On Friday, the Croatian Bureau of Statistics published its first estimate on GDP for Q1 2021 showing that in real terms it decreased by 0.9% YoY (seasonally adjusted data). The slowdown in GDP drop in the first quarter of 2021 is a result of continuation of recovery of consumer consumption as decrease of households expenditure slowed-down to -0.4% YoY. Increase in exports of goods continued from a previous quarter, showing that demand for locally produced goods continued.
According to the first estimates of Croatian Bureau of Statistic, Croatian economy contracted by 0.9% YoY in Q1 2021 on a comparison with same quarter of previous year and in relative terms this is the lowest quarterly YoY decrease since the outbreak of the Covid-19 pandemic. Seasonally adjusted data showed an expansion by 5.8% compared to the previous quarter.
Final consumption, the main contributor to GDP, was down only 0.3% in Q1 as we are comparing it to Q1 2020 when pandemic has not yet started yet. Consumer consumption started to recover gradually despite lock-down in the ‘light’ format that was on again from November. Travel bans continued, so tourism activity was still at very low levels and could not support further spending as in Q1 45% YoY drop in tourist arrivals was evidenced. So, household consumption the biggest part of final consumption (73%), decreased by 0.4% YoY. Household expenditure decelerated its drop from the previous quarter of -4.5% YoY, while general government’s spending, amounting to 27% of final consumption, continued to support the economy in Q1 (+0.2% YoY), albeit at a lower rate compared to previous quarter (+3.1% YoY). In Q1 investments increased 4.6% YoY as outlook for the future opening of economies became more certain and vaccination of citizens was underway. It is expected that gross fixed capital formation will be positive in 2021 and 2022 driven by investments which will be directed from EU instrument named Next generation EU, that is allocating to Croatia loans and grants in the amount equaling 18.5% of pre-Covid crises GDP.
In Q1 2021 increase in exports of goods was evidenced at 8.3%, a continuation of a trend evidenced in previous quarter (+8.6% YoY) showing that demand for locally produced goods continued and that they have found their position on foreign markets. Drop in export of services decelerated to -18.6% as slow flow of people goods across borders continued. So the decrease in exports of goods and services (-0.9%) was completely driven by drop in exports of services as a result of continued drop in tourism movements. As Q1 already shows improvement in export of goods, we expect strong rebound of merchandise trade in remaining three quarters of 2021. On the level of 2021 we expect mid-teens goods and services exports growth which will together with hike in household consumption result in growth of GDP app. 5% YoY. Merchandise imports Q1 2021 growth rate came to a positive territory as crude oil prices increase (+ 22% YoY in USD terms) and car sales picked-up (Q1 +4.7 YoY). Despite increase in consumer consumption we do not see them to reach pre-pandemic times so quickly, so we expect imports goods and services to increase slower than exports.
Croatian GDP, Real Growth Rates (%, YoY)*
*Quarterly Gross Domestic Product, seasonally adjusted real growth rates
