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Dec 27, 2007 13:16 EEST
ZAGREB (Croatia), December 27 (SeeNews) – Personal consumption will have boosted Croatia's economic growth in the third quarter of 2007, compared with a year eariler, two foreign bank analysts said.
The current account surplus is unlikely to show a significant change, one of them added.
The State Statistics Bureau is due to release its third quarter gross domestic product (GDP) estimate on Friday. The Croatian central bank will release third-quarter current account balance figures on Monday.
Real economic growth is estimated at some 5.8% year-on-year in the quarter, a slowdown from 6.6% in the previous quarter but well above the 4.7% rise seen in the third quarter last year, said Zrinka Zivkovic-Matijevic, an analyst with Raiffeisenbank Austria Zagreb, and Hrvoje Stojic, an analyst with the Croatian units of Hypo Alpe-Adria Bank.
"We expect that the annual growth of gross domestic product will be some 5.8%, triggered primarily by growth in personal consumption, as indicated by very good results in retail trade, up 5.3% on the year, a good tourism season, up 5.3% on the year, and continuation of the usual growth of real salaries in this period,” Zivkovic-Matijevic said in a statement to SeeNews.
Stojic mostly agreed.
Both analysts expect a mild slowdown in capital investment, as compared to the first half of the year, due to relatively high growth rates in the first two quarters. The GDP of the European Union candidate country grew by 7.0% year-on-year in the first quarter.
For the whole of 2007, real GDP growth could be 5.9% versus 4.8% last year, Zivkovic-Matijevic said. Stojic’s earlier projection, which is under revision now, was for 5.8% growth in the current year.
"In 2008 we expect a slowdown of GDP growth to 5.0% due to a slowing of personal consumption and lower public investments," Zivkovic-Matijasevic said. The peak tourism season could bring somewhat lower figures due to the European soccer championship, and without more domestic tourism offerings no more significant growth rates could be expected, while retail trade could slow, partly due to the strong basis from 2007, inflation pressure and lower disposable income available for consumption, she added. Tourism is a key industry in the Adriatic country of 4.4 million people, contributing a fifth of its GDP. Croatia usually shows a current account surplus in the third quarter, thanks to tourism, but runs current account deficits for the whole year.
"The usual [third-quarter] current account surplus should remain at its level from last year, 2.0 billion euro ($2.9 billion), as stronger revenue from tourism was balanced by a continued worsening of the deficit on commodities trade, although exports grew relatively faster than imports," Zivkovic-Matijevic said. She expects that the current account deficit for all of 2007 will be equivalent to 7.9% of the GDP, up from 7.7% in 2006.
The end-year current account deficit, along with a foreign debt equivalent to some 85% of the GDP, are key macroeconomic problems for Croatia. The central bank has imposed a set of restrictions to curb foreign borrowing and reduce the country’s external vulnerability.
Stojic gave no exact current account projections but said this year’s record high tourism revenue will help improve the overall current account balance.
"The