Record Spending: Croats the Most Optimistic in the Region Regarding Financial Situation

It seems that the global crisis and European recession hardly affect us, and both the state and citizens are spending as if there is no tomorrow. The government has inflated the budget expenditures for 2024 by as much as 11.2 percent, as the ‘budget is socially sensitive and continues to be a pillar for implementing aid packages for citizens and the economy, as well as for increasing salaries in public and state services and for pension payments and other social benefits.’

 

In an election year, of course. The alibi is the expected growth of 3.1 percent (the difference between GDP growth and expenditure growth evidently does not concern anyone) that citizens presumably rely on, who, according to data from the Tax Administration, spent frantically in December, even 351 million euros more compared to the same period last year (from the beginning of December to Christmas), and if this continues until the New Year, spending this month could exceed the optimistically estimated 3.1 billion euros.

 

More specifically, again according to data from the Tax Administration, citizens had already spent 2.6 billion euros by Christmas. Just on Saturday, the day before Christmas Eve, 147 million euros were spent, or 3.6 percent more than on the same date last year. Croats evidently do not anticipate a recession, believing analysts who estimate that countries like Germany, our main trading partner, are recovering. Personal consumption remains the main fuel for economic growth, both in the EU and in Croatia.

 

An analysis by Valicon, a consulting and marketing firm, shows that unlike the rest of the region, Croatia truly believes in recovery estimates, consequently also in the sense of consumption, meaning they are less anxious when it comes to spending money and worrying about tomorrow. The latest analysis for Croatia, Slovenia, BiH, and Serbia shows that the trend of negative assessments, or expectations of worsening personal financial situations, continues in all countries of the region. However, unlike the previous measurement, the growth of optimistic expectations is present only in Croatia. This time, due to the worsening situation, Slovenia and Serbia join BiH. Serbia continues to record the most negative rate, while Croatia is the most optimistic.

 

Although the perception of rising prices is present in all four countries, in Croatia, expectations for price increases across all categories are significantly lower, and a reduction in the perception of rising prices is expected in the future. At the same time, both in Croatia and Slovenia, the volume of savings is significantly decreasing, which is an indirect indicator of confidence in the future. Namely, in Slovenia and Croatia, according to the previous measurement, the preservation of the volume of savings has significantly decreased, especially in Slovenia. It remains at a similar level in BiH and Serbia. In Slovenia, among other things, there is a significant increase in the cessation of savings, while in Croatia, the volume of savings is decreasing.

 

Estimation of personal financial situation:

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The analysis also shows that in Slovenia, BiH, and Serbia, the estimation of the volume of consumption has decreased. The most pessimistic view of the situation this time is significantly more pronounced in Serbia, and least in Croatia, where an increase in the volume of consumption is expected. The situation in Slovenia and BiH is at the same level, but with greater deterioration in Slovenia.

 

The trend of decreasing sizes of the ‘cautious’ and ‘disadvantaged’ segments, which are key indicators of negative market conditions, continues only in Croatia. In Slovenia and Serbia, the trend has reversed, while in BiH it has remained at the same level. On the other hand, the trend of growth in the ‘secured’ segment, which is a reliable indicator of market growth (‘secured’ are those who do not reduce consumption and have no negative expectations regarding their financial situation), has accelerated in Croatia but has fallen in other markets, especially in Serbia. Despite the improvement in the situation in Croatia, the relationships between individual segments in all markets are still significantly closer to a situation characteristic of a recession than to a period of economic growth, which is still mostly the case for the Serbian market.

 

Segments of expected financial condition and consumption:

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However, what makes Croatia still a ‘mentally’ inseparable part of the region is the hypothetical decision about what citizens would do with a surplus of, for example, 100 thousand euros. Respondents in all four countries preferred purchasing real estate or land, thereby showing that the rentier mentality is so deeply rooted in the genetic structure of the Balkans that no novelties like cryptocurrencies, not even other currencies (except for the euro), can displace it from the genetic code. Immediately behind real estate are deposits in banks, the same ones we despise due to zero interest rates on savings and the growing discrepancies between them and rising loan interest rates. Gold is only in third place, while everything else related to the digital age or capital markets fails to attract more than seven percent of respondents.

 

What would you do with a surplus of 100,000 euros:

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When it comes to the perception of inflation, consumers across all markets still perceive a significant rise in prices of products they usually buy, but the perception of price changes is the lowest so far and is most pronounced in Croatia, followed by Bosnia and Herzegovina. A reduction in the perception of rising prices can be expected in the future in Croatia and Bosnia and Herzegovina, but despite somewhat lower shares in Slovenia and Serbia, this cannot be said for these two countries. Consumers in the coming months still expect further price increases in Serbia, BiH, and Croatia, especially in the category of food and basic necessities, and in Slovenia, an increase in utility costs.

 

The promising fact is that expectations of rising prices have decreased in almost all categories, in Slovenia this does not apply only to the category of utility costs, and in Serbia to the category of food and basic necessities. For Slovenia, Croatia, and BiH, it is still an encouraging indicator that expectations of further price increases are still lower than those already perceived.

 

A decline in consumption is expected in all four markets, particularly in the categories of food ordering, purchasing sports equipment, visiting bars and restaurants, buying home equipment, and attending events. In BiH, this also applies to the category of travel and vacations, and in Slovenia to the category of clothing and footwear purchases. However, Croatia stands least pessimistically in most segments.

 

Change in the volume of consumption allocation:

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Clearly, in an election year, voters are aware that the state will be more generous, and the announcements of recovery or at least the avoidance of a more serious recession in our most important markets open at least small wings for consumption, which will still provide the greatest boost to GDP growth in 2024.