HUP: Economic Growth Exceeds Expectations, but Poor Structure of GDP Growth Signals Challenges

The Croatian Employers’ Association (HUP) highlighted on Tuesday that the growth of the Croatian economy in the third quarter of 2.8 percent year-on-year exceeded expectations, but also warned that the poor structure of GDP growth signals challenges that the economy will face in the coming months.

The Croatian Bureau of Statistics (DZS) published on Tuesday its first estimate indicating that the gross domestic product (GDP) in the third quarter grew by 2.8 percent in real terms compared to the same period last year. This is a faster growth than in the second quarter of this year, when GDP grew by 2.6 percent, marking the 11th consecutive quarter of economic growth.

– We have had another successful quarter, with GDP growth above 2.8 percent, which is above expectations, but the poor structure of GDP growth signals challenges that the economy will have to fight even more intensively in the months ahead – emphasized HUP. They are concerned, as they stated, about the significant decline in goods exports, which is a direct consequence of the slowdown in economies in our region and the recession in the economies of the most significant trading partners.

The decline in service exports shows that the existing tourism model is facing growth limitations, they said, noting that the data from the third quarter suggest that the potential of the tourism model that Croatia has has reached its peak. HUP emphasizes that it is time to promote organized high-quality tourism. Therefore, HUP supports the new Tourism Act, which aims to develop segments of tourism with higher quality and added value as well as sustainable tourism.

HUP Advocates for Raising Personal Allowance Above Minimum Wage Level

HUP calls for the adoption of measures that would enable the enhancement of the competitiveness of domestic products and services to retain export potential. Croatian exports, as stated by the employers’ association, are burdened by the tax treatment of labor, as well as the price of electricity for companies, which is above the EU average.

Therefore, HUP, as they stated, advocates for the relief of wages through raising the personal allowance above the minimum wage level and lowering income tax rates, which would accelerate wage growth for employees while maintaining competitiveness.

In the last quarter of 2023, growth is expected to slow to 2 percent in line with the deterioration of the business climate in the euro area, namely the decline in exports and worsening financing conditions that threaten private investments, HUP estimates.