Croatia’s GDP decline seen slowing down in Q2 2013 - analyst poll

By bne IntelliNews August 26, 2013

Croatia’s GDP sank into a seventh quarter of decline in Apr-Jun 2013 albeit at a slower pace, according to macroeconomists polled by news agency HINA. The estimates of the seven analysts for the annual decrease in Q2 vary between 0.8% and 1.4%. Though sharp, this would be a smaller decline than in the first quarter of 2013 when the economy slid 1.5% y/y.

The statistics office is due to release a flash estimate for the Q2 GDP dynamics at the end of August.

Some of the economists polled by HINA saw positive effects on the GDP from the recent growth in retail sales and investment activities, suggesting increasing domestic demand. In June, retail trade turnover (excluding motor vehicles and motorcycles) jumped 4.9% y/y in real terms after posting a revised 3.8% increase in May, statistics office data has shown.

Despite these positive signs, exports dropped by a significant 4.5% y/y in the first half of the year. Indications that the euro zone has emerged from the recession suggest exports may strengthen in the second half of the year but this is yet to affect Croatia’s economy. Pushed by increased local demand imports edged up by 0.3% y/y in H1, widening the trade gap by 6.3% y/y.

The weak industrial output is also pushing down the overall economic performance. It shrank 1.5% y/y in June after dropping an annual 5.3% in the previous month. The drop was prompted by a worse performance in manufacturing where output went down 4.5% following a 10% decline a month earlier.

International organisations have revised down their predictions for Croatia’s 2013 economic growth as the negative trends persist. The European Commission lowered its latest 2013 forecast to 1.0% drop from a 0.4% decline projected back in Feb. The IMF expects a 0.2% y/y GDP drop for the current year, while the World Bank sees the contraction at 0.4%.

The Croatian central bank said in July it expects the country’s GDP to shrink 1% in full 2013 due to the higher than estimated fall in personal consumption and the slow revival of the investment cycle.

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