Croatia: Economy slows less than initially expected in third quarter
December 20, 2011
In the third quarter, GDP grew 0.7% over the same quarter the year before, according to the second GDP estimate released by the Croatian Bureau of Statistics on 20 December. The print came in slightly above the 0.6% increase reported in the 25 November flash estimate, but still was a notch below the 0.8% rise recorded in the previous quarter. The main cause of the modest third quarter deceleration was a sharp deterioration in domestic demand (Q2: -2.0% year-on-year; Q3: -4.2% yoy), which this was partially offset by a marked improvement in the external sector. Private consumption grew 0.1% over the same period last year, which was down from the 0.6% rise seen in the second quarter. Public spending declined 0.4% (Q2: +1.7% yoy), due to government efforts to contain the fiscal deficit. Meanwhile, fixed investment deteriorated further to an outright contraction of 8.4% (Q2: -7.3% yoy), which represents the sharpest decline since Q3 2010. The external sector's net contribution to overall economic growth improved markedly due to a significant decline in import growth, while exports accelerated over the previous quarter. Imports contracted 8.3% in the third quarter, down from a 6.0% decline in the second quarter. On the other hand, exports of goods and services grew 2.0% (Q2: +1.1% yoy). As a result, the external sector's net contribution improved from 3.5 percentage points in the second quarter to 5.0 percentage points in the third. At the sector level, the third quarter slowdown was caused by a sharp contraction in the industrial sector (Q2: +2.2% yoy; Q3: -2.4% yoy). On the other hand, the service sector accelerated from a 0.6% increase in the second quarter to a 0.9% rise in the third, while agriculture rose 4.0% from a flat reading in the previous quarter.