In 2008, GDP growth slows to 2 percent

Seasonally adjusted data on the quarterly movement of Croatia’s gross domestic product (GDP) shows that in the third quarter of 2008, the gross value added created was real lower than in the second quarter, which represents a possibility for an official entry into recession, analysts from the Croatian Chamber of Economy state in the latest “Economic Trends” report.

Data on GDP for 2008 is not yet known, but it is expected to slow to approximately two percent, down from 5.6 percent in 2007. The latest available data for the nine months of last year shows that GDP growth slowed from 6.2 percent in the same period of 2007 to 3 percent, with a slowdown in personal and government consumption and exports of goods and services, while at the same time, the dynamics of investment growth in fixed capital increased, and inventories also rose. The greatest impact on the slowdown in growth was due to the movement of personal consumption, analysts from the Center for Macroeconomic Analysis of the Croatian Chamber of Economy note. The slowdown in personal consumption was influenced by the deceleration of real wage growth, a slowdown in credit activity, lower amounts of social transfers, i.e., pension returns, and poor conditions in the capital market.

On the other hand, they state, on the production side, the growth of most activities has slowed, with the exception of primary activities (agriculture, hunting, forestry), construction, and public services. The greatest impact on the slowdown in growth compared to the previous year was from industrial production and trade, whose rates, combined with high shares in the structure of gross value added, decreased by 4.8 and 7.2 percentage points, respectively. Additionally, seasonally adjusted data on quarterly GDP movement shows that in the third quarter of 2008, the gross value added created was real lower than in the second quarter, which represents a possibility for an official entry into recession (by definition, a decline in two consecutive quarters), say analysts from the Croatian Chamber of Economy. Noting that such movement of gross value added has rarely been recorded, only in two quarters since the beginning of 2000, analysts from the Croatian Chamber of Economy emphasize that this data should still be taken with caution due to the frequent revision of GDP data. (H)