Thursday, 11 February 2021

EC Expects Croatia's Economy to Rebound by 5.3% in 2021, 4.6% in 2022

ZAGREB, 11 February, 2021 - Croatia's Gross Domestic Product is estimated to have contracted by 8.9% in 2020, while it is expected to rise at a rate of 5.3% in 2021 and 4.6% in 2022, the European Commission says in its latest Winter 2021 Economic Forecast, published on Thursday.

The economy's contraction in 2020 "is mainly attributable to the impact of the COVID-19 pandemic on service exports, particularly tourism, which suffered greatly due to the fall in demand for air travel and the imposition of travel restrictions in many countries."

Croatia's private consumption also fell, reflecting the accumulation of involuntary and precautionary savings.

Following a better-than-expected third quarter, the country's GDP is estimated to have contracted again towards the end of the year as pandemic suppression measures were reintroduced in December.

This contraction is lower than the previous projections of -9.6%, as stated by the EC in its Autumn Economic Forecast. However, the latest forecasts about the rise in 2021 are smaller in comparison to the previously projected recovery at a rate of 5.7%, while the projected growth for 2022 has been revised upward from 3.7% to 4.6%.

"Real GDP is forecast to bounce back by 5.3% in 2021, as domestic demand should rebound once pandemic containment measures are phased out and more people are vaccinated.," the EC says.

"Pent-up demand, coupled with a gradual recovery in the labour market, is expected to boost private consumption. Investment should rebound on the back of the already strong dynamics in the construction sector, supported by rebuilding efforts following the strong earthquakes in the Banija region and Zagreb.

"A gradual pick up in longer-term investment projects, is also expected. The recovery in external demand, however, is expected to be uneven. Goods exports are expected to increase strongly on the back of the improved global outlook but services exports are projected to remain subdued in both 2021 and 2022 compared to their 2019 levels.

"This is mainly because the recovery in the travel and hospitality sectors are likely to take several years. This forecast does not include any measures expected to be funded under the Recovery and Resilience Facility, posing an upside risk to the growth projections.

"HICP inflation rate dropped to 0% in 2020 on the back of a strong decline in energy prices, while core inflation remained broadly stable at around 1%. As the effect of last year’s fall in oil prices dissipates, inflation is expected to pick up slightly in 2021 but should remain subdued throughout the forecast horizon (1.2% in 2021 and 1.5% in 2022)," reads the Croatia section of the EC Winter Economic Forecast.

Croatia ranks 3rd in terms of expected rise in 2021, fourth in terms of fall in 2020

For the sake of comparison, Spain is expected to have the most robust recovery in 2021, at  a rate of 5.6%, France follows (5.5%), and Croatia ranks third among the 27 EU member-states.

When it comes to the economic downturn in 2020, Spain again tops the ranking (-11%), Greece is  the runner-up (-10%), and Malta ranks third (-9%), while Croatia comes as fourth with a negative growth rate of 8.9%.

Thursday, 30 April 2020

GDP to Shrink by 9.4% in 2020, Rebound by 6.1% in 2021

ZAGREB, April 30, 2020 - The government forecasts that this year Gross Domestic Product (GDP) will fall by 9.4% while in 2021, recovery is expected at a rate of 6.1%.

The government session on Thursday discussed the 2020 National Reform Programme and the Croatia's Convergence Programme for 2020 and 2021.

The convergence programme projects the contraction of the national economy by 9.4% in 2020 while in 2021 the government expects a recovery and growth rate of 6.1%.

Opening the cabinet meeting on Thursday, Prime Minister Andrej Plenković said that with reference to economic policies the National Reform Programme rests on three existing objectives that the government had set at the outset of its term.

That is sustainable growth and development, connecting education with the labour market and the sustainability of public finances.

Under a baseline scenario, the main adverse impact on the domestic, and global economy will be of a short-term nature.

It is expected that the general government budget will record a deficit of 6.8% of GDP or HRK 24.8 billion in 2020 while in 2021 the general government budget deficit is expected to be reduced to 2.4% of GDP, he said.

