many years the number of permanent new jobs is now almost equal to the number of fixed-term contracts offered.
Researchers at the Faculty of Economics have found that, at the end of January this year, there were 1.509 million employed persons, or 3,000 more than a month before, bringing the employment rate to the highest level since May 2010. However, research scientist Tomislav Globan says that Croatia still has about 110,000 employees less than at the end of 2008.
Unfortunately, there are fewer inhabitants as well, which is felt in the labour market where there are more and more unfulfilled positions. In January 2018, the number of open positions was 42% higher than in January 2017, according to the Zagreb Economics Institute.
Translated from Večernji List (reported by Ljubica Gatarić).
