HGK expects investment growth this year

Data from the Croatian Bureau of Statistics (DZS) shows that total investments increased last year to 46.6 billion kuna, and the Croatian Chamber of Economy (HGK) expects this growth to continue this year.

According to data released by the DZS on Monday regarding the movement of investment values last year, their slight annual growth has continued, as stated by HGK.

They emphasize that in 2013 there were minor changes in the monitoring methodology, so the data for the past two years are not fully comparable with previous years, but it is noticeable that after a four-year declining trend that began in 2009, investments are slowly recovering.

Thus, the value of gross investments achieved last year increased by 3.2 percent year-on-year, with investments in construction works, which have the largest share in the investment structure, decreasing by 1.8 percent, while other forms of investment increased.

Investments in new fixed assets, which account for about 90 percent of total investments, increased by 2 percent, according to HGK. The largest investments among individual sectors were made in public administration, defense, and compulsory insurance – supported by the use of EU funds – as well as in the manufacturing industry.

The largest growth in investment value last year was recorded in transportation and storage – significantly influenced by the construction of a new passenger terminal at Zagreb Airport – public services, and in the accommodation and food service activities – primarily the renovation and construction of hotel capacities.

At the same time, a continued significant decline in the value of investments in construction and in the supply of electricity, gas, and water was recorded, HGK points out.

They note that the data on achieved investments last year still show their relatively low value compared to pre-crisis levels. Thus, if we disregard the changes in methodology, last year’s investment value of 46.6 billion kuna was approximately 45 percent lower than the 83.7 billion kuna that investments amounted to in 2008.

The structure according to the investor’s activity has also changed significantly – in 2008, the highest value of investments was recorded in construction, and other sectors, namely manufacturing, trade, and financial activities, were also major investors. Therefore, investments in public services were only in fifth place by size.

Although such a decline in investment value and changes in their structure are a result of difficult borrowing conditions in the domestic market, high levels of indebtedness, worsening financial results, a decline in investment willingness, and a decrease in capacity utilization, it can be said that the main cause leading to this was the significant drop in demand recorded in the years of the greatest impact of the crisis, HGK emphasizes.

Therefore, as they state, “it can be expected that the currently present slight recovery of total demand this year will lead to further growth in investment value, which is already reflected in the structure of GDP.”

“Although in 2014 there was an investment growth of 3.2 percent, the achieved 46.6 billion kuna is still almost half the value compared to that of 2008. Given the trend of recovery in total demand, we expect further growth in investment value this year, which is already visible in the structure of GDP,” says Zvonimir Savić, Director of the Sector for Financial Institutions, Business Information, and Economic Analysis at HGK, in a comment.

Recently, the DZS published the first estimate of GDP growth in the third quarter of 2.8 percent year-on-year, while gross investments in fixed capital increased by 2.2 percent compared to the same period last year.