The public debt to GDP ratio in 2020 is expected to grow by 13.5 percentage points compared to 2019 and will amount to 86.7% of GDP, mostly due to increased needs for borrowing as a consequence of the negative fiscal effects caused by the coronavirus pandemic.

In 2021, subsequent to reducing the general government budget deficit to 2.4% of GDP and strong economic growth it is expected that the public debt to GDP ratio will fall to 83.2% of GDP, which is a drop of 3.5 percentage points compared to 2020.

Consumer prices are expected to drop mildly in 2020 by 0.3% year on year.

The government is counting on job-keeping measures to buffer the shock on the unemployment rate and that the fall in the number of people employed will drop by 3.3% in all of 2020, and the average surveyed unemployment rate in 2020 will amount to 9.5% and 9% in 2021.

As far as fiscal trends are concerned, direct aid from the budget is estimated at HRK 14.9 billion which includes deferments on taxation and contributions, writing-off direct taxes and contributions, deferring profit tax for 2019, job-keeping incentives and the procurement of medical protective equipment in the fight against COVID-19.

An additional HRK 15 billion has been secured for favourable loans for entrepreneurs under schemes provided by the development bank HBOR and and the HAMAG BICRO agency, as well as HRK 17 billion for a moratorium on loans.

More news about GDP growth can be found in the Business section.

Tuesday, 14 April 2020

IMF Expects Croatia's GDP to Shrink by 9% in 2020

ZAGREB, April 14, 2020 - In 2020 Croatia's economy will contract by nine percent, the most in the group of emerging European economies, shows the latest global economic forecast of the International Monetary Fund (IMF), published on Tuesday.

The coronavirus pandemic has been strongly impacting economic activity, shows the latest forecast, reflecting the consequences of quarantine and other stringent measures with which governments around the globe have been trying to fight the new, highly contagious virus.

According to the latest IMF forecast, Croatia's GDP will drop by 9% this year. For the sake of comparison, last autumn, before the outbreak of the epidemic, the IMF forecast a growth rate of 2.7% for Croatia's economy in 2020.

In 2021 recovery is expected, with an estimated growth rate of 4.9%.

The international lender has also revised the growth rate for 2019 to 2.9%, down by 0.1 percentage point.

The IMF expects a significant increase in unemployment this year, to 11.5%, as against the autumn forecast of an unemployment rate of 8%.

In 2019 unemployment was at 7.8%, whereby the October 2019 forecast has been revised down by 1.2%.

In 2021 unemployment is expected to drop again, to 8%.

The IMF also forecasts a deficit in the current account, expressed as a share in GDP of 4% in 2020, whereas in its autumn forecast it predicted a surplus of one percent.

A deficit in the current account of 1.5% is forecast also for 2021.

The forecast about consumer price growth in 2020 has been revised up by 0.1 percentage point, to 1.3%. In 2021 prices are expected to grow at an almost unchanged rate of 1.2%.

In 2019, according to the IMF's estimates, prices grew by 0.8%, a downward revision of the autumn forecast by 0.2 percentage points.

According to the latest forecast, the surplus in 2019 was 2.9%, which is 1.2 percentage points higher than forecast in October 2019.

The latest IMF estimates show that this year Croatia's economy is expected to drop the most in the group of emerging European economies, which also encompasses Russia, Turkey, Poland, Romania, Ukraine, Hungary, Belarus, Bulgaria and Serbia.

The IMF estimates that those economies will drop by 5.2% on average this year, as against a 2.5% growth, forecast in the autumn of 2019.

In 2021, strong recovery is expected, with an estimated growth rate of 4.2%.

Last year, the emerging economies grew by 2.1% on average, 0.3 pp more than forecast by the IMF in October 2019.

A more pronounced drop in economic activity is expected this year in Ukraine and Belarus, of 7.7% and 6% respectively. The two countries are followed by Russia, with an estimated drop of 5.5%, and Turkey and Romania, each with a decline of 5%.

Poland's economy is expected to contract by 4.6% and Bulgaria's by 4% while economic activity in Hungary and Serbia is expected to contract the least, by 3.1% and 3% respectively.

More economic news can be found in the Business section.

