Croatia: Economy remains deeply mired in recession
June 20, 2011
In the first quarter, GDP contracted 0.8% over the same period last year, according to revised data from 20 June. The contraction was slightly more severe than the 0.6% decline observed in Q4 but a notch better than the 0.9% drop reported in the 27 May flash estimate. The Q1 GDP outturn marked the eighth negative reading in the last nine quarters, confirming that the economy remains deeply mired in recession. The first quarter downturn was mainly driven by a sharp contraction in the external sector and a drop in fixed investment, which has been reporting losses since the first quarter of 2009. Private consumption (Q1: -0.1% year-on-year; Q4: +1.2% yoy) and government spending (Q1: -0.9% yoy: Q4: +0.6% yoy) contracted over the same quarter the previous year, while gross fixed capital formation declined less markedly (Q1: -6.7% yoy; Q4: -8.0% yoy). Nevertheless, domestic demand improved somewhat compared to the previous quarter (Q1: +0.6% year-on-year; Q4: -3.7% yoy) on the back of strong stockpiling. Exports of goods and services swung from a 10.8% expansion in Q4 to an 11.1% drop in Q1. Imports also registered losses and declined 5.3% over the same period last year (Q4: +1.1% yoy). As a result, the net contribution from the external sector to overall economic growth plummeted from a 3.4 percentage-point contribution in the fourth quarter to a 1.1 percentage-point detraction in the first.