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Croat GDP Falls for Fifth Quarter as Consumption Falters

March 20 (Bloomberg) -- Croatia’s economy contracted for a fifth quarter as household consumption, investment and industrial production continued to decline amid Europe’s sovereign debt crisis.

Gross domestic product shrank 2.3 percent in the fourth quarter from a year earlier, the statistics office in Zagreb said today, confirming a preliminary estimate from Feb. 28. The economy shrank 2 percent last year, after stagnating in 2011 and contracting in the two years before that.

The Adriatic nation, which is preparing to become the European Union’s 28th member on July 1, is struggling to emerge from a recession. Industrial output declined 3.4 percent in January from a year ago, while retail trade in the same month fell 5.3 percent, according to a preliminary report.

“There are no surprises in this contraction, as personal consumption has continued its rapid decline, along with a fall in state consumption and capital investment,” Zdeslav Santic, the chief economist at Soc-Gen Splitska Banka d.d., said by phone before the release.

Household consumption declined 4.2 percent from a year earlier in the fourth quarter, while government consumption dropped 2 percent and gross fixed capital formation fell 4.9 percent, the statistics office said.

Forecast Lowered

Croatia reduced its 2013 GDP forecast on Feb. 20 to 0.7 percent growth, from an earlier estimate of 1.8 percent, citing an investment drought.

The former Yugoslav republic stands to receive 20 billion euros ($25.8 billion) in EU funds through 2020. Finance Minister Slavko Linic said he wants to use the funds to increase competitiveness in the private sector and overhaul infrastructure and the education and health systems.

The International Monetary Fund said on Jan. 21 that Croatia’s economy will stagnate this year. It urged the government to remove barriers to investment and employment in order to return to growth. The European Commission said Feb. 22 that the economy will contract 0.4 percent this year, before returning to “modest growth” in 2014.

The economic decline will be softened in the first quarter this year as Easter holidays in March are expected to support consumption, Santic said.

To contact the reporter on this story: Jasmina Kuzmanovic in Zagreb at jkuzmanovic@bloomberg.net

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

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