Croatia: Economic growth slows in the second quarter
GDP growth waned to 3.3% year on year in the second quarter from 3.9% in the first quarter. On a seasonally adjusted quarter-on-quarter basis, economic growth slowed to 0.8% in Q2 following the previous period’s 1.0% increase.
The deceleration was solely driven by a weaker performance of the external sector; while exports of goods and services fell at a milder pace of 1.3% year on year in the second quarter (Q1: -2.0% yoy), imports of goods and services growth sped up to 5.2% (Q1: +2.2% yoy).
More positively, data for domestic subcomponents was upbeat across the board. Private consumption growth accelerated slightly to 6.1% year on year in the second quarter (Q1: +6.0% yoy), which marked the best reading since Q3 2022. Government spending growth, meanwhile, accelerated to a 4.0% increase in Q2 (Q1: +1.0% yoy). Additionally, fixed investment growth picked up to a three-year high of 12.9% in Q2, following the 10.8% expansion logged in the previous quarter.
Our Consensus is for the economy to retain solid momentum in H2 as price pressures soften from H1 and the ECB delivers additional rate cuts. Looking at 2024 as a whole, the economy should expand at a quicker pace than last year thanks to EU funds and a rebound in exports. Stronger-than-expected tourism activity poses an upside risk.
Alen Kovac, analyst at Erste Bank, commented on the outlook:
“Private consumption looks set to keep an overall supportive tone owing to ongoing strong labor market factors, resilient consumer sentiment, and vivid consumer credit […]. As external demand goes, tourism is expectedly under the spotlight, and YTD developments are largely matching expectations of modest sector growth being mostly driven by pre-season and post-season performance.”