Croatia: Economy contracts the most since Q2 2010
September 20, 2012
In the second quarter, GDP contracted 2.2% over the same quarter last year, according to the second GDP estimate released by the Croatian Bureau of Statistics on 20 September. The result, which represents the largest contraction recorded since Q2 2010, exceeded both the 1.3% contraction tallied in the previous quarter and the 2.1% drop previously reported in the 31 August flash estimate. The main cause behind the deterioration seen in the second quarter was a sharp drop in domestic demand. Private consumption fell 3.4% over the same quarter last year, exceeding the 0.3% decline observed in the previous quarter. Moreover, gross fixed capital formation contracted 5.9% year-on-year, which more than doubled the 2.8% drop seen in Q1. On the other hand, government spending contracted at a softer pace (Q1: -1.5% yoy; Q2: -0.2% yoy). Exports of goods and services fell 1.8% in the second quarter, contrasting the 2.4% rise seen in Q1, while imports contracted at a 3.3% pace (Q1: +1.1% yoy). As a result, the external sector's net contribution to overall economic growth stepped up from 0.2 percentage points in the first quarter to 0.8 percentage points in the second. The Central Bank expects GDP to contract about 1.6% this year.