Croatia Economic Outlook
The economy performed well in Q4, expanding 4.0% year on year and rebounding quarter on quarter. In annual terms, household consumption slowed in the last three months of the year, and public consumption and fixed investment growth accelerated. On the external front, exports and imports growth moderated markedly, and net exports detracted from growth. Overall, 2022 GDP growth landed at 6.3%, down from the 13.1% seen in 2021. Turning to Q1 2023, available data is fairly positive. Retail sales and tourist arrivals rose in annual terms in January, while consumer confidence improved in January–February from the previous quarter. Moreover, in January, the unemployment rate continued trending downwards, and average earnings rose. However, industrial output remained in contractionary territory in the same month amid soft external goods demand and high producer prices.
Harmonized inflation fell to 11.7% in February from 12.5% in January amid smaller price rises for transportation, food and housing. Our panelists expect further declines in inflation later this year due to the high base effect, cooling demand and supply chain normalization. Further government relief for energy bills is a downside risk to the outlook.