Monday, 19 September 2022

Croatian Postal Market Income Reaches 523 Million Kuna

September the 19th, 2022 - The Croatian postal market has managed to earn an income of 523 million kuna thanks to positive developments throughout this year's second quarter.

As Poslovni Dnevnik writes, positive developments on the Croatian postal market continued throughout the second quarter of 2022, and the total revenue amounted to 523 million kuna, the Croatian Regulatory Agency for Network Activities (HAKOM) announced recently. When compared to the previous quarter, revenues on the Croatian postal market increased by 6.3 percent, while compared to the same period of the previous year, they grew by 10.2 percent.

The result was primarily contributed to by services with greater, more added value, as the total number of postal services being carried out actually decreased. As such, in the second quarter, 8.2 million packages were transferred, which is 5.5 percent more than in the previous quarter and 12.6 percent more than last year.

In contrast to parcels and packages of a larger volume, a decline was recorded in letter shipments with one of the lowest recorded shares in the total number of services performed, which amounted to 79 percent in the middle of the year. With the reduction in the number of letters sent and delivered, the share of universal service fell below 50 percent for the first time. When it comes to the Croatian postal market and wider, more specifically international traffic, the number of services was higher by 11 percent.

The number of postal service providers across the Republic of Croatia didn't change, and in the middle of the year there were still 24 of them. The largest provider was of course Croatian Post (Hrvatska posta) with a share of 87 percent in the number of services performed and 58.3 percent in total revenues.

For more on the Croatian economy, make sure to check out our dedicated business section.

Saturday, 10 September 2022

Croatian National Association of Caterers Welcomes Government Measures

September the 10th, 2022 - The Croatian National Association of Caterers has welcomed the package of economic measures the government has introduced to battle inflation and spiralling energy bills.

As Morski writes, on Thursday, the Croatian National Association of Caterers welcomed the package of measures introduced by the Croatian Government following drastic energy bill increases which, over recent months, have posed a huge amount of danger to the survival of enterprises already exhausted by the dire effects of the global coronavirus pandemic.

This is especially true with those operating within the catering, hospitality and tourism sector, which are mostly micro, small and medium-sized businesses and companies, the aforementioned association's press release notes.

From the government's package of measures, the Croatian National Association of Caterers have singled out the measure of capping the cost of electricity and the measure which seeks to increase the amount of tax-free payments to employees, which, as they pointed out, will enable the continuation of the work of catering and hospitality establishments this winter, as well as contribute to the preservation of jobs.

They have assessed that by limiting the cost of electricity for half-yearly consumption by companies up to 250,000 kWh to 0.53/kWh kuna, which ensures a price 12 times cheaper than the stock exchange price, the Ministry of Economy and Sustainable Development has showcased "a previously unheard of level of understanding and support for micro, small and medium-sized companies which experience the most difficult moments when doing business, and at the same time forms the backbone of the domestic economy."

The Croatian National Association of Caterers has also said that they hope for successful negotiations and equal treatment when it comes to the limiting of the price of gas, which, along with electricity, is an essential energy source in the hospitality industry, especially in the area of ​​continental Croatia in the winter period of the year.

Considering the wide scale and long-term nature of this ongoing and unfolding crisis and limited resources, they're also calling for the implementation of savings measures and the rationalisation of energy consumption in the business and private spheres, as reported by HRT.

For more, make sure to check out our dedicated business section.

Saturday, 3 September 2022

Receipts Issued During August 2022 5.1 Billion Kuna Higher Than 2021

September the 3rd, 2022 - Fiscalised invoices, bills and receipts issued across Croatia during the month of August are very encouraging, exceeding August 2021's amount by a very impressive 5.1 billion kuna more.

As Poslovni Dnevnik/Jadranka Dozan writes, while various statistical indicators of Croatian economic activity typically arrive with a greater or lesser time lag depending on the sector we're talking about, the first figures on the movement of consumption measured by fiscalised traffic, which really means physical indicators of the tourist season, are publicly available practically immediately.

That means that even though we've only just entered the month of September, we can see that all taxpayers (from all activities listed within that system) in August issued receipts worth 31.6 billion kuna, which, when compared to the same month last year, is a figure higher by almost a fifth (19.3%) that is, by 5.1 billion more kuna. During the summer months, there is an increased focus primarily on tourism, catering and hospitality activities, as well as those heavily influenced the tourist season, from trade to transportation.

