ZAGREB, 26 February, 2021 - The annual drop in GDP of 8.4% is as expected, Maruška Vizek, a researcher from Zagreb's Institute of Economics, told Hina, adding that Q3 saved Croatia from a deeper downturn because of the key contribution of tourism and underscoring the contribution of government's strategy in H1 2020.

"The year-on-year decline in GDP of 8.4% compared to 2019 is in line with expectations, and Q3 saved us from a larger contraction, since it was much better than expected thanks to the strategy the government employed in the first half of last year," Vizek said.

She recalled that the country had had a relatively strict lockdown with good epidemiological results and then a sudden relaxation of measures just before the start of the main tourist season, which had, she said "definitely contributed to the good results of the tourist season".

She added that the quarterly GDP had grown in the last two quarters, that is, in the second half of the year, which meant that the economy was pulling out of the recession.

"Unless there is again a very strict lockdown this year, I think that we can really expect that the growth in 2021 will be significant, that it will be in line with estimates between 5% and 6%, which again means that we won't return to the starting point before the pandemic this year, but we are at least no longer in the red," she said.

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.

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.

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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ZAGREB, August 30, 2020 - Prime Minister Andrej Plenkovic said on Sunday, that a blueprint of the plan for the recovery from the corona crisis could be expected in October, and added that the 15.1-percent contraction of Croatia's Gross Domestic Product in Q2 was within expectations.

The government is due to have the basic outlines of the recovery plan until 15 October, Plenkovic informed the press after a conference on the occasion of International Day of the Disappeared.

"It is our idea that we have the outlines of that plan drawn up until 15 October. After that we will fine-tune the document in communication with the European Commission, just as all other countries. The adoption of those documents is expected at the beginning of the next year," said the Croatian premier.

The recovery plan is being adjusted to the targets from our National Reforms Programmes, the Convergence Programme and the agenda of this cabinet, he added.

The sum of 22 billion euro which is put at disposal to Croatia in seven years is an excellent lever for the start of a robust economic recovery in 2021, he recalled.

Commenting on the 15.1% decline in Q2 GDP,  Plenkovic said that it was within expectations considering the COVID-19 lockdown in that period. He recalled that Q1 saw some growth and that one should wait for results in Q3 and Q4.

"This is a specific year, and globally, this (fall) is within the average of EU member-states," Plenkovic said adding that the H1 GDP was actually at -7.5%.

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ZAGREB, August 28, 2020 - Due to the consequences of the coronacrisis, Croatia's GDP contracted by a record 15.1% in the second quarter of 2020 compared to the same period last year and analysts expect a record fall in GDP for the entire year but note that the fall could be milder in the next two quarters.

The State Bureau of Statistics (DZS) released its initial estimates on Friday according to which GDP in the second quarter fell by 15.1% on the year, falling for the first time since mid-2014.

This is also the greatest fall since 1995 when the DZS started collecting data on GDP. Until now, the highest ever drop in GDP was recorded in Q1 2009, at the start of the global financial crisis.

Six analysts polled by Hina expected GDP to drop on the year by an average 13.9%, with their estimates ranging from 12% to 17%.

In the second half of March already economic activity was partially or completely halted in a bid to curb the spread of the Covid-19 pandemic, and together with exceptionally high uncertainly, this strongly impacted the business and consumer confidence index while leading to high rates of decline in almost all activities, analysts at the Raiffeisenbank Austria (RBA) said in a comment on the latest DZS figures.

Prior to the figures being released RBA analysis expected GDP in 2020 to contract by 8.5%. 

"The latest figures confirm that the fall in 2020 will be significantly greater. The greatest contribution to the fall for the entire year will be the fall in personal consumption due to increased unemployment, reduced employment and decrease in available income whereas investments will decrease significantly or will be deferred under the influence of great uncertainty," RBA analysts said.

Saravanja: The worst has passed

The sharp fall in GDP was expected. Drops were recorded in almost all of the most important segments and in double-digit figures at that, except for government expenditure...This year, due to the modest tourism season and lower investments, as a consequence of the fall in consumption, reserves have had a negative impact on GDP, Goran Saravanja of the Imelum consulting company said.

Saravanja expects GDP for the entire year to drop at a higher rate than in 2009, when the economy plunged by 7.4% at the start of the financial crisis.

The better-than-expected tourism season will buffer the fall in the next two quarters. "The worst has passed. We reached the bottom in the second quarter," he added.

The fact that tourist turnover will be significantly lower than for the same period last year will result in an economic decline in the third quarter too.

According to Eurostat data, GDP in the EU fell by 11.7% compared to Q1 and by 14.1% on the year. Croatia's figures are poorer than the European Union average.

As a consequence it is clear that Croatia's economy will dive into a recession, which is defined as a GDP fall for two consecutive quarters.

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ZAGREB, August 28, 2020 - Croatia's economy in the second quarter of 2020 contracted by a record high of 15.1% compared to the same period last year, this being its biggest fall since Croatia started collecting data on GDP, caused by the coronavirus crisis.

The State Bureau of Statistics (DZS) released its initial estimates on Friday according to which GDP in the second quarter fell by 15.1% on the year, falling for the first time since mid-2014.

