As announced, the real growth of retail trade in July is 2.9 percent year-on-year after an average growth of 1.7 percent in the first half of 2023, alongside the complete lifting of pandemic restrictions in the main emitting markets compared to the first quarter of last year and a strong increase in the number of accommodation units, the comparative advantage of our tourism is significantly influenced by the simultaneous introduction of the euro, entry into Schengen, and increasingly better transport connectivity, announced the Croatian Employers’ Association (HUP) in their new edition of analyses.
In the second half of the year, a continuation of the strong recovery of real net salaries (by 4-5 percent annually) is expected, increasingly pronounced in the public sector alongside rising social transfers. We have also raised the estimate of average employment growth this year to 2.7 percent thanks to stronger immigration and stronger economic activity. Moreover, an acceleration of investment growth (+7.0 percent) is expected on the wings of EU funds (EUR 4 billion available or 5.5 percent of GDP), favorable (real) financing conditions, and the integration of companies into global value chains, which requires significant investments in productivity, said HUP.
However, there are always reasons for caution, given that the deterioration of the business climate among major trading partners (Germany, Italy) into recessionary ‘territory’ combined with a significant deterioration of financing conditions in the euro area and uncertainties in energy markets indicate further weakening of foreign demand. Contrary to the expectation of most that the drop in energy prices will have a beneficial impact on the economy in the coming year, aggregate demand in the euro area cannot remain immune to the strong cumulative rise in reference interest rates of 425 basis points in just one year, the withdrawal of energy subsidies, and the announcement of (stricter) fiscal rules.