Friday, 20 March 2020

RBA: GDP to Drop 5% This Year

ZAGREB, March 20, 2020 - Croatia will face a steep fall in GDP this year, of almost 5% on the year, while seasonality in tourism demand and weak industry will make recovery slower in comparison with other countries, Raiffeisenbank Austria analysts have said.

The current situation and coronavirus spread will have a significant impact on the Croatian economy, especially due to its strong dependence on tourism, according to a special publication, "Covid-19", published by RBA on Friday.

It is already quite certain that there will be no preseason, and the impact of the epidemic on the peak tourist season is expected to increase. The consequence will be a fall in overnight stays and loss of tourism revenue, RBA said.

The bank's analysts reiterate that at least a fifth of overnight stays and tourism revenue in Croatia can be matched to Q2, while the main tourist season, which falls in Q3, accounts for 70% of overnight stays and revenue.

Among the sectors at risk, RBA analysts include the service sector, especially transport and all other services that depend on tourism: accommodation, food and beverage services, recreation and entertainment and travel services. They add that the manufacturing industry - chemical, paper, textile, lumber etc. - will most certainly experience a decrease in supply and demand since the main Croatian export markets are EU countries, especially Italy and Germany, so a slump in goods export is inevitable in Q2.

More economy news can be found in the Business section.

Friday, 28 February 2020

Economic Growth Slows Down to 2.5% in Q4 2019

ZAGREB, February 28, 2020 - Croatia's economy grew by 2.5% in the fourth quarter of 2019 compared to Q4 2018, which is a lower rate than in Q3, when economic growth was at 2.9%.

The national statistical office (DZS) on Friday published its preliminary estimate, which shows that GDP saw an annual increase of 2.5% in Q4 2019, the 22nd consecutive quarter to see an increase in GDP albeit lower than in the previous quarter.

In 2019 GDP grew by 2.9%, which is more than the year before, when the growth rate was 2.65%.

The faster GDP growth in 2019 was mostly owing to a strong, 4.1% increase in the first quarter, while in the second quarter GDP grew 2.4% and in the third it rose 2.9% on the year.

The biggest positive contribution to GDP growth in Q4 2019 came from an increase in the export of goods and services and household consumption, the DZS says.

On the other hand, the contribution of net external demand was negative.

Household consumption in Q4 grew by 4% compared to the same period of the year before, which is a faster growth than in Q3, when household consumption grew by 3.1%.

The export of goods and services grew in Q4 by 5.6% on the year, which is higher than the 5.1% growth recorded in the previous quarter.

The export of goods grew by 2.1% and the export of services jumped by 12.1%.

The import of goods and services rose by 0.1% on the year, much less than in the previous quarter, when it rose by 4.3%.

The import of goods rose by 0.8% while the import of services dropped by 3.1%.

In Q4, investments in fixed assets rose by 4% on the year, which is a decrease compared to a 5% increase in the previous quarter.

Government spending also grew in Q4, by 3.5% on the year, which is faster than in Q3, when government spending grew at a rate of 2.9%.

According to seasonally adjusted data, GDP in Q4 grew by 0.3% compared to the previous quarter while on the year it grew by 2.7%.

The GDP growth rate is higher than the EU average considering that Eurostat recently said that the EU economy in Q4 2019 grew by 1.2% on the year and by 0.1% on the quarter.

More economy news can be found in the Business section.

Monday, 24 February 2020

Croatia's GDP per Capita Reaches 11,893 Euro

ZAGREB, February 24, 2020 - Croatia's Gross Domestic Product (GDP) reached €11,893 per capita in 2017, with only the City of Zagreb and three coastal counties surpassing the national average, data from the National Bureau of Statistics shows.

Zagreb's GDP per capita was three times as high as that of Virovitica-Podravina County, which was the lowest.

Expressed in the national currency, the kuna, Gross Domestic Product per capita in 2017 amounted to 88,726 kuna, which is a nominal growth rate of 5.4% compared with 2016, while the growth rate in euro is 6.4%.

Statistics also show that Croatia's Gross Domestic Product per capita was 61.7% of the EU28 average.

