Croatia’s economy contracted for a fourth quarter as personal consumption, investment and industrial production declined amid Europe’s debt crisis.
Gross domestic product fell 1.9 percent in the third quarter from a year earlier, the statistics office in Zagreb said today, matching its preliminary estimate. GDP declined 2.2 percent from the three months through June.
“Personal consumption continues to decline as a result of growing unemployment and increased caution by consumers,” Alen Kovac, a chief economist at Erste Banka d.d. in Zagreb, a unit of Austria’s Erste Group Bank AG, said by e-mail before the report.
The Adriatic Sea nation, which is set to become the European Union’s 28th member in July 2013, is struggling to emerge from a renewed recession. Industrial output declined 5.8 percent in October from a year ago, after falling 7.7 percent in September. Retail trade contracted 6 percent in October.
The Finance Ministry yesterday reduced its 2012 economic forecast for a contraction of as deep as 2 percent, compared to a Nov. 19 prediction of a 1.1 percent decline, citing a fall in public and personal consumption.
“Industrial production also continues to slide and public investment has not materialized, so we expect this trend to continue in the fourth quarter,” Kovac said. He predicts the economy will decline 2 percent for the whole year.
The International Monetary Fund on Nov. 13 said Croatia’s economy will shrink 1.5 percent this year, urging the government to remove barriers to investment and employment in order to return to growth in 2013. The European Commission said on Nov. 7 the economy will contract 1.9 percent in 2012.
Standard & Poor’s on Dec. 14 cut Croatia’s sovereign debt rating to junk, saying the government’s structural and fiscal overhaul isn’t enough to spur growth and render public finances sustainable. S&P said the economy will contract 2 percent this year and stagnate in 2013.