GDP 0.7% decline as expected, future figures to be better

Finance Minister Zdravko Marić said on Friday that the latest statistics on a year-on-year GDP decline of 0.7% in Q1 2021 were in line with the government's forecasts, noting that statistics for Q2 would certainly be positive.

Marić said that the GDP drop in Q1 was the smallest rate of decline in the last four quarters, since the outbreak of the coronavirus pandemic.

"If we compare Q1 this year with the last quarter of 2020, we can see that it grew by 5.8%," he said.

He added that the government had expected a GDP decline of around 1% in Q1.

Analysing individual GDP components, he said that they were all more or less slightly above the expectations.

"Personal consumption dropped by 0.4%. Some will say that it is surprising considering that retail trade grew more than 4% in Q1. But we can see now that a decrease in personal consumption is mostly due to a drop in services," he said, explaining that he was referring to a decline in services in the domestic catering sector, transport and other services as well as to a drop in service imports.

He noted that investments had been growing at a solid rate for the second consecutive quarter, going up by more than 4% in Q1, which, he said, was a good indicator of future developments.

Commodity exports, too, grew for the second quarter, by more than 8%. At the same time, service exports as well as service imports saw a significant drop.

Commodity and service exports dropped by 0.9% on the year, with commodity exports going up 8.3% and service exports sinking by 18.6%. Commodity and service imports dropped by 2.1% on the year, with the import of commodities going up by 1% and the import of services dropping by 19.7%.

Gross investments in fixed assets grew in Q1 by 4.6% on the year, as did state consumption, by 0.2% on the year.

"As for the entire year, we stand by our assessment of a GDP growth of 5.2%, and considering the estimate of a 6.7% GDP growth in 2022, that puts us in a position to achieve the pre-crisis, 2019 GDP level already in 2022," said Marić.

He noted that it had taken Croatia 11 years to overcome the previous crisis and that this time recovery would happen much sooner on the condition there were no additional unexpected repercussions.

Comparing Croatia with other EU member-states, Marić said that only France, Lithuania and Slovakia saw a GDP increase in Q1, with Croatia being the country with the smallest GDP decline in that period.

The EU GDP dropped by 1.8% on average in Q1.

Marić noted that Spain and Portugal, countries which like Croatia have an above-average share of services in GDP, notably tourism, and a similar structure of the economy, saw GDP declines of 4% and more than 5% respectively.

He believes that Croatia will have a very strong GDP growth in Q2 considering that quarterly indicators have been steadily improving.

Speaking of the tourist season, Marić said that if the current positive trends were maintained, with a growing vaccination rate, one could expect this year's tourist season to be better than last year's.

Text: Hina

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