Šaravanja: GDP Growth in Line with Expectations, Foreign Framework Increasingly Questionable

The real growth of the economy in the second quarter was 2.7 percent year-on-year and 2.5 percent year-on-year according to seasonally adjusted data. The growth of 1.1 percent compared to the previous quarter is a sign that the economy has entered the third quarter solidly. The Euro area, meanwhile, grew at a rate of 0.3 percent. All key components of GDP are actually in line with monthly releases of economic data, states the commentary by Goran Šaravanja, chief economist of the Croatian Chamber of Economy, on GDP trends.

Wages and employment are rising, so the increase in personal consumption of 2.3 percent year-on-year in the second quarter is not surprising. The growth of investments of 3.2 percent year-on-year is also expected. However, the decline in imports of -3.6 percent year-on-year in the second quarter indicates caution.

The decline in inventories and imports is partly a result of adjustment after the pandemic (double-digit real annual growth rates of exports and imports from the second quarter of 2021 to the fourth quarter of 2022). We will certainly closely monitor the movements of these indicators in the second half of the year in terms of further slowdown due to slower global economic growth.

The decline in goods exports of -9.7 percent year-on-year (and -4.6 percent year-on-year in the first half of the year) only confirms the impact of falling orders from Germany and the fact that other important European economies such as the Netherlands are in technical recession or, like Italy, recorded a decline in economic activity in the second quarter.

Economic trends in large EU member states and China, which is an important export market for Europe, will be a key factor for the pace of economic growth in the second half of 2023.

For now, the weighted average of economic growth estimates for 2023 in the HGK Consensus of 2.3 percent seems quite realistic.