Croatian GDP Falls for Sixth Quarter on Consumption, Investment

Croatia’s economy contracted for a sixth quarter as the euro region’s record recession prompted further declines in personal consumption and investment.

Gross domestic product fell 1.5 percent from a year earlier between January and March compared with a 2.3 percent drop in the previous three months, the statistics office in the capital, Zagreb, said today in a preliminary estimate. The median forecast of four economists in a Bloomberg survey was for a 1.6 percent contraction.

Croatia, which joins the European Union on July 1, hasn’t posted economic growth since 2008, with foreign direct investment slumping last year to almost a fifth of 2008’s $4.2 billion. The nation is counting on 10 billion euros ($13 billion) in EU funds through 2020 to reignite expansion through infrastructure and tourism investments.

“A slower fall in industrial production and personal consumption contributed to a softer decline in GDP,” Alen Kovac, chief economist at the Croatian unit of Erste Group Bank AG (EBS), said by phone.

The yield on Croatia’s dollar-denominated bond maturing July 2020 climbed to 4.743 percent at 11:08 a.m. in Zagreb, the highest since April 18. The cost of insuring the debt with five-year credit-default swaps, which rises as perceptions of creditworthiness worsen, advanced to 296 basis points from 295 yesterday.

The economy will grow 0.7 percent this year after shrinking 2 percent in 2012, the government predicts. The European Commission said May 3 that GDP will drop 1 percent in 2013 as domestic demand continues to ebb, while net exports will provide “limited support” in 2014, when the economy will expand by 0.2 percent.

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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