According to the latest flash estimate of the Croatian GDP, it grew by 3.9% YoY in real terms and amounted to EUR 18.12bn. On an annualized basis ending in Q1 2024, this would mean that the GDP amounted to EUR 78.17bn. Finally, on a QoQ basis, the GDP growth in real terms amounted to 1%.
Yesterday, the Croatian Bureau of Statistics released the latest flash estimate for the Croatian GDP, for Q1 2024. According to the release, the Croatian GDP in real terms increased by 3.9% YoY, and 1% QoQ in Q1 2024. Furthermore, in nominal terms, it amounted to EUR 18.12bn in Q1, while on the annualized basis ending in Q1 2024, it amounted to EUR 78.17bn.
Croatian GDP growth (2007 – Q1 2024, YoY, %)*
Source: Croatian Bureau of Statistics, InterCapital Research
*Quarterly Gross Domestic Product, seasonally-adjusted real growth rates
In nominal terms, the GDP grew by 10.3% YoY. As the real growth is 3.9% (meaning growth in the expansion of volume), this would mean that the remainder (6.4%) came from inflation.
When breaking down the real GDP growth into components, we can see that final consumption expenditure, the largest component of the GDP which includes households, non-profit institutions serving households (NPISH) as well as the government, grew by 4.5% YoY. Households themselves increased by 6%, NPISH declined by 1.8%, while the General Government grew by 1%. Meanwhile, the gross capital formation, which includes investments as well as changes in inventories, grew by 10.8% YoY, primarily due to higher investments (+14% YoY), while inventories declined by 12% YoY.
Moving on, the export of goods and services declined by 2%, mainly as a result of an 8.2% drop in Services export, while Goods export increased by 2.9% YoY. Import of goods and services on the other hand, increased by 2.2% YoY, primarily as a result of 13.8% higher Services import YoY, while Goods import grew slightly by 0.5%.
What all of this points towards is what we have seen for a while now in Croatia. Firstly, the main drivers of growth come from consumption, which is primarily driven by higher private consumption. This is a positive development, as these changes reflect real growth rates (excl. inflation). In other words, despite the elevated inflation rates that were recorded for the majority of 2023, personal consumption still remained high, leading to increased sales volume.
Gross fixed capital formation, supported by investments was in turn primarily supported by the various EU funds which made billions of euros available for many different projects. Turning our attention to exports and imports, this is one side that has been quite challenging for Croatia. As a country, it is generally better to have higher levels of exports than imports, although this issue can also be strongly affected by the currency used, as higher imports than exports can lead to foreign exchange reserves being drained. As Croatia is part of the Eurozone, however, this issue isn’t present anymore. Even so, Croatia’s main export inside the Services export is of course tourism, and an 8.2% drop YoY is quite notable in this regard.
On the other hand, the import of Services, and while we do not have a breakdown of what exactly these services entail, could be seen as negative, and this is due to the fact that the Croatian economy is quite service-orientated. If we look at the export and import of goods (+2.9% and +0.5% YoY, respectively) then this can be considered positive, especially considering that Croatia does not have a heavy industry base, especially compared to other more developed European peers. As such, there is a higher reliance on services, and higher levels of services import while the services export drops could be worrying if it continues.
Overall, the Q1 results for Croatia’s GDP are quite strong, growing a lot higher than the EU average. If growth rates like this continue through the year, convergence with the EU average would be faster than expected, which is positive news indeed. Of course, one quarter does not make a year.
