The GDP annual growth rate fell to 2.5% in the last three months of 2019, with the result that real activity growth in the whole calendar year was 2.9%. Employment continued to grow and unemployment to decline in early 2020, albeit at a slower pace, whereas wage growth accelerated, the National Bank of Croatia said in the last Bulletin.
The annual consumer price inflation rate rose from 1.4% in December 2019 to 2.0% in January 2020, mostly driven by the price growth of unprocessed food products and pharmaceutical products (partly due to the base effect resulting from a cut in the VAT rate last year), as well as of refined petroleum products. Monetary policy remained supportive of favourable trends in funding conditions for domestic sectors. The annual growth of bank placements accelerated to 4.3% in January on the back of annual growth in corporate placements, while household lending held steady. According to MoF data, the central government budget ran a surplus of 0.9% of GDP on an annual level in 2019.
Preliminary CBS data show that real GDP rose by 0.3% in the fourth quarter of 2019 from 0.6% in the previous quarter. The annual GDP growth rate slowed down to 2.5% in the last three months of 2019. The annual increase in real economic activity at the end of the previous year primarily resulted from accelerated growth in personal consumption, reflecting the continuation of favourable labour market trends and household borrowing, as well as a high level of consumer optimism. The growth of investment activity and goods exports decelerated, while services exports picked up sharply. Due to a slowdown in investment activity and exports of goods, total exports held steady on an annual level. As a result, net foreign demand made a positive contribution to real GDP growth in the last quarter of 2019.
The GDP nowcasting model, based on a small number of available high-frequency monthly data, points to an annual slowdown in real activity in the first quarter of 2020 (Figure 1). Industrial production decreased by 0,6% in January 2020 from the previous quarter. Broken down by the main industrial groupings, the production of energy and non-durable consumer goods decreased, while the production of intermediate goods, capital goods and non-durable consumer goods decreased. The real retail trade turnover increased by 3.4% in January from its average in the fourth quarter of 2019.
The consumer confidence index was higher in January and February 2020 than in the last three months in 2019, despite a slight deterioration in consumer optimism in February. It should be noted that the level of consumer confidence in January was the highest since the confidence survey started to be carried out. The deterioration in February was due to a downturn in expectations regarding the financial situation of households and the overall economic situation in Croatia in twelve months from now compared with the current situation. The expectations of businesses in construction, industry and trade improved on a quarterly basis, while business optimism in service activities deteriorated slightly from the last quarter of the previous year.
Employment in the labour market increased by 0.4% in January 2020 from the fourth quarter of 2019. The number of employed persons increased the most in construction, information technology and business services, remaining almost unchanged in the industry. The fall in unemployment decelerated early in the year due to a decrease in new employment, while clearings from the records continued at a similar pace. The fall in the number of unemployed persons brought down the registered unemployment rate to 6.9% from 7.3% in the fourth quarter of 2019. Having decelerated at the end of the previous year, wage growth picked up significantly in January 2020 (1.3% relative to 0.4%) due to the wage growth in both the public and the private sector.
Consumer prices fell by 0.3% in January from the previous month, primarily as a result of seasonal decreases in clothing and footwear prices and to a smaller extent due to a drop in the prices of solid fuels and bread and cereals./ibna