Croatia's GDP dropped by a real 1.5% on the year in Jan-Mar 2013, worse than expected, and contributed to a string of six quarters of economic contraction in a row, according to a flash estimate issued by the country's statistics office on May 29. Detailed GDP data for the quarter will be released on June 10.

The GDP contracted 2.3% y/y in the fourth quarter of 2012 after falling 1.9% y/y in the previous quarter.

The negative economic growth could be attributed to the continued decline in household consumption, related to dropping real wages and disposable income. The stagnation in the EU countries has also affected negatively Croatia’s exports. In the first quarter of 2013, the industrial production probably had a positive contribution to the GDP as it rose 1.1% on the year.

A survey carried out by news agency HINA among eight local economists earlier this month predicted a 1.2% drop of Croatia's GDP in the first quarter of 2013. All eight economists polled by HINA projected an annual GDP drop in the first quarter ranging between 0.3% and 2%. The economists also expect the 2013 GDP to contract 0.9%, worsening their projections made three months earlier, when this year’s GDP drop was seen at 0.4%.

The government has revised its projections for the 2013 GDP, expecting a slower economic growth of 0.7% (1.8% in the previous projection). The IMF, however, expects Croatia’s economy to contract by a real 0.2% in 2013, while the European Commission projects that Croatia's economy will shrink 0.4% in 2013.