Croatia’s GDP grows by real 2.8% y/y in Q3 beating expectations– flash estimate

By bne IntelliNews November 27, 2015

Croatia's GDP expanded by a real 2.8% y/y in the third quarter of the year, accelerating from a 1.2% expansion in the previous three months, according to a flash estimate issued by the statistics office on November 27. 

This was the fourth consecutive quarter the Croatian economy posted growth, following 12 straight quarters of decline. The GDP expansion beats analysts’ expectations and gives hope the Croatian economy might return to more robust growth rates in the following years. A survey carried out by news agency Hina among local economists earlier this month predicted a 2.2% hike in the country’s GDP. The economists’ expectations ranged between 1.6% and 3%.

According to data from the statistics office, household consumption, which went up by real 1.4%, had the largest contribution to the increase among the components of domestic demand. Investment continued to rise, with growth strengthening to 2.2% from 0.8% in the previous quarter. Detailed GDP data for the quarter will be released on December 4.

“Working in Croatia's favour is the low base, but also a good tourism season - Croatia could well benefit from regional security concerns as Europeans (Russians?) look for safe short haul destinations as they divert from north Africa, and possibly even now Turkey,” Timothy Ash, head of CEEMEA strategy at Nomura International said.

He added that the problem for Croatia is the lack of investment in infrastructure, and a bit more focus from policy makers managing the tourism industry.

“More inward investment from foreigners into the sector would see efforts to extend the season, and then the upside is huge still,” he said.

"The fourth quarter of 2015 is expected to bring some slowdown in the annual pace, with tourism playing a less important role, and with the trade balance trajectory pointing to less supportive net exports footprint,"Erste Group Research said.

"Looking into 2016, we expect similar GDP growth. Domestic demand should be marginally more supportive, mainly owing to anticipated acceleration on the investments side, courtesy of EU funds absorption pick-up. Private consumption is not anticipated to accelerate vs. 2015, as one-offs from changing personal income taxation framework and partially also the low inflation environment, should fade and support is expected from gradual labor market stabilization and improving consumer sentiment," Erste added.

In seasonally adjusted terms, the GDP grew 1.3% q/q and 2.7% y/y in July-September.

The EC has said it expects the Croatian economy to grow by 1.1% this year, supported by increasing external demand and a halt in the domestic demand contraction. According to the Croatian central bank, the GDP should expand 1.2% in 2015.

GDP, real growth rates y/y Q4 2014 Q1 2015 Q2 2015 Q3 2015
Non-seasonally adjusted data 0.2 0.5 1.2 2.8
Seasonally adjusted data 0.2 0.2 1.5 2.7
GDP, real growth rates y/y, expenditure approach        
Final consumption -0.5 0.4 0.6 1.2
 households  -0.5 0.3 0.6 1.4
non-profit institutions serving households -1.1 1.8 1.5 2
general government -0.5 0.6 0.4 0.6
Gross fixed capital formation -4.1 -0.4 0.8 2.2
Exports of goods and services 5.9 7.2 10.2 8
exports of goods  7.4 8.5 14.1 10.9
exports of services 5 6.3 6.1 5.7
Imports of goods and services 0.3 5.7 6.9 8.1
imports of goods 2.4 7.5 5.7 8.6
imports of services -9.8 -4.9 13.8 5.6
Source: Croatian Statistics Office        

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