Poor Economic Indicators at Year-End

The Croatian economy welcomes the end of 2012 with more than 357,000 unemployed, a decline in gross domestic product, and a downgrade of the country’s credit rating to non-investment grade, which Standard & Poor’s attributed to insufficient reforms.

GDP has fallen in all three of the first quarters of this year (by 1.3%, 2.2%, and 1.9% year-on-year), which is expected to continue in the last quarter, with estimates suggesting that this year’s real GDP decline could be around 1.8 to 2 percent, along with declines in all its components, particularly household consumption expenditures and gross investments in fixed capital.

A strong decline in domestic demand has continued, which, along with negative trends in foreign markets, especially the EU market, has led to further production declines.

Industrial production in Croatia in November was down 4.3% compared to the same month last year, and the total number of employees in the industry fell by 5.8% year-on-year. In the first eleven months, industrial production fell by 5.5% compared to the same period last year. Thus, this year will see a continuation of the decline in industrial production on an annual basis, marking the fourth consecutive year of negative trends.

The trend of declining construction activity has continued, which was 11.2% lower in the first ten months than in the same period last year.

In November, inflation in Croatia was 4.4% year-on-year, marking the second consecutive month of weakening inflationary pressures. Since the beginning of the year, inflation has continuously risen, reaching 5.0% in September, the highest level in nearly four years. In November, year-on-year, housing, water, energy, gas, and other fuel prices rose the most, by 13.2%, with gas prices (up 30.8%) and electricity prices (up 22.1%) being the largest growth generators in this category.

Retail trade continues to be negatively affected by uncertainty in the labor market and high levels of consumer pessimism. According to statistical data, in October, retail trade turnover in Croatia fell by 5.7% year-on-year in real terms. This marks the eighth consecutive month of declining real consumption on an annual basis.

In the commodity exchange with foreign countries in the first ten months of this year, expressed in kunas, exports increased by 1.1%, and imports by 1%, while expressed in euros, both exports and imports decreased, with exports down 0.1% and imports down 0.2%. The coverage of imports by exports in the first ten months of this year stands at 58.3%.

Tourism, on the other hand, is among the few sectors showing positive indicators. According to data from the Croatian Bureau of Statistics, from January to October, nearly 11.5 million tourist arrivals were recorded in commercial accommodation facilities, an increase of 3.4% compared to the same period last year, while the 61.9 million overnight stays represent a 4% increase.

Growth is recorded among foreign guests, who accounted for over 92% of the total number of overnight stays, while domestic tourists recorded declines, reducing the share of domestic tourists in total overnight stays from 11.4% in the first ten months of last year to 7.9% in the same period this year.

However, even in the peak tourist season in July, which is usually not the case, there was an increase in the number of unemployed compared to the previous month, which continued in the following months, and according to daily data from the Croatian Employment Service, the current number of unemployed, as of today around noon, is 357,928.

According to the latest official data, at the end of November, there were 347,047 registered unemployed in the records of the Croatian Employment Service, which is an increase of 4.1% or 13,647 persons compared to October, and an increase of 14.9% or 44,967 persons compared to November last year.

The registered unemployment rate for November was 20.4%, which is 2.5 percentage points higher than in the same month last year. The last time the registered unemployment rate of 20.4% was recorded was just over nine and a half years ago, in April 2003.

In October, there were a total of 1,366,472 employed persons in Croatia, which is 18,791 persons or 1.4% less than in September.

For the period from January to September, the average net salary of employees in legal entities was 5,435 kuna, which is nominally 0.9% higher than in the same period of 2011, but real wages decreased by 2.1%.

The state of the economy and among the population is also reflected in data from Fina, which states that at the end of October, due to unpaid payment obligations totaling 44.5 billion kuna, 72,654 business entities were blocked, as well as 242,192 citizens whose total debt amounted to 16.3 billion kuna.