Stronger growth in the hospitality industry

Enterprises working in the provision of accommodation, catering and hospitality reported 8.4 billion kuna in fiscalised turnover in August 2022. Compared to last August, this is 1.6 billion kuna or 16 percent more. Slightly more than half of last month's turnover refers to accommodation (4.3 billion), but year-on-year comparisons show that stronger growth was recorded in the hospitality sector.

Cafes, restaurants, bars and other companies operating within the segment of food and beverage preparation/service during the month of August of this year issued less than 4.1 billion kuna's worth of receipts, which is almost 30 percent or 930 million kuna more than last year, while the aforementioned turnover in accommodation represents an increase of 18 percent or about 660 million kuna.

To a large extent, the growth percentages, of course, reflect increased prices caused by ongoing inflation. This naturally means that companies have had to deal with unusually high operating costs of their own to remain above water, but that's another story for another time.

Be that as it may, the cumulative data shows significantly higher growth rates of fiscalised traffic in the tourism, hospitality and catering sector. In terms of accommodation, the 8-month turnover reached 12.1 billion kuna, thus exceeding last year's 8 billion kuna by a very significant 51 percent. At the same time, almost 16.1 billion kuna was reported in the hospitality industry since the beginning of the year, which is as much as 70 percent more than last year's 9.5 billion kuna, which can partly be attributed to the lower seasonality of that segment and the fact that in the first part of last year, the impact of epidemiological restrictions was still considerable.

Among the activities that rely quite heavily on tourism during the summer months is the transportation and storage category.

Croatian companies operating within that branch reported almost 540 million kuna in fiscalised turnover in August 2022, which is 36 percent more than last August. A significantly larger 80 percent of the increase in the value of issued bills and receipts was also recorded through the fiscalisation system in Administrative and auxiliary service activities (435 versus 242 million kuna).

In the retail trade (excluding that of motor vehicles), bills worth a total of 12.7 billion kuna were issued last month, which is about one hundred million more than in July and 1.55 billion kuna or almost 14 percent more than in August 2021. At the same time, more than half of that turnover refers to supermarkets and hypermarkets, i.e. non-specialised stores mainly selling food, drinks, tobacco and household products, where the increase in August's turnover stood at a slightly higher 17 percent (6.9 against 5.9 billion kuna recorded last August).

For more, make sure to check out our dedicated business section.

Saturday, 3 September 2022

CBS: Croatian Industrial Production Slowed Down in July 2022

September the 3rd, 2022 - Croatian industrial production slowed down during the scorching summer month of July this year according to the Central Bureau of Statistics (CBS). Inflationary pressures, the Russia-Ukraine war and economic downturn all pose continuing threats.

As Poslovni Dnevnik/Josipa Ban writes, back during July this year, Croatian industrial production increased by 2.9 percent on an annual basis, while it fell by 1.9 percent on a monthly basis, data from the CBS shows. Growth experienced back during July was slower than it was one month earlier, when Croatian industrial production increased by 3.8 percent on an annual basis.

When referring to this CBS report, analysts from Raiffeisenbank Austria (RBA) have pointed out that the growth of industrial production, along with the growth of retail trade, is a continuation of the favourable trends for the third quarter. This, they say, indicates solid domestic economic growth in the period from July to September.

As for the sectors involved, production growth in July was recorded in four of them. The most, standing at 14.1 percent, lies in the production of capital goods. Following that with 10.5 percent is the production of energy, while the production of durable consumer goods increased by 4.3 percent, and non-durable consumer goods increased by 1.2 percent. Only the production of intermediate products fell - by 3.1 percent in total.

However, RBA analysts have also made sure to warn the public of negative risks alongside this seemingly completely positive news.

"The adverse impact of the current geopolitical conflicts (referencing the Russia-Ukraine war and the spiralling inflation we're all experiencing) has a negative impact on the recovery of foreign demand due to the dependence of some of the Republic of Croatia's most important trade partners on Russia. Likewise, strong inflationary pressures and problems in supply chains will act in a negative direction and reduce potential stronger achievements,'' they concluded.

For more, make sure to check out our dedicated business section.

Monday, 29 August 2022

Do Benefits of Croatian Eurozone Accession Outweigh Risks?

