Croatia: It will take two years for the economy to recover

Croatia: It will take two years for the economy to recover

Based on trends in April and May, the Croatian National Bank estimates that Croatia’s GDP fell between 12 and 13 per cent in the second quarter of this year, Vecernji List reported on Tuesday.

Croatia entered the summer with approximately 52,000 fewer employees than it had at the beginning of July 2019 and 37,000 more unemployed. The deficit in the state treasury reached 17 billion Kuna, which was expected given the quarantine and the economic chaos it caused. Tax collection was reduced by five billion Kuna, and costs increased by seven billion. Exactly how much the domestic economy declined in the second quarter will be known later this month, but all known data suggest it will be in double digits, similar to the EU level, which sank by about 15 per cent.

Croatia had a double blow because the earthquake in Zagreb produced almost the same material losses as the Covid-19 pandemic. Autumn brings increased uncertainty due to a possible second wave and fear of the uncontrolled spread of the infection, due to which many countries are introducing measures that restrict the movement of the population, which automatically leads to reduced consumption, especially in tourism.

Two parameters in Croatia were pleasantly surprising, the first related to industrial production, which fell by only 3 per cent annually in the first part of 2020, and tourism in the peak season, which could reach half of last year’s revenue. This is important because earlier estimates of an annual GDP decline of ten per cent were based on the assumption that the country would generate only 30 per cent of last year’s tourism revenue. A more favourable outcome in tourism will open up the opportunity for additional state interventions in the coming months.

The Croatian Central Bank Governor, Boris Vujčić, believes that the recovery will be slow and extremely uneven, and the pre-crisis level of economic activity is unlikely to be reached for at least another two years. Only the IT industry is doing well in the quarantine period, while the building industry is slowly returning.

As Dubrovnik Times wrote, autumn will certainly be difficult for people without jobs and families with reduced incomes and about 300,000 citizens with frozen bank accounts because the moratorium on mortgages and loans will unfreeze.

Governor Vujčić also believes that available funds from the EU will improve the standard of living and stability of the economy./ibna