Current Account Deficit of the Balance of Payments 31.6 Percent Higher than Last Year

The current account deficit of Croatia’s balance of payments in the second quarter of this year amounted to 1.8 billion euros, which is 434.2 million euros, or 31.6 percent more than in the same period last year, according to preliminary data from the Croatian National Bank (HNB).

In the first quarter, the deficit amounted to 2.5 billion euros, thus in the first half of this year, a deficit of 4.3 billion euros was recorded on the current account of the balance of payments, što is for 939.3 million euros, or 27.7 percent more than in the first half of last year. The increase in the current account deficit is primarily due to unfavorable trends, namely the growth of the deficit in trade with foreign countries, and the deficit on the income account has also increased, which could not be mitigated by more favorable trends on the services account. The faster growth of goods imports compared to exports in the first half of this year influenced the increase in the deficit on the goods sub-account by 21 percent, to nearly 5.7 billion euros.

The deficit is also recorded on the income sub-account, increasing by 26.4 percent, to nearly 1.1 billion euros. These unfavorable trends could not be mitigated by somewhat favorable trends on the services sub-account, which recorded a surplus of 1.9 billion euros in the first half of this year, which is 17.4 percent more than last year. This growth was mainly influenced by the tourism sector, as a surplus of about 1.8 billion euros was recorded in travel, which is 18.1 percent more than in the first half of last year. A surplus was also recorded on the current transfers sub-account amounting to 506 million, but this is somewhat less, by 2.2 percent, compared to the first half of last year.

The current account deficit of the balance of payments in the first half of the year was financed in equal proportions by direct foreign investments and borrowing abroad. According to preliminary data from the central bank, direct foreign investments in Croatia in the first half of this year amounted to 1.8 billion euros, što is in relation to the same period in 2007 about 22 percent less. On the other hand, liabilities on the other investments sub-account increased by 42.8 percent, to about 1.9 billion euros.

Economic analysts estimate that, given the high dependence of the Croatian economy on imports, there will be an additional increase in the current account deficit of the balance of payments this year. Analysts from the Economic Institute estimated at the end of July that the current account deficit of the balance of payments this year will amount to 9.7 percent of GDP, analysts from Privredna banka Zagreb in their latest macroeconomic analyses estimate the deficit at 9.8 percent of GDP, while economists from Raiffeisen Bank estimate the deficit at around 10 percent of GDP. (H)