When Germany and France were distributing 500 euros to their citizens during the height of the crisis, they did so with the intention of stimulating the growth of personal consumption. Indirectly (although it would be more accurate to say: primarily) and reviving the real sector, as citizens were buying – domestic products with that money. The idea has once again been circulating in the minds of European economists in recent months, as nothing else seems to work. They would distribute between 500 and even two thousand euros to push consumption and boost domestic production. If there were room for such measures in the Croatian budget, they would miss the target. That money would mainly be spent on – imports. However, if nothing else, both we and the rest of Europe are rubbing our hands in satisfaction, as personal consumption, one of the main ‘drivers’ of growth, is recovering. Here, however, all similarity with the world around us ends. The fundamental difference between us and the EU lies in the reverse logic: Europe finances consumption that ends up in domestic production with export currencies; we finance mainly imported products from foreign sources (through borrowing), as we do not have domestic ones.
In the new issue of Lider: It is a misconception that the growth of household consumption stimulates the domestic economy
HNB: growth of loans
But first, what does the statistics say? In the first seven months of this year, retail sales in the EU were on average 2.8 percent higher (in Croatia, it is 1.8 percent) compared to the same period in 2015, or 4.1 percent higher (in Croatia, 8.7 percent lower) compared to the same period in the first year of the crisis, 2008. What does our statistics say? Household personal consumption in the first half of the year increased in real terms by 3.1 percent compared to the same period last year (3.1 percent in the first and three percent in the second quarter). What is driving this?
You can read the full text in the new issue of Lider, which is available at kiosks on Thursday.
Authors: Gordana Gelenčer and Tin Bašić