The highest GDP per capita in 2017 was recorded in the City of Zagreb, reaching €20,850, which is 75.3% above the national average. Zagreb was also the only administrative unit in Croatia which had a Gross Domestic Product per capita higher than the EU28 average, namely 8.2% above the average.

Only three other counties, notably those on the Adriatic coast, had a GDP above the Croatian average. Istria County's GDP per capita was €14,866, 25% above the national average, Primorje-Gorski Kotar County had a Gross Domestic Product per capita of €14,526, 22.1% above the national average, while Dubrovnik-Neretva County surpassed the national average by 5.7% with a Gross Domestic Product per capita of €12,575.

More news about economic growth can be found in the Business section.

Thursday, 13 February 2020

EC Revises Upwards Growth Predictions for Croatia

ZAGREB, February 13, 2020 - The European Commission on Thursday stated that Croatia's real GDP growth "is estimated to have risen to 3.0% in 2019", as against the previous forecasts of 2.9%, assessing that in 2020, the economy will grow at a rate of 2.6% and in 2021 at 2.3%.

"After a weak 2018, real GDP growth in Croatia is estimated to have risen to 3.0% in 2019," the EC says in its latest Winter 2020 Economic Forecast.

"Domestic demand strengthened, driven by a noticeable pick-up in investment and government consumption expenditure, while continued improvements in the labour market and low inflation underpinned private consumption," reads the report issued on Thursday.

"Even though exports rebounded sharply, their growth was outpaced by imports.

"Economic growth is expected to moderate as GDP is forecast to expand by 2.6% and 2.3% in 2020 and 2021, respectively," reads the latest report and while the previous economic forecast by the EC, issued on 7 November 2019, estimated that Croatia's economy is likely to expand at the same rate of 2.6% in 2020 and at the rate of 2.4% in 2021.

The EC expects domestic demand to remain the main driver of growth in both years.

"Household consumption growth is expected to inch down but remain supported by rising real disposable incomes as unemployment, already at record low levels, is expected to further decline," says the EC.

"Investment growth is expected to remain strong, supported by a growing volume of maturing EU-funded projects from the 2014-2020 programming period.

"Export growth is set to moderate, in line with lower growth in Croatia’s main trading partners, trade uncertainties and the limited scope for further growth in the tourism sector. Import growth should be underpinned by still strong domestic demand but is Expected to decline in both 2020 and 2021.

"After improving in 2019, the contribution of net exports to growth is expected to deteriorate in 2020 before stabilising in 2021,” reads the Croatia report from the latest Economic Forecast.

"The HICP inflation rate halved in 2019 compared to 2018, due to negative inflation for unprocessed food price, resulting from changes in the applicable VAT rate. With the VAT change effect dissipating, wage pressures in the labour market and strong domestic demand are expected to fuel a pick-up in inflation in both 2020 and 2021, despite the assumed decline in energy prices Core inflation is thus expected to increase even more. Inflation is forecast at 1.5% and 1.7% in 2020 and 2021 respectively," the EC concluded.

More economy news can be found in the Business section.

Thursday, 13 February 2020

HNB: Croatia's Real GDP Growth Slows in Q4 2019

ZAGREB, February 13, 2020 - The available monthly indicators suggest that Croatia's real GDP growth slowed in the fourth quarter of 2019, while the labour market continued to see favourable trends, including increased employment and wages and a fall in unemployment, the Croatian National Bank (HNB) Council said a statement on Wednesday.

The HNB Council met to discuss the latest monetary and economic trends and analyse the financial stability of the banking system in the last quarter of 2019.

Inflation picked up from 0.7% in November to 1.4% in December, mostly due to food prices, notably a strong increase in pork prices, and oil prices.

Financing costs mainly continued to decrease as a result of the accommodative monetary policy.

The annual rise in bank loans accelerated to 4.2% at the end of 2019 on the back of the rise in household and corporate loans. At the same time, the annual rise in loans to non-financial companies was mostly due to the fading of the negative effect of the activation of state guarantees for shipyards in late 2018.

The available fiscal data for the third quarter of 2019 indicate a continuation of favourable trends in public finance as budget revenues grew faster than expenditures, the statement said.

More news about Croatian economy can be found in the Business section.

