Croatia: Economic growth remains solid in Q3
The Croatian economy weakened marginally in the third quarter, according to detailed GDP data released by the Statistical Institute on 30 November, with annual economic growth ticking down to 2.8% from 2.9% in the second quarter. Healthy domestic demand underpinned the third-quarter expansion.
Private consumption climbed 2.7% in year-on-year terms in Q3, the weakest expansion in nearly three years and well below the 3.6% rise logged in Q2. Despite the moderation, consumer spending remained solid, buoyed by strong tourism activity related to the FIFA World Cup, historically-low unemployment and healthy real wage gains. In addition, fixed investment grew 3.7% on an annual basis, accelerating from Q2’s 3.1% increase. Meanwhile, public expenditure growth picked up to 3.9% in Q3, the highest print in nearly a decade (Q2: +2.5% year-on-year).
On the external front, exports of goods and services increased 3.7% year-on-year in Q3, decelerating from Q2’s 5.6% climb. Meanwhile, import growth gathered pace in Q3, coming in at 5.1% (Q2: +4.7% yoy). Taken together, the external sector added 0.1 percentage points to headline growth, marginally below the 0.2 percentage point contribution recorded in the previous quarter.
Looking ahead, growth should continue to be propped up by healthy domestic demand dynamics. Solid private expenditure, underpinned by further tightening of the labor market and higher household purchasing power, coupled with an upturn in capital spending, largely thanks to improved absorption of EU funds, should propel economic activity next year.