Croatia: Economic growth quickens in Q1 on strong domestic demand
The economy grew at a healthy pace in the first quarter of the year as domestic demand expanded at the fastest clip since the third quarter of 2008. According to detailed GDP data released by the Statistical Institute on 1 June, annual economic growth came in at 2.5% in Q1, up from the 2.2% rise recorded in Q4.
The domestic economy drove the acceleration in Q1. Private consumption grew a robust 3.9% on an annual basis, which marked the strongest print since Q1 2008. Consumer spending was buoyed by strong tourism and a strengthening labor market. Furthermore, fixed investment expanded 3.6% in year-on-year terms, a solid pick-up from Q4’s tepid 1.9% increase. Meanwhile, government consumption growth eased to 2.8% in Q1 (Q4: +3.4% year-on-year).
The external sector was the weak spot of the report. Exports of goods and services dropped 0.5% year-on-year in Q1, contrasting Q4’s 3.8% expansion and marking the lowest reading since Q1 2013. The decline was driven by a notable decrease in goods exports, while growth in exports of services eased compared to Q4. Meanwhile, import growth lost steam in Q1, moderating to 5.5% from 6.8% in Q4.
Looking ahead, private consumption growth is expected to continue underpinning robust economic performance, thanks to a tightening labor market contributing to higher household real incomes. In addition, a buoyant tourism sector and improved absorption capacity of EU structural funds, which should translate into higher capital spending, bode well for the economic outlook.