Thursday, 9 January 2020

World Bank Raises Croatia's 2019 and 2020 Growth Forecast

ZAGREB, January 9, 2020 - According to the latest World Bank estimates, Croatia's growth in 2019 and 2020 is forecast to pick up to 2.9% and 2.6% respectively, which means that the difference from previous estimates is respective 0.4 and 0.1 percentage points.

The World Bank's Global Economic Prospects, issued on Wednesday. reads that in 2021, Croatia's economy is likely to slow to 2.4%, and this forecast is the same as in the previous report issued in June 2019. Croatia's economy is set to grow at the rate of 2.4% also in 2022.

The latest report reads that the growth in emerging economies in Europe and Central Asia, the region where Croatia is also added in the report, "is expected to firm over the forecast horizon, to 2.6 percent in 2020 and 2.9 percent in 2021-22, on the assumptions that key commodity prices and growth in the Euro Area stabilize, and that Turkey’s economy recovers from earlier financial pressures and Russia firms on the back of policy support."

Considerable variation across economies is expected to continue. "Economies in Central Europe are anticipated to slow as fiscal policy support wanes and demographic pressures persist, while those in Central Asia are projected to continue growing at a robust pace, and more rapidly than previously envisaged, on the back of structural reform progress."

Central Europe is forecast to sharply decelerate over the forecast horizon, to 3.4 percent GDP growth in 2020 and 3 percent by 2022.

Growth in the Central Europe is "highly dependent on the continued absorption of EU structural funds, with the current cycle expected to end in 2020."

"The regional outlook remains subject to significant downside risks, including slowing growth in major trading partners, geopolitical turbulence, heightened policy uncertainty, exposure to disorderly financial market developments, as well as weakening productivity growth over the long run."

Global growth set to pick up modestly to 2.5% in 2020 amid mounting debt and slowing productivity growth

Global economic growth is forecast to edge up to 2.5% in 2020 as investment and trade gradually recover from last year’s significant weakness but downward risks persist, the World Bank says in its January 2020 Global Economic Prospects.

"Growth among advanced economies as a group is anticipated to slip to 1.4% in 2020 in part due to continued softness in manufacturing.

"Growth in emerging market and developing economies is expected to accelerate this year to 4.1%. This rebound is not broad-based; instead, it assumes improved performance of a small group of large economies, some of which are emerging from a period of substantial weakness. About a third of emerging market and developing economies are projected to decelerate this year due to weaker-than-expected exports and investment.

"With growth in emerging and developing economies likely to remain slow, policymakers should seize the opportunity to undertake structural reforms that boost broad-based growth, which is essential to poverty reduction," World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu, was quoted as saying.

More economy news can be found in the Business section.

Saturday, 21 December 2019

Erste Bank: Croatia's GDP Growth to Slow Down to 2.5% in 2020

ZAGREB, December 21, 2019 - Erste Bank estimates that Croatia's GDP growth in 2020 will slow down to 2.5% compared to the 3% forecast for this year, it was said on Friday during a Christmas function for the bank's executives and the media.

Chief analyst at Erste Bank Alen Kovač said that personal consumption and investments were the main generators of growth in 2019 and that investments were supported by better absorption of European Union funds. Kovac expects that these two segments will once again be the main contributors to growth in 2020 and that a relatively strong growth in investments, once again supported by EU funds, would compensate for the potentially unfavourable economic situation abroad next year, which could mean negative risks for Croatian exports.

Those risks are primarily related to Brexit, the potential further deterioration of trade relations between the major powers, and the level of growth in Germany and Italy. Personal consumption and its contribution should remain relatively stable and strong, and that should be supported by positive aspects in the area of disposable income, consumer confidence, the labour market and increased wages in the public sector, Kovač said.

Risks related to the estimated growth rate of 2.5% in 2020 are relatively balanced and investments represent a positive risk, while the global surroundings are a negative risk," Kovač underlined.

He added that growth climaxed in central and eastern Europe in 2018 while it slowed down in the majority of countries in 2019. Croatia is among that group of countries where a mild acceleration occurred, which is a positive exception.

 More economic news can be found in the Business section.

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