Croatia: GDP growth records best reading since Q3 2022 in Q4
GDP growth accelerated to 4.3% year on year in the fourth quarter from 2.8% in the third quarter. Q4’s reading marked the strongest expansion since Q3 2022. On a seasonally adjusted quarter-on-quarter basis, GDP growth accelerated to 1.3% in Q4 from 0.5% in Q3. Looking at 2023 as a whole, economic growth decelerated to 2.8% from 6.3% in 2022.
Private consumption accelerated to 5.3% yoy in the fourth quarter, supported by declining inflation and marking the best reading since Q3 2022 (Q3: +3.0% yoy). Less positively, public consumption growth was the slowest since Q2 2023, expanding 0.2% (Q3: +2.1% yoy). Meanwhile, fixed investment growth eased to 6.0% in Q4 from 6.1% in the previous quarter. On the external front, exports of goods and services fell 4.4% on an annual basis in the fourth quarter, which was an improvement from the third quarter’s 8.5% contraction. Meanwhile, imports of goods and services contracted at a slower pace of 7.1% in Q4 (Q3: -12.1% yoy).
Shifting to 2024, the economy is projected to grow at a similar rate to 2023. Private spending will remain supportive thanks to lower inflation. Moreover, a rebound in exports—spurred by a robust tourism sector—will enhance growth. Meanwhile, tight financing conditions are set to take a toll on investment activity. The disbursement of EU funds is a key factor to watch.
Alen Kovac, analyst at Erste Bank, commented on the outlook:
“Domestic demand, especially private consumption, should remain the growth backbone. Private consumption prospects [have] gained further traction as decelerating inflation supports real wages growth (currently in the double-digit region), coupled with employment gains, public sector wage hikes, resilient consumer confidence and solid consumer credit dynamics.”