Croatia: Economic growth climbs in Q3
November 29, 2019
The economy gained traction in the third quarter, according to detailed GDP data released by Croatia’s Statistical Institute (CBS) on 29 November. Annual economic growth rose to 2.9% in Q3, up from the 2.4% expansion logged in Q2.
Improved conditions on the external front drove the third-quarter upturn. Exports of goods and services accelerated (Q3: +4.7% year-on-year; Q2: +3.3% yoy), thanks to a surge in merchandise shipments, which compensated for a downturn in services exports. Meanwhile, import growth fell sharply from 8.3% in Q2 to 1.1% in Q3. Taken together, the external sector contributed to growth in the third quarter after dragging on the overall print in the second quarter.
On the flip side, domestic demand slowed sharply. Fixed investment lost further steam in the quarter, rising 5.0% after climbing 8.2% in Q3, while government spending shifted into a lower gear (Q3: +2.9% yoy; Q2: +3.9% yoy). On a brighter note, private consumption picked up amid resilient wage and employment growth, increasing 3.3% in the quarter after cooling in the previous period (Q2: +2.7% yoy).
Looking ahead, economic activity is projected to ease next year, due to cooling domestic demand and a loss of momentum in the external sector. Household spending is seen moderating amid a notable pick-up in price pressures, while reduced absorption of EU-structural funding will weigh on capital spending. External headwinds such as stronger competition from other tourist destinations and weaker EU demand cloud the outlook.
Author: Nihad Ahmed, Economist