Friday, 26 February 2021

Opposition: Record GDP Fall Due to Lack of Adequate Measures to Help Entrepreneurs

ZAGREB, 26 February, 2021 - Opposition parties said on Friday that the record GDP fall of 8.4% in 2020 was due to the coronavirus crisis as well as the lack of appropriate measures to bail out entrepreneurs and the government's unwillingness to abolish parafiscal levies and put the system of public procurement in order.

Social Democratic Party (SDP) political secretary and MP Mirela Ahmetović said this was the biggest GDP fall since Croatia declared independence and that it was to have been expected.

"Now, it's important to see how the government will react to that fall, what it will do to revive the economy and if it will succeed in that. Yesterday we saw that Finance Minister Zdravko Marić was uncomfortable when asked whether bailout measures would continue, to which he responded that they 'did not recognise the situation'." I find it sad that the finance minister and prime minister do not recognise the situation even though we have been in this situation for a year," Ahmetović told reporters in Parliament House.

Asked whether she expected a faster economic recovery than that after the 2009 crisis, which is what the government has announced, Ahmetović said, "Do you believe in a government which, one day prior to the expiry of the moratorium on loan payments and debt enforcement, does not have any plan of what to do next? Do you believe in a government whose minister says that they cannot tell how the situation will develop?."

Bridge MP Nino Raspudić underscored that the government cannot be blamed for the coronavirus pandemic and everything that it has brought. However, he added, we can talk about the years that were lost prior to the pandemic and why Croatia has not developed sufficiently in relation to other countries in the European Union.

This is an opportunity to discuss what to do next and we have proposed that the mandatory membership fees in the chambers of commerce and trades (HGK and HOK) be abolished. The proposal is not about abolishing any institution because such institutions function quite well on a voluntary basis, from Slovenia to other countries, Raspudić said.

In a situation in which the economy is stifled and we see that the funds to be obtained will be invested almost exclusively in the public sector, and, being aware that there cannot be any development in Croatia without a developed enterprise sector, we want to reduce the tax burden on it as much as possible, primarily parafiscal levies, of which there are abut 500, said Raspudić.

Sunday, 22 November 2020

Analysts Say Croatia's GDP Dropped by About 10% in Q3 2020

ZAGREB, November 22, 2020 - Despite the fact that Croatia's economy somewhat recovered from the record decline in the second quarter, thanks to activities after the lockdown, analysts estimate that in the third quarter it also fell at a double digit rate compared to the previous year.

The national statistical office (DZS) will release at the end of next week the first estimate of gross domestic product (GDP) for Q3, and seven analysts who took part in Hina's survey expect a drop in GDP of 10.4% on the year.

Their estimates of the decline range from 9.5% to 11%.

Economy in recession

That will be the second quarter in a row that the economy declines on the year, which means it has entered a recession, but the decline will be milder compared to the record 15.1% drop in the previous quarter.

The record decline in Q2 was a consequence of the coronavirus pandemic and restrictive measures aimed at curbing the spread of the virus, which paralysed economic activity from the second half of March to the end of April.

"When the measures were relaxed in June, and especially during the summer months, most activities already started to recover. First high-frequency indicators confirm that Q3 will see a growth compared with the period from March to June, but a relatively steep decline in GDP on the year is inevitable," one of the analysts said.

Personal consumption continues to decline

The decline is mainly due to weak personal consumption, which is the largest component of GDP. Data from the national statistical office show that retail trade turnover fell by 7.6% in Q3 compared to the same period last year.

"That is mainly a consequence of trends in hospitality services, which didn't manage to compensate for losses caused by the closure of the economy even during the summer months, and tourist spending was markedly lower compared to the previous year," it was said in the survey.

Even though the summer tourist season was slightly better than expected at the start of the coronavirus crisis, the decline in tourist turnover was sharp.

According to the DZS's data, there were 6.6 million tourists in commercial accommodation establishments in the first nine months of 2020, which is a drop of about 63% from the same period last year, while the number of tourist nights dropped by 54% to 39.7 million.

The decline in industrial production also had a negative effect on GDP. In the past quarter, production dropped by 1.3% on the year.

That is a consequence of weak domestic demand, as well as foreign demand, as indicated by the decline in exports since the start of the year.

