Krištof on GDP Slowdown: Industry Has Underperformed

Director of the Croatian Bureau of Statistics (DZS) Marko Krištof reported on Wednesday that the growth of the Croatian economy in the fourth quarter of last year was, for the first time in a while, lower than the average of the European Union.

According to seasonally adjusted data, the Croatian gross domestic product (GDP) increased by 2.2 percent in the last quarter compared to the fourth quarter of 2016, while the average growth at the EU level was 2.6 percent.

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On a quarterly basis, however, with a growth of 0.1 percent, the Croatian economy recorded the slowest growth among all member states, while the average growth in the EU in the last quarter of last year was 0.6 percent.

“This is somewhat to be expected due to the significant seasonal impact and the fact that the industry has somewhat underperformed in the fourth quarter,” said Krištof.

The Croatian Bureau of Statistics (DZS) published on Wednesday the first estimate according to which, based on original data, GDP in the last quarter of last year increased by 2 percent compared to the same period a year earlier.

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This marks the 14th consecutive quarter of GDP growth, but slower than in the previous quarter when the economy strengthened by 3.3 percent, and also the slowest growth since the second quarter of 2015, when growth was 1.9 percent.

In the entire year of 2017, the Croatian economy grew by 2.8 percent, slower than the 3.2 percent growth in 2016 and below expectations.

The Largest Decrease in Agriculture.

The largest decrease in the growth rate in the last quarter of last year was recorded in the agricultural sector, where the annual decline was five percent, primarily due to drought. The volume in the industrial sector was also reduced, which, along with mining, extraction, and energy, recorded a decline of 0.2 percent, said the director of the DZS.

As Krištof explained, in the fourth quarter, the structure of the economy is significantly different from that in other quarters. Namely, the share of industry in total GDP is higher, because seasonal activities have a smaller volume, so the reduction in volume in industry has a greater impact on total GDP.

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Industrial production fell in the last two months of last year. A decline in industry for two consecutive months has not been recorded since mid-2014. As a result, industrial production stagnated on an annual basis in the last quarter of last year, while it increased by 2.9 percent in the previous quarter.

The reduction in industry, Krištof said, occurred due to lower production in the manufacturing of metal products, which primarily relates to shipbuilding and metal structures, but also in the furniture manufacturing sector.

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“We have very stable growth rates in consumption, wages, and employment, but the impact of tourism is really significant. In the fourth quarter, when there is no tourism, as soon as a few sectors produce less, the growth rates are not at the levels they were before,” explained Krištof.

The Largest Contribution to Growth is Consumption.

Hospitality, tourism, accommodation, trade, and transport recorded an annual growth of 3.8 percent, with hospitality growing by as much as five percent, but in the fourth quarter, it constitutes only a small part of the added value, so it could not reverse the trend and pull the entire sector, said Krištof.

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According to components, the largest positive contribution to GDP in the last quarter of last year was achieved by the growth of household final consumption expenditures. The contribution of domestic demand was positive, while the contribution of foreign demand was negative.