Real GDP increased by 0.2 percent in the second quarter

The real gross domestic product (GDP) of Croatia increased by 0.2 percent in the second quarter of this year compared to the first quarter, announced the Croatian National Bank (HNB), which reminds that the first estimate by the DZS of a GDP decline of 0.7 percent compared to the second quarter of last year and the seasonal adjustment by the HNB indicate that a very slight economic growth was achieved in the second quarter compared to the first three months.

 - Favorable expectations for economic developments in the EU could also stimulate a slight growth of the domestic economy, but its medium-term perspective remains very weak – assess analysts from the central bank in the publication Economic Trends, published on the HNB’s website.

They emphasize that economic flows in the second quarter were strongly marked by the entry into the EU, which temporarily intensified international trade, and the introduction of fiscal cash registers, which contributed to a noticeable reduction of the gray economy in trade and hospitality and increased state revenues.

 - However, the overall fiscal deficit due to the growth of budget expenditures during the first six months has nearly reached the planned amount for the entire year. The effects of the introduction of fiscal cash registers and Croatia’s entry into the EU will be able to be more precisely determined only with a time lag – note the HNB.

They emphasize that the growth of real GDP in the second quarter of this year compared to the first by 0.2 percent is primarily a reflection of increased personal consumption and strong growth in the export of goods and services, with notable exports of other transport equipment and tourist services.

The movements of other components of aggregate demand were also favorable during the second quarter. On the other hand, the strong increase in imports, which was achieved mainly due to changes in excise duties and conditions of international trade after Croatia’s entry into the EU, had an unfavorable statistical effect on GDP movements.

 - According to the latest available monthly indicators, the weak growth dynamics could continue into the third quarter. According to initial estimates, economic developments in the EU in the third quarter are more favorable than expected, which will positively affect the growth of the domestic economy – emphasize the HNB.

They also remind that tourist overnight stays in July increased by 1.8 percent compared to the same month last year, primarily due to the increase in overnight stays of foreign tourists, while industrial production, on the contrary, decreased.

Finally, at the beginning of the third quarter, consumer optimism continued to grow, while business optimism slightly weakened.

HNB analysts also note that the labor market in the second quarter recorded an increase in the number of employed compared to the previous quarter, as a result of stronger employment in the service sector and public sector.

The number of unemployed gradually decreased after a spike in April, but remained above the average value for the first quarter.

The administrative unemployment rate, according to seasonally adjusted data, decreased during the second quarter and was 19.9 percent in June, while in the first quarter it averaged 20.4 percent, the HNB states, adding that according to July data, the number of unemployed persons continued to decrease at the beginning of the third quarter, while the number of employed only slightly increased.

Therefore, in July, the unemployment rate further decreased to 19.5 percent.

However, analysts from the central bank also note that data from the business optimism survey for August indicate a possible deterioration of conditions in the labor market in the coming months.

When it comes to labor costs, nominal and real gross and net wages stagnated in the second quarter compared to the beginning of the year, while at the beginning of the third quarter, a noticeable monthly decline was recorded.

Central bank analysts also state that in the second quarter, net foreign debt increased by 200 million euros, with a strong growth of foreign receivables (1 billion euros), as well as gross foreign debt. The increase in debt of 1.1 billion euros (excluding currency changes and other adjustments) was mainly contributed by the April issuance of a central government bond on the US market worth 1.5 billion dollars, two-thirds of which were subscribed by foreign investors. In addition, credit institutions borrowed 500 million euros, while public enterprises from other domestic sectors significantly reduced their debt, and private non-financial enterprises further increased their debt by 200 million euros, while HBOR slightly increased its foreign debt.

Thus, at the end of June 2013, the relative indicator of gross foreign indebtedness reached 104.8 percent of GDP, and net foreign indebtedness 64.6 percent of GDP, analysts from the central bank state, among other things.