August the 29th, 2022 - Croatian Eurozone accession is just around the corner, with all requirements filled, all boxes ticked and the date for entry marked out for the 1st of January, 2023. The public is still divided on the issue, however, so what are some of the advantages and some of the risks and costs of Croatia finally becoming a Eurozone member?

As Poslovni Dnevnik/Marina Marovic writes, here is no alternative to joining the Eurozone for Croatia, as it was part of the referendum the country held on joining the bloc. It did so back in July 2013 and according to experts, all the benefits of Croatian Eurozone accession greatly exceed the potential costs and risks. The Croatian economy has an extremely high degree of euroisation despite still using the kuna as it is tied to the euro, and around 70% of people's savings in Croatia are in the bloc's single currency.

Therefore, kuna devaluation is simply not an option, because the balance effect would be significantly more difficult for the Croatian economy to handle than any gains on the export front.

The biggest advantages of Croatian Eurozone accession

This high rate of Croatian euroisation originates from the time of the former state of Yugoslavia when, due to hyperinflation, the German mark was the currency used to preserve the value of money in the country. This means that regardless of Croatia having its very own currency for less than three decades, this sense of illusory monetary sovereignty will not actually be lost, but the risks involved in everything financial will be greatly reduced.

The absolute biggest advantage of Croatian Eurozone accession on January the 1st, 2023 comes in the form of significantly lower risks and reduced borrowing costs. In addition to the reduction in interest rates, which also maintains a better investment rating, additional borrowing will be made much easier because joining the Eurozone frees up significant funds (about 160 billion kuna in total) currently tied up as minimum foreign currency claims. In addition to that, the country's banks will reduce currency risks and improve overall stability.

In addition to lower interest rates and borrowing costs, Croatia will become more attractive for both investors and tourists (75 percent of them come from the Eurozone, and tourism makes up 20 percent of the nation's economic activity). Additionally, conversion costs for capital transactions such as the sale of property and land, the prices of which have been expressed in euros for a long time now, will be reduced.

Aside from property and other forms of real estate, renting an apartment or buying a car is also usually expressed in euros. By joining the Eurozone, Croatia is merely formalising some of the existing conventions. An additional advantage is that Croatia will be able to count on ECB support in case of any liquidity problems.

Croatian banks will lose out when it comes to conversion fees (about a fifth of their profit, or 1.5 billion kuna), and have additional ATM costs (totalling about 900 million kuna). Exchange offices will largely be out of business. The one-time cost of introducing the euro in Croatia will cost the banks an enormous 100 million kuna, and the cost of the entire adjustment will be paid for by other sectors of the economy, especially retail and telecoms. The average cost for large retail chains will stand at around 30 million euros, for telecoms it is around 20 million euros, and for smaller companies the cost of introducing the euro isn't expected to exceed 10,000 euros.

Uncertain times...

Croatian Eurozone accession is finally occurring in incredibly uncertain times in which it is really difficult to comply with all the requirements for convergence - known as the Maastricht criteria - and yet all the basic indicators were assessed as positive and successful in the latest report and decision back on July the 12th, 2022 The biggest risk is in the galloping rate of inflation.

Back in April 2022, the annual average rate of HICP inflation in Croatia stood at 4.7%, which is below the reference value of 4.9% for the price stability criterion. This value was decisive for the final decision on Eurozone accession in 2023. That said, by the time June rolled around, inflation crossed over into the concerning land of double digits, and the last July value of 12.3% was significantly higher than the average inflation in the Eurozone of 8.6%. The Baltic countries, all of which are now members of the Eurozone, have already registered inflations of more than 20%.

Just joining the euro brings a one-time increase in prices, but on average such an increase amounts to about 0.3% and in the context of current inflation is negligible. The dual display of prices (in both kuna and euros) serves to reduce this risk, and in general, the preparation for the introduction of the euro in Croatia is systematic and thorough, so that these risks are minimal.

In the long term, one would expect convergence of both prices and real income, but in practice there are many other factors that influence whether this actually happens or not. In addition to inflation - foreign exchange markets have experienced tectonic shifts. Croatia is now joining the club of prestigious countries when the euro is at its worst so far - and is at parity with the dollar, which has not happened in the last 20 years. There are several reasons for a strong dollar and a weak euro, but the most important one lies in the fact that the ECB is reluctant to raise interest rates.

