Croatia’s GDP contracts by record 8.4% in 2020

ZAGREB, 26 February (Hina) – The contraction of Croatia’s GDP in Q4 2020 slowed down in relation to previous quarters but the contraction for the whole year, due to the COVID-19 crisis, was a record 8.4%.

The national statistical office said on Friday that according to its first estimate, GDP in Q4 2020 contracted 7% year on year.

The decline was slightly lower than forecast by analysts. Six analysts polled by Hina projected the Q4 GDP decline at 7.3%, their estimates ranging from 6.5% to 8.3%.

It was the third quarter in a row that GDP had fallen on the year, due to restrictions aimed at curbing COVID-19.

However, the fall in Q4 was less than in the preceding quarters. GDP contracted by 15.4% in Q2, the biggest drop since 1995, while dropping by 10% in Q3.

GDP contracted by a record 8.4% for the entire year. Before that, the record fall of 7.3% was recorded at the start of the 2009 global financial crisis.

Personal consumption dropped, investments increased

Most GDP components recorded decreases except gross investment in fixed capital, commodity exports and government spending, which mitigated negative trends with positive growth rates, Raiffeisenbank Austria (RBA) analysts said in a comment.

The contraction in Q4 was mainly due to weak personal consumption, the biggest GDP component. Household consumption dropped 4.5% year on year, less than in Q3.

The export of goods and services dropped 9.8%, much less than in Q3, with commodity exports increasing 8.6% and service exports plunging 35%.

The import of goods and services decreased 7.6% year on year, with commodity imports dropping by 3.6% and service imports by 25.9%.

In Q4, gross investment in fixed capital went up 4.2% year on year, increasing after two quarters of decline.

Government spending went up 1.6%.

Above EU average quarter on quarter

According to seasonally adjusted data, GDP in Q4 2020 went up 2.7% quarter on quarter, while falling 7.1% year on year.

In relation to the EU average, Croatia’s GDP recorded better results on the quarterly level and worse results on the annual level.

According to Eurostat, the EU economy in Q4 2020 contracted 0.5% quarter on quarter and 4.8% year on year.

Compared with some other countries, Croatia recorded the sharpest year-on-year decline in Q4 at 7.1%. Bulgaria’s GDP contracted by 3.8%, the Czech GDP by 5%, the Polish GDP by 2.8%, the Romanian GDP by 1.7% and the Slovakian GDP by 2.7%, RBA analysts said.

Deep but short recession?

Although the 2020 recession was deeper than that at the beginning of the 2009 financial crisis, when GDP sank 7.3%, it is expected that it will be shorter. The previous recession lasted six years while this time it is expected the economy will recover this year already.

Polled by Hina, six analysts believe GDP could go up 4.4% on average this year, their forecasts ranging from 3.5% to 5.1%.