Retail in January Recorded a Decline of 9.3 Percent

Analysts from Privredna banka Zagreb currently do not see signs of economic recovery in Croatia, and they expect that the first quarter of this year will result in an annual GDP change rate of around minus 0.5 percent.

They note that a statistical increase in some economic variable does not necessarily mean a turning point in the trend and a secure exit from the crisis. They state that industrial production, seasonally adjusted, recorded a growth of 1.5 percent in January 2010 compared to January 2009. In February, it recorded a growth of 0.2 percent compared to the same month in 2009, during which a decline of 8.4 percent was recorded compared to February 2008, thus in February 2010, we are at minus 8.2 percent compared to February 2008.

With this explanation, PBZ analysts point out the fact that we are still at least one or two steps behind the “good old” times and that a statistical increase in some economic variable does not necessarily mean a turning point in the trend and a secure exit from the crisis. “The harbingers of spring” are still deeply under the snow, states Ivana Jović in the latest PBZ Weekly Analyses. Given the extremely low base from last year, in her assessment, it is expected that industrial production this year will not show a significant recovery, and that the growth rate will remain at very low single-digit levels.

PBZ analysts currently do not see signs of recovery in domestic demand, while the recovery of foreign demand is still in its infancy and is likely to be of an unstable nature throughout the year. They point out that the extremely poor domestic component is also indicated by the fact that retail trade in January 2010 recorded a real decline of 9.3 percent. Retail trade has been in decline for twelve consecutive months. Given the negative expectations of the population regarding developments in the labor market (rising unemployment, decline in average nominal wages in January), as well as news from the Ministry of Finance about the lack of funds for the payment of Christmas bonuses and severance pay in state and public services and state companies, it is difficult to expect significant changes in retail trade movements except for the effect of last year’s low base.

Unlike industrial production, which seems to have hit its bottom, they warn that construction activity is still declining and at an accelerated pace. In January, construction works recorded a decline of 18.4 percent compared to the same month last year. Over the past year, the number of employees in the construction sector has decreased by almost 13 thousand (12 percent) in legal entities, and by about six thousand among craftsmen (data for December 2009). PBZ analysts do not expect that the recently adopted state measures to stimulate apartment sales will affect the revival of the market, given that the purchase of apartments continues to be postponed in line with expectations of a stronger correction in new construction prices than has been the case so far. (H)