The reason for the ECB's lack of reaction is multifaceted, but the fact is that inflation in the EU hasn't been caused by an increase in demand, but rather by an increase in energy and food prices. On the other hand, inflation across the pond in the United States of America is more a consequence of the post-pandemic recovery of the economy than anything else.

For more, make sure to check out our dedicated politics section.

Saturday, 27 August 2022

Croatian GDP Growth in Second Quarter Exceeds EU Average

August the 27th, 2022 - Croatian GDP growth has been considerably higher than it has been in the rest of the European Union, despite the ongoing troubles being faced by spiralling inflation and pressure on the government to step in with measures to protect some of the most vulnerable in society.

As Poslovni Dnevnik writes, Prime Minister Andrej Plenkovic recently visited Rijeka where he commented on the news about the 7.7 percent Croatian GDP growth in the second quarter of this year, saying that it represents the second highest growth in the European Union (EU) and is almost double the average at the level of the bloc.

Plenkovic said that for now, only neighbouring Slovenia has enjoyed a higher GDP growth in the second quarter in the entire 27 member bloc.

''The average growth in the second quarter at the European Union level stands at four percent. So, that means that Croatian GDP growth is almost a hundred percent higher, almost doubling that. We can be very satisfied with that indeed,'' he said, highlighting the extra burden the economic crisis we're all dealing with at this moment in time.

He added that considering the "fantastic" tourist season Croatia has enjoyed so far, with numbers matching those of the pre-pandemic, record year of 2019 in multiple sectors, everything indicates that the third quarter will also be very good for the country.

''This means that Croatian GDP growth this year will be higher not only as we predicted it, but also how others predicted it. This includes international institutions, agencies, organisations, and so on, so we can look forward to that and it will, of course, help us in solving the economic crisis that we're all facing,'' Plenkovic concluded, as reported by HRT.

For more on Croatian GDP growth and the Croatian Government, make sure to check out our dedicated politics section.

Tuesday, 23 August 2022

Could Croatian Hemp Growing Industry Rescue Domestic Economy?

August the 23rd, 2022 - Could the Croatian hemp growing industry boost the overall economic picture? Many believe so, but there are many obstacles to anything being made easy, such is Croatia.

As Poslovni Dnevnik writes, it has been estimated that the value of the industrial hemp market across Europe should be almost nine billion US dollars by the year 2027. In Croatia, there are numerous organisations that deal with the cultivation and distribution of this particular plant, but they also encounter numerous problems, Dnevnik.hr writes.

Industrial hemp (Cannabis Sativa L.) is a plant from the cannabis family that contains 0.2 percent or less of the psychoactive compound tetrahydrocannabinol (THC). Although this industry is one of the fastest growing in all of Europe, planters and producers across Croatia continually encounter numerous problems that hinder their full potential and prevent the development of the potential Croatian hemp growing could have.

The Dom konoplje/Hemp house cooperative is a platform that gathers industrial hemp growers from all over Croatia. The executive director of the cooperative, Mihael Zlovolic, has been actively promoting the plant and the entire Croatian hemp growing industry for years. He believes that the future of this industry is too beneficial to ignore. "I think that, according to some of my estimates, the cannabis plant in Croatia will be legalised in 2025 at the latest. We're seeing similar movements across Europe, for example in Malta, Luxembourg, Switzerland... Germany also plans to legalise cannabis by the end of 2022, so this whole story is part of a wider movement," he said.

"I'm convinced that if this entire project was done properly and if systematic investments were made in the industry on a wider level, we'd be able to get rid of all of the country's debts and get out of the economic crisis in the mandate of one single Government. All of that with the help of industrial hemp," he said.

Systemic obstacles

However, numerous obstacles are continuing to slow down the development of this industry and hold back small producers. “Where do I even begin? First and foremost, there are so many cases where people shamelessly steal plants from small producers that it has become something that has to be factored into the cost of production,” he said.

He says that this is most often the result of ignorance. Legislation, which often lags behind industry development, is also an obstacle. "There are cases where people ended up in court, and the judge was not aware of the latest changes to the Drug Abuse Prevention Act. Not to mention the police. But I have to praise them, we actively cooperate with the police and competent inspectors who help us a lot, but there are often officials who see a cannabis plant and immediately think - drugs", said Zlovolic.