This is also the greatest fall since 1995 when the DZS started collecting data on GDP. Until now, the highest ever drop in GDP was recorded in Q1 2009, at the start of the global financial crisis.

The fall in GDP in Q2 this year is greater than analysts had expected.

Six analysts polled by Hina expected GDP to drop on the year by an average 13.9%, with their estimates ranging from 12% to 17%.

The sharp decline in the economy in the second quarter is the consequence of the coronavirus pandemic and restrictive measures introduced to curb the pandemic, which paralysed commercial activities from mid-March until the end of April.

Sharp fall in consumption, investments, exports...

Due to the pandemic a sharp fall was recorded in personal consumption.

Household consumption plunged by 14% in Q2 2020 compared to Q2 2019.

Gross investments in fixed capital contracted by 14.7% year on year.

The export of commodities and services sunk by 40.6%.

The exports of commodities was 10.9% while the export of services plummeted by 67.4%. The import of commodities and services contracted too, by 28.1%, with commodity imports contracting by 25.3% and imports of services by 42.5%.

State spending however increased in Q2 by 0.7% on the year.

Figures poorer than EU average

According to seasonally adjusted data, GDP in Q2 fell by 14.9% compared to Q1 and by 15.1% on the year.

These figures are poorer than the European Union average. According to Eurostat data, GDP in the EU fell by 11.7% compared to Q1 and by 14.1% on the year.

DZS said that due to the circumstances related to the coronavirus crisis, some data may not be precise.

"Difficulties in gauging economic growth, particularly in service activities, might result in a potentially greater revision of GDP figures for the quarter," DZS said.

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ZAGREB, Aug 26, 2020 - Finance Minister Zdravko Maric said on Wednesday the GDP drop in this year's second quarter was expected to be larger than the largest drop during the global financial crisis.

The national statistical office is expected to issue a report on GDP in Q2 on Friday.

Responding to questions from the press, Maric said the government would present new forecasts for the whole year in the first two weeks of September.

The largest GDP drop to date, of 8.8%, was recorded in Q1 2009, at the start of the global financial crisis.

Six analysts polled by Hina expect GDP to drop 13.9% year on year. This will be the first drop since mid-2014 and the largest since 2000.

Maric said everyone realized how much the state-supported the economy this year via job retention measures, but added that this could not be done indefinitely.

New programs are opening up, such as the EU's SURE program, from which Croatia is expected to receive €1 billion in favorable loans which will most likely be used to finance a shorter working week.

Maric said Croatia fared even better with the Next Generation EU instrument, the coronavirus recovery plan in which Croatia will have €9.4 billion at its disposal. He said the big challenge now was to draw the highest amount possible as quickly and as effectively as possible.

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ZAGREB, Aug 23, 2020 - The national statistical office (DZS) will publish a report on Croatia's Gross Domestic Product next week, and analysts are agreed the report will show that the country's economy in Q2 has experienced a record decline due to the coronavirus crisis.

Six analysts interviewed by Hina expect the GDP decline to be around 13.9% on the year, with their estimates ranging from 12% to 17%.

This will be the first time since mid-2014 GDP has decreased and at the highest rate since 2000, when the DZS started keeping record of these statistics.

So far the biggest GDP decline, of 8.8%, was reported in Q1 2009, at the start of the global financial crisis.

The lockdown due to the coronavirus epidemic in Q2 caused a record drop in personal consumption, the most important component of GDP.

DZS data show that retail trade in Q2 sank by around 13% compared to the same period of last year.

Statistics also show that commodity exports dropped by 13.5% while imports dropped by 22.8%, one of the interviewed analysts said.

Industrial production went down as well, by 8.4% from Q2 2019.

All components of GDP saw a decline except for government spending, an analyst said.

This year has seen a lack of the positive impact of tourism on the economy due to restrictions on movement in most countries.

In the first six months, there were 1.5 million tourist arrivals in commercial accommodation facilities and 5.2 million overnight stays, a 77% drop from the same period of last year.

But while tourism is not of crucial importance for consumption and GDP trends in the first six months, it is crucial in Q3 because of the summer tourist season.

So far the tourist season has been much better than expected, but expectations were very modest, at 30% of last year's tourist trade.

It is a fact that tourist trade will be much lower than in the same period last year, therefore an economic decline in Q3 is expected, the more so as a further decline in commodity exports and imports is expected given the recession in Croatia's most important trade partners, Italy and Germany.

Source: Pixabay

Deep but short recession?

The economic decline in the second half of the year will be milder than in Q2 due to the relaxation of restrictions and normalisation of economic activity, however, a more significant decline is expected for the entire year than at the time of the financial crisis.

The six analysts estimate that economic activity in 2020 could go down by 10.5%, with their estimates ranging from 8.5% to 12.5%.

In 2009, at the start of the financial crisis, the economy sank by what so far has been a record 7.4%.

The government, too, expects the economic decline to be deeper than in 2009, estimating that GDP will go down by 9.4%, while the Croatian National Bank expects a decline of 9.7%. The European Commission predicts that Croatia's economic activity will drop by 10.8% this year.

While the economic decline this year will probably be deeper than during the global financial crisis, the recession is expected to be shorter. The recession caused by the global financial crisis lasted six years while this time the economy is expected to recover already in 2021.

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