GDP in Croatia

Croatia - GDP

Economy loses steam in the final quarter of 2018

The Croatian economy lost traction in the final quarter of last year, according to detailed GDP data released by the Statistical Institute on 1 March, with annual economic growth sliding to 2.3% from 2.8% in the third quarter. Solid domestic demand drove the fourth-quarter outturn, but a weak external sector dragged on overall growth. For the year, growth came in at 2.6%, decelerating from the 2.9% expansion logged in 2017.

Private consumption gathered momentum in Q4, expanding a strong 3.9% in year-on-year terms (Q3: +2.7% year-on-year) amid improved consumer confidence and healthy real wage gains propping up the purchasing power of households. In addition, fixed investment surged 6.1% on an annual basis, the strongest expansion in nearly two years and well above the 3.7% increase notched in Q3. Meanwhile, public expenditure growth moderated to 2.3% in Q4 after reaching a near-decade high in the previous quarter (Q3: +3.9% yoy).

On the external front, exports of goods and services increased a soft 1.3% year-on-year in Q4, decelerating markedly from Q3’s 3.7% climb and largely held up by the booming tourism industry. Meanwhile, imports jumped 6.6% in annual terms, notably above Q3’s 5.1% rise. Taken together, the external sector subtracted 2.6 percentage points to headline growth, contrasting the 0.2 percentage point contribution recorded in the previous quarter.

Looking ahead, healthy domestic demand dynamics are set to prop up growth again this year. Solid consumer spending, underpinned by an improving labor market and higher real incomes, coupled with a pick-up in capital outlays, largely thanks to higher disbursement of EU funds, should propel economic activity overall.

FocusEconomics panelists expect GDP to rise 2.7% in 2019, which is unchanged from last month’s estimate. In 2020, the panel also projects economic growth of 2.5%.