Decline in Croatia's unemployment rate stalls in September

Decline in Croatia's unemployment rate stalls in September
By Akin Nazli in Belgrade October 24, 2016

Croatia's registered unemployment rate remained constant at 13.1% in September, preliminary data from the statistics office showed on October 24.

Though declining for the seven consecutive month until August, the Croatian jobless rate continues to be one of the highest in the EU. The significant annual decline in the unemployment rate was mainly due to a change in the methodology for collecting data from the labour market over the last year.

The statistics office said last month that a total of 238,000 Croatians were unemployed at end-June. The number of employed Croatians rose to 1.62mn in Q2 from 1.55mn in Q1 while the active population increased to 1.62mn from 1.55mn, according to data from the Croatian Employment Service.

Croatia’s population declined to 4.19mn at end-2015 from 4.25mn at end-2014. Croatia is among the EU members with the highest emigration rates. According to data from the German government, 50,646 of a total 685,485 registered immigrants to Germany from the EU member countries in 2015 were Croatians. The Croatian Chamber of Commerce (HGK) said last month that Croatia needs 3,000 foreign workers to compensate for the drain of qualified workers.

Caretaker Prime Minister Tihomir Oreskovic said in August that he expected the budget deficit to be below 3% of GDP, adding that the debt and unemployment were falling and that exports were growing.

GDP growth in Croatia accelerated from 2.7% y/y in Q1 to 2.8% y/y in Q2. Escalating growth performance in the first second quarter was again mainly supported by domestic private consumption. Households’ final consumption grew 3% y/y in Q2, slightly lower than the 3.1% growth recorded in Q1.

In August, Erste Group Research cut its unemployment rate forecast for 2016 to 15.2% from a previous 16.2%.

Unemployment in the country should stay high this year, edging down just 0.5pp to 16.4%, the International Monetary Fund (IMF) said in the October edition of its World Economic Outlook.

The fund warned on May 10 in the concluding statement of its 2016 Article IV Mission that ambitious structural reforms are needed to improve the efficiency of the public sector, the ease of doing business and competitiveness. Reforms would help increase income levels towards the EU average and reduce the very high unemployment.

The European Commission expects the unemployment rate in Croatia to decline to 15.5% this year from 16.3% in 2015. Modest employment growth is set to bring a reduction in the unemployment rate of about 0.8bp in both 2016 and 2017. The Commission expects nominal compensation of employees to resume growing above productivity, leading to a small increase in unit labour costs.

Croatian banking association HUB announced in March that the chief economists of the six biggest banks in the country expect the unemployment rate to continue declining and to reach 16% in 2016.

The Croatian Anti-Poverty Network, a non-governmental organisation, and the European Economic and Social Committee (EESC), a consultative body of the EU, announced on June 14 that 20% of Croatian citizens do not have sufficient financial resources for their basic needs. However, private consumption in the Adriatic country has been on a growth track during the last six quarters, pointing to a problem with income distribution.

Croatia's Unemployment Rate
Nov 17.7
Dec-15 17.9
Jan 17.9
Feb 17.8
Mar 17.2
Apr 15.9
May 14.4
June 13.6
July 13.3
August 13.1
September 13.1
source: dzs