"These cases most often occur in smaller communities where not only are the officials not familiar with the legal framework, but they're also under pressure from the local population. We still live in a conservative society that, when it sees someone planting a field of industrial hemp, often reacts negatively to it," he said.

''We should be working on educating the population and providing a healthy basis for the development of the Croatian hemp growing industry. The goal is to form a kind of portal and centre of knowledge and information, where people who possess proven knowledge and skills will be able to educate everyone - not only producers and growers, but also ordinary people - because hemp is the future," said Zlovolic.

However, in order to achieve this, systematic support and the formation of an official market are needed. "We have the knowledge, we have the conditions and we can do miracles. Especially when you have such people who also have a great will and desire to throw themselves into it. Now the question is how to get ordinary people to recognise it," he said.

For more, make sure to check out our dedicated business section.

Friday, 5 August 2022

PicoPACK: Neglected Knin Making Entrepreneurial Comeback

August the 5th, 2022 - Knin in inland Dalmatia has unfortunately been left to ''go to the dogs'' in the economic sense, but the arrival of PicoPACK's new entrepreneurial centre and factory could see that neglect overturned.

As Poslovni Dnevnik/Darko Bicak writes, despite being one of the most economically deprived and neglected parts of the entire country, every year at the beginning of August, on the occasion of Victory Day and the Day of Croatian Veterans, the City of Knin comes into the public spotlight. This isn't only in the historical and political sense, but also in an economic one.

According to the data presented by the Financial Agency (Fina) for the year 2021, and according to the processed financial statements, 105 enterprises with 615 employees were operating in the City of Knin, which is a reduction of the number of employees there by 36 or 5.5 percent when compared to 2020.

DIV is the largest employer in Knin

Back in 2021, Knin-based companies achieved 255.4 million kuna in total income, which is an increase of 18 percent when compared to 2020, and total expenses of 242.7 million kuna, marking growth of 21.3 percent.

The share of enterprises based in Knin in the number of enterprises in the wider Sibenik-Knin County back in 2021 stood at 3.9 percent, in terms of the number of employees it stood at 4.9 percent, in terms of total income, three percent, and in terms of net profit - 4.8 percent.

Among companies based in Knin, ranked according to total revenue, the first small enterprise is Sirovina Benz transport with sixteen employees. Last year, the company achieved 41.4 million kuna in total revenue, which is a share of 16.2 percent in the total revenue of all companies headquartered in Knin.

Transport beton Lubina took second place with almost 37 million kuna in revenue and 2.6 million kuna in profit, followed by Production Shopping Centre Krka Knin with 24.8 million kuna and Efficient Powerful Successful with 21.7 million kuna in total revenue. This company, from the wider DIV group's system, is also the largest employer with as many as 164 employees to boast of. The Top 10 companies by revenue also include Logistika, Ljekarne (Pharmacies) Silvija Saric, G.O. Gradjevinar (Builder) Vrbnik, Komunalno Poduzece (Municipal Company), Cistoca i zelenilo and Agro Herc.

By the end of this year, according to all indicators, the economic situation in Knin should be improved because, according to announcements, the factory belonging to the wider PicoPACK Group Austria, a multinational company for the production of packaging with branches in several countries in Europe and Asia, should be opened in that inland Dalmatian city.

As they stated, their team specialises in the development and production of industrial solutions for the packaging of any type of bulk materials in both the food and non-food sector, as well as the packaging of dangerous substances and transport solutions for bagged cargo. As one of the largest suppliers of this type of goods in all of Europe, and being motivated by a significant increase in the costs of transportation from India and China, as well as the inability to ensure timely deliveries, the PicoPACK Group plans to transfer its product production facility from India to Europe.

An additional reason is the impossibility of ensuring adequate product quality in a remote facility in India. If everything goes well, they would install their future production and distribution centre in the Knin Enterprise Centre, which is currently under construction. This represents one of the most significant projects from the Intervention Plan of the city of Knin, with a total value of 33.3 million kuna, which will convert the former Kninjanka factory into an Entrepreneurship Centre, as a key element of the city's entrepreneurial infrastructure.

According to the already prepared Business Plan, PicoPACK Group initially plans to employ around seventy employees, with the fact that by the end of the year, if they succeed in realising their plan, they expect to employ a total of 300 workers in their future Knin-based plant.

The special advantage of the City of Knin for PicoPACK as a location for stationing their central production and distribution centre, lies in the possibility of the relatively quick activation in the newly renovated Entrepreneurial Centre, without the obligation of designing and building a brand new facility, then in the possibility of finding a sufficient number of employees with an adequate qualification structure, and last but by no means least, in the fact that Knin is in geostrategically favourable location with a branched traffic network.

For more, make sure to check out our dedicated business section.

Wednesday, 3 August 2022

Croatian Accommodation and Hospitality Sectors Enjoying More Traffic Than 2021

August the 3rd, 2022 - The Croatian accommodation and hospitality segments of the overall tourism sector are enjoying more traffic than they did last year when concerns about coronavirus restrictions and lockdown worries continued to prevail.

As Poslovni Dnevnik/Jadranka Dozan writes, as usual, the fastest barometer of consumption trends is the Tax Administration's data on the fiscalisation of issued receipts and bills/invoices, and during the height of the summer months, the figures related to the tourist season are always firmly in the foreground.

They, on the other hand, say that tax payers from the tourism and catering/hospitality sector issued bills worth a total of 7.5 billion kuna last month, which is as much as 42.6 percent or 2.24 billion kuna more than back during the same month last year.

Consequences of inflation

Approximately equal turnover was recorded in the Croatian accommodation segment (3.73 billion) and in hospitality and catering (cafes, restaurants, bars and other activities involved in the preparation and serving of food and drink, who reported 3.76 billion kuna), with the fact that the increase (compared to last July) was somewhat more pronounced in catering (+45 percent) than in the Croatian accommodation segment (+40 percent).

As was the case during the first half of the year, such an increase is only partially the result of a higher number of bills and receipts issued, i.e. to a considerable extent it also reflects significantly higher prices.

July 2022, however, greatly exceeded the achievements from the pre-crisis (and record) year of 2019. In the Croatian accommodation and catering and hospitality segments in July 2019, the value of fiscalised bills issued stood at 5 billion kuna (2.4 plus 2.6), which means that this year's result exceeds it by an impressive and far from insignificant 50 percent.

Including the first six months, when companies engaged in the business of providing accommodation services were paid with cards or cash in a total of 4.12 billion kuna (compared to last year's 1.72 and 3.32 billion kuna realised in the first half of pre-pandemic 2019), this tourist year obviously will convincingly break the record with revenues.

Of course, for the industry itself, the story is not complete without the cost side of the story, which is also growing strongly owing to ongoing inflation, but that is a separate topic. It is similar when the cumulative results of cafes, restaurants and other such facilities which are engaged in the preparation and serving of food and drinks are in the middle.

They reported 8.23 ​​billion kuna in turnover in the first half of the year, which was almost 120 percent more than last year and a quarter more than what was recorded back in 2019, when bills in the amount of 6.6 billion kuna were fiscalised and issued by the middle of the year.

Tourist movements have a little influence on the fiscalised turnover of a number of other activities. So, for example, enterprises in the transportation and storage category issued receipts and bills worth a massive 542 million kuna last month alone, which is as much as 62.7 percent more than the amount issued last July and a quarter (or 110 million kuna) more than were issued during the same month of 2019.

Those subject to fiscalisation in arts, entertainment and recreation this July reported 310 million kuna in turnover, which is 44 percent more than last July (215 million kuna) and 14 percent more than pre-pandemic 2019. Tourist consumption, of course, is also very important for the retail trade sector across Croatia. Last month, retailers (excluding motor vehicles) issued fiscalised bills worth 12.6 billion kuna in total.

Compared to the same month last year, this is about 1.72 billion kuna or almost 16 percent more. At the same time, the increase is somewhat more pronounced in the case of supermarkets and hypermarkets (so-called non-specialised shops mainly selling food, drinks and tobacco products) which have largely strengthened their network all the way along the coast.

Last month, they issued fiscalised receipts in the amount of 6.74 billion kuna, which has exceeded last year's achievement by almost a fifth, or by more than 1 billion kuna.

For more, make sure to check out our dedicated business section.

Monday, 1 August 2022

Croatian 2022 Tourist Season Pushes Spending and GDP Up

August the 1st, 2022 - The Croatian 2022 tourist season is succeeding in pushing GDP and spending up, but with the German stagnation still ongoing, things on that front continue to remain a valid concern from a very important market for the country.

As Morski writes, thanks to the excellent Croatian 2022 tourist season so far, spending and consumption back in June continued to grow on an annual basis for the seventeenth month in a row: retail sales increased by 3.8 percent, and at the same rate, data from the National Bureau of Statistics (CBS) shows, industrial production also increased, for the second month in a row and more rapidly than back in May.

These latest indicators confirm previous announcements that economic activity in the second quarter of the year could be even higher than it has been during the first and that GDP growth should exceed five percent this year despite the negative consequences of the Russian invasion of Ukraine. However, this means that consumers aren't aware of the circumstances in which they find themselves, as reported by Jutarnji list. While it continued to grow on an annual basis, retail trade fell by 1 percent compared to the month of May, which also recorded a faster annual growth of 4.3 percent.

While the data on fiscal receipts and invoices for June pointed to a strong growth in retail trade turnover, as noted by RBA analysts, "it was certainly supported by increased tourist spending", and indicators of consumer optimism simultaneously pointed to a slowdown in the annual growth rate, "which recorded deterioration on a monthly and annual basis in June".

Disposable income

The consumption structure itself points to the increased caution of consumers, given that the turnover of food, beverages and tobacco products is growing at a rate of 5.2 percent, on an annual basis, while non-food products (except for the trade in motor fuels and lubricants) fell by 0.3 percent. However, for as long as the Croatian 2022 tourist season continues to last, it is quite likely that encouraging figures will thankfully prevail across the nation.

''We expect a good season and a double-digit growth rate of both physical and financial indicators, which will positively affect consumption. This will certainly contribute to the preservation of disposable income and thus have a positive effect on retail trends,'' concluded the aforementioned RBA analysis. However, the effect of the base period and the strong uncertainty due to geopolitical events, they believe, will certainly slow down the dynamics of positive changes in trade activity. The high perception of inflation, which is strongly influenced by the rise in food and energy prices, also has a direct effect on restraining consumption.

What the Croatian economy can expect largely depends on global trends, especially in Eurozone countries that are its main foreign trade partners, and which it is set to join on the first day of 2023.

The latest data suggests that the Eurozone's economy is more resilient than previously expected. According to Eurostat's initial data, GDP in the second quarter increased by 0.7 percent compared to the previous three months, while economists expected a growth of only 0.2 percent. In addition, despite the shock caused by the war in Ukraine, growth accelerated compared to the first quarter, when it stood at 0.5 percent. Nevertheless, the data indicates that the German economy is very much stagnating, and as stated by the statistical office Destatis, this is primarily due to "weak trade".

While Germany is visibly suffering the consequences of higher energy prices and inflation, the leaders in terms of growth in the Eurozone are now Spain (+1.1), Italy (+1.0), France and other countries that are supported by tourism and higher consumption. Quarterly declines were recorded by Latvia (-1.4 percent), Lithuania (-0.4 percent) and Portugal (-0.2 percent), but year-on-year growth rates were positive for all countries.

Although the Eurozone achieved faster growth than expected, the pressure on the cost of living is still intensifying. The official estimate of inflation for the month of July reached 8.9 percent, compared to 8.6 percent back in June.

Across the pond, the USA is in recession...

Analysts pointed out that difficult days are yet to come for the Eurozone, especially for Germany. A technical recession in that country, the Dutch Ing Group analyst Carsten Brzeski pointed out, "looks like a done deal", given the high prices of energy and raw materials that continue to undermine purchasing power and profit margins.

The American economy, on the other hand, is technically already in recession after the announcement that GDP fell for the second quarter in a row, by 0.9 percent. At the same time, in an effort to curb inflation, the US central bank raised key interest rates by a further 0.75 percentage points. However, they said that any further moves will depend on future economic indicators, so a slower pace of monetary policy tightening is now expected.

Production growth is modest, remaining below two percent.

Industrial production back in June grew by 3.8 percent on an annual basis, and by 1.2 percent compared to the previous month. Almost all sectors recorded solid growth, especially the production of capital goods (12 percent) and energy (9.6 percent). Only the production of durable consumer goods fell, 4.7 percent. However, this year, a modest growth rate is expected on average, below two percent, RBA analysts estimate. The main reason for this is the potentially unfavourable influence of geopolitical conflicts, "that is, the dependence of certain important Croatian trade partners on Russia,'' concluded Jutarnji.

For more on the Croatian 2022 tourist season, keep up with our lifestyle section.

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