Croatia Economy

EIZ sees Croatian economy growing by 14.5% in Q2


Croatia’s economy grew by an estimated 14.5% in annual terms in the second quarter of 2021, the Institute of Economics Zagreb (EIZ) said. On a quarterly basis, the economy advanced an estimated 1.2%.

The estimate was based on the year-on-year change of the institute’s Coincident Economic Index (CEIZ) for the month of May, the local think-tank said in a statement.

CEIZ is a monthly composite business cycle indicator developed by the EIZ. Its purpose is to provide timely information on the current business cycle condition. Consequently, the CEIZ index value changes simultaneously with the business cycle, thus indicating the present state of the economy.

In May 2021, CEIZ index rose by 11.0 index points compared to May 2020. At the same time, average value of the index for April and May 2021 was as much as 15.2 index points higher compared to the same period in 2020, when the economy was, for its most part, closed due
coronavirus-related restrictions.

Observing index components in April and May 2021, compared to the same period in 2020, all four index components (state budget income from VAT revenues, volume of industrial production, real retail trade, and the number of tourist arrivals) registered growth, with annual growth rates ranging from 15.6% (growth rate of industrial production) to 323.7% (growth rate of the number of tourist arrivals).

Croatia economy CEIZ INDEX
(Source: Institute of Economics Zagreb)

The described index movements suggest that the economic activity measured with quarterly GDP change rates in the second quarter of 2021 is sharply accelerating compared to the same period last year, EIZ said. Based on the index movements, it can be estimated that, in the second quarter of 2021, the Croatian GDP will accelerate 14.5% compared to the same quarter in 2020. Index movements suggest that quarterly GDP change rate in the second quarter will also be positive and should amount to 1.2%.

The institute will be able to make conclusions about the business cycle in the second quarter of 2021 with greater certainty when CEIZ index value for June becomes available.

Croatia’s GDP shrank 0.7% year-on-year in the first quarter of 2021, following an upwardly revised 7.2% decline in the previous period. On a seasonally adjusted quarterly basis, the economy advanced 5.8%. For this year the government expects growth of 5.2%.

Erste Group in its CEE Macro Outlook published in June 2021, upgraded its call for Croatia for 2021 to 5%, seeing risks mostly to the upside. “Headline figures should gather stronger support from both private consumption and investments” the Austria-based banking group said. It also revised its inflation forecast upwards to 1.6-1.7% for 2021-22, while keeping its call that monetary policy would remain accommodative going forward. “The fiscal gap in 2021 should narrow towards the 4.5% of GDP region, allowing for a public debt trajectory reversal, though being higher than initial MoF targets. Global factors remain the driving force on the bond market, while local factors continue to support LCY yields at present levels.”

Croatia’s unique geographical location, modern infrastructure, business-oriented environment, a highly qualified and multilingual workforce, cost competitiveness, and ability to quickly adapt to current challenges make the country a desirable destination for a foreign investor.

The Croatian Bureau of Statistics will release its first estimate of second-quarter GDP on August 27.