According to the DZS's data, the value of exports of goods in the first nine months of 2020 totalled about HRK 80 billion, which 4.8% less compared to the same period last year, while imports dropped by 10.1%, to approximately HRK 126 billion.

"High levels of uncertainty and worsening expectations also curbed stronger investment, while government spending is the only GDP component that is mitigating the negative trends on the demand side with its growth," one of the analysts said in Hina's survey.

Second wave of corona crisis

Because of the second wave of coronavirus spreading in Croatia and Europe, analysts also expect an economic decline in Q4 compared to the previous year.

It is expected that holiday spending and tourist activity will weaken due to epidemiological measures.

In addition, a further decline in exports and imports is expected, given the new restrictive measures introduced in most European countries due to the second wave of coronavirus, as is recession in Croatia's largest trading partners, Italy and Germany.

Deep, but brief recession?

Because of all this, a record decline in economy is expected in the entire 2020.

According to Hina's survey, seven analysts on average estimate that in the entire 2020 the economy could decline by 9.2%. Their estimates of the decline range from 8% to 10%.

The estimates of the decline have slightly decreased since three months ago analysts on average expected a drop of 10.5%.

According to one analyst, some of the reasons for that include a somewhat salvaged main tourist season, the resilience of construction (more) and industry (less) to negative trends, reduced gap in trade in goods (goods exports more resilient than imports) and, finally, the government's fiscal impulse through wage subsidies and maintaining household income levels, as well as the moratorium on loan repayment.

Despite being mitigated, this year's economic downturn could be greater than during the 2009 financial crisis, when the GDP dropped by a record 7.4%.

The government itself expects a greater drop in economy than in 2009, so it estimates that the GDP will decline by 8%.

The Croatian National Bank also expects a drop of about 8%, while the European Commission estimates that Croatia's economy will decline by 9.6% this year.

While the drop in GDP in 2020 will likely be deeper than during the global financial crisis, it is expected that this recession will be shorter. Then, the recession lasted for six years, while this time the economy is expected to grow as soon as next year.

Tuesday, 8 September 2020

Croatia Among EU Countries With Sharpest GDP Declines In Q2

ZAGREB, Sept 8, 2020  - Croatia is among the EU countries with the sharpest GDP declines in Q2 of this year compared with the previous quarter, according to Eurostat's estimate released on Tuesday. 

In the second quarter of 2020, compared with the previous quarter, seasonally adjusted GDP decreased by 11.4% in the EU and by 11.8% in the euro area. In the first quarter of the year, GDP had declined by 3.3% in the EU and by 3.7% in the euro area.

Compared with the second quarter of 2019, seasonally adjusted GDP fell by 13.9% in the EU and by 14.7% in the euro area, following declines of 2.7% and 3.2% respectively in the first quarter.

Spain sees by far the sharpest drop

All the EU member states recorded declines in economic activity in the second quarter, both month on month and year on year.

The sharpest quarterly decline, of 18.5%, was recorded in Spain, followed by Croatia (-14.9%), Hungary (-14.5%), Greece (-14.0%), Portugal (-13.9%) and France (-13.8%). In the first quarter of the year, Croatia observed a GDP decline of 1.3% quarter on quarter. 

Germany, the EU's strongest economy, saw its GDP shrink by 9.7%.

The lowest quarterly declines of GDP were observed in Finland (-4.5%), Lithuania (-5.5%), and Estonia (-5.6%).

Compared with the second quarter of 2019, the largest GDP declines were recorded in Spain (-22.1%), France (-18.9%), and Italy (-17.7%). The German economy contracted by 11.3%.

Croatia's GDP fell by 15.1% compared with the second quarter of last year, while in the first quarter of this year it had grown by 0.3% year on year.

The lowest annual declines were observed in Ireland (-3.7%) and Lithuania (-4.0%).  

A heavy blow to employment

The pandemic and measures put in place to contain the spread of the infection dealt a heavy blow to employment both in the EU and the euro area, resulting in the sharpest declines in the number of people employed in both zones since Eurostat started tracking data.

The number of employed persons decreased by 2.7% in the EU and by 2.9% in the euro area in the second quarter of 2020 compared with the previous quarter. In the first quarter of this year, employment had declined by 0.2% in the EU and by 0.3% in the euro area.

Compared with the second quarter of 2019, employment fell by 2.9% in the EU and by 3.1% in the euro area, after increasing by 0.4% in both zones in the first quarter.

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