Croatia: Decline in GDP moderates but remains pronounced in Q4 2020
GDP fell at a softer, albeit still notable, pace of 7.0% year-on-year in the fourth quarter of 2020, improving from the 10.0% contraction seen in the third quarter. Q4’s result marked the third successive quarter of contracting output, as lingering restrictions throughout most of the period weighed on activity. All in all, GDP tumbled 8.4% in 2020, contrasting 2019’s 2.9% expansion and logging the worst reading in over two decades.
Q4’s milder contraction reflected a broad-based improvement in private consumption, public spending, fixed investment and exports. Household spending fell 4.5% year-on-year in the final quarter, softening from Q3’s 7.5% drop. In addition, fixed investment rebounded solidly in Q4, growing 4.2% and swinging from the 3.0% contraction tallied in the prior quarter. Meanwhile, government consumption edged up in the quarter, increasing 1.6% (Q3: +1.5% yoy).
On the external front, exports of goods and services fell 9.8% on an annual basis in the fourth quarter, softening markedly from the third quarter’s 32.3% dive, amid firming foreign demand. In addition, imports of goods and services slid at a slower rate of 7.6% in Q4 (Q3: -14.1% yoy).
Commenting on the outlook ahead, Rory Fennessy, assistant economist at Oxford Economics, said:
“Restrictions in response to the coronavirus have been extended until the end of February, and so we now expect the economy to contract again in Q1 2021. The health situation has improved substantially relative to Q4, with case numbers now a fraction of their December peak and fewer hospitalisations. But the government is wary of prematurely relaxing restrictions in case new coronavirus variants cause a rapid acceleration in case numbers. We have therefore revised down our forecast for growth in 2021 from 5% to 3.6%, but still expect activity to return to its pre-crisis level by the end of the year, although this is subject to substantial downside risks.”