The number of pension insured persons increased by 14,875 in June to 1,554,821

In June, Croatia recorded an increase in the number of insured persons both on a monthly and annual basis – compared to May, the number of insured persons was higher by 14,875 or 1%, reaching 1,554,821, according to the latest data from HZMO. The continuation of growth on a monthly basis is not surprising given that this increase reflects usual seasonal movements and increased employment of seasonal workers due to the main tourist season, analysts from RBA assess.

However, considering that in June most preparations for the main tourist season were nearing completion, the dynamics of growth in the number of insured persons on a monthly basis has slowed down. The impact of seasonal employment in tourism is also reflected in the monthly increase in the number of employed persons by sectors. Thus, compared to May, the number of insured persons in accommodation services increased by 7.3%, in food and beverage preparation and serving by 9.9%, while in water transport, for example, the number of employed persons increased by 12.1%.

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Similarly, the number of insured persons in travel agencies, tour operators, and other reservation services increased by 8.2%. In the retail trade sector, excluding the trade of motor vehicles and motorcycles, which account for 15.7% of the total number of insured persons, a monthly increase of 1.3% was recorded.

When viewed in relation to June 2017, the growth rate of insured persons also slowed down, from 2.4% in May to 1.9%, representing an increase of 29,364 persons. The annual growth in the number of insured persons was supported by a larger number of insured persons in most sectors. Insured persons from the manufacturing industry, which account for 16.1% of the insured, continued a positive trend that has been ongoing since September 2016, with an annual growth rate of 1.7%. At the same time, the number of insured persons in wholesale and retail trade, repair of motor vehicles and motorcycles (with a share of 15.8%) recorded a growth of 1%, thus confirming the continuation of positive trends since the end of 2015.

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Since the end of the same year, positive annual growth rates of the number of insured persons have also been recorded in the construction sector, which accounts for 6.8% of the insured, and despite stagnation on a monthly basis, they recorded a noticeable annual growth rate (7.8%). The growth in the number of insured persons in construction can certainly be a positive indicator of the recovery that has begun in this sector. Conversely, the decline in the number of insured persons continued in financial activities and insurance (-2.5% annually) and in real estate activities (-20.4%), which account for 2.9% and 0.8% of the insured, respectively.

Given the significant impact of seasonal movements on the number of insured persons, we expect that the number of insured persons will continue to increase on a monthly basis in July, primarily in sectors related to the tourism sector, analysts from RBA predict. However, as the end of the main tourist season approaches, we expect that, due to the return of seasonal workers to the unemployment register, the number of insured persons will begin to decrease on a monthly basis. Namely, despite relatively favorable trends in the labor market supported by seasonal employment, known structural weaknesses in the labor market, such as mismatches between labor supply and demand, low levels of employment and activity remain burdens on stronger positive changes in the labor market.

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Furthermore, the labor market is additionally burdened by the process of demographic aging of the population, leading to a decline in the working-age population. Additionally, Croatia is facing accelerated emigration of the working-age population. The outflow of young people in the working-age group is a consequence not only of the open labor market at the level of the European Union (where the demand for working-age population is increasing) but is also strongly pushed by a long-standing recession, during which key structural interventions in the economy were largely absent.

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If the aforementioned trends continue, medium to long-term such movements carry a range of negative consequences and diminish growth potentials. Therefore, addressing negative demographic trends along with known structural problems remains a challenge in creating macroeconomic policies.