Croatian Bureau of Statistics published its first estimate for Q3 2020 GDP on Friday. In real terms GDP decreased by 10.0% YoY (seasonally adjusted data), beating analyst estimates by a few percentage points.
Croatian GDP fell by 10% in Q3 beating analyst estimates by a few percentage points. Such a better than expected performance could be attributed to a significantly better tourism result in Q3, which is one of the main drivers of Croatia’s GDP. As a reminder, in Q3, Croatia observed a decrease of 51.7% in tourist arrivals and a 41.6% decrease in nights realized, while during first lock-down period even higher decrease of arrivals for Q3 (-70%) was expected. Results proved to be much better due to strong pick-up in arrivals in July, that lasted until early-mid August when foreign governments began to introduce travel bans due to spikes in newly infected rates. It is also important to mention that the recent harsher restrictions imposed the Government will definitely leave its toll on Croatia’s GDP in Q4. We expect to see macro analysts revising their Q4 estimates, which were in mid single digits, to double digit figures.
The main contributor to GDP – final consumption – in Q3 dropped by 5.0% as local spending was subdued even though economy was reopened from June, but uncertainty remained high. Summer season started later than usual, as one of the main Croatia’s tourist inbound countries (Germany) abolished restriction of travelling in the late June. Personal spending of foreign tourists was a result of drop in arrivals (Q3 51.7%). Therefore, the largest part of final consumption, household expenditure decreased 7.5% YoY, while general government’s expenditure amounting to more than 1/4 of final consumption accelerated and grew by 1.5% YoY. Pandemic continued to pose strong impact on Croatia’s reduced household consumption that has in 9M of 2020 decreased for 6.73% (at current prices), which could not be offset by higher general government spending that in the same period grew by 5.10% (at current prices). Due to reopening of economy investments resumed, albeit at a slower pace than last year, so drop in gross fixed capital formation decelerated, falling by 3% YoY (vs -14.7% in Q2). Due to strong slow-down in flow of people and goods across borders, decrease in imports and exports of goods and services was evidenced at 14.1% and 32.3% respectively. Due to halved summer tourist season, the decrease in exports of goods and services (-32.3%) was in majority driven by drop in exports of services of -45.3%. To display what a strong impact tourism has on Croatian GDP, we can see from exports of services that have in 9M 2020 almost halved at current prices amounting to HRK 51.9bn. Exports of services have accounted for 44% of total exports (vs. 58% in 9M 2019). On the other hand, exports of goods in 9M have decreased only 8% YoY. So total exports have in 9M of 2020 decreased 30% YoY, while imports have decreased 16% YoY.
Croatian GDP, Real Growth Rates (%, YoY)*
*Quarterly Gross Domestic Product, seasonally adjusted real growth rates
Comparing Croatia to other EU countries, the drop in GDP in Q3 was the highest among all EU countries, due to Croatia’s strong dependency on tourism. Other Mediterranean countries like Spain (-8.7%), Portugal (-5.7%), Italy (-4.7%) and France (-4.3%) fared much better in Q3 despite outperformance of Croatia’s summer season mostly due to the specificity of the tourist structure that is mostly reliant on foreign guests. Q3 GDP drop was also lower in Austria (-5.3%), Belgium (-5.2%), Hungary (-4.7%), Germany (-4.2%) and Slovakia (-2.2%). Slovenia will publish its first estimate of Q3 2020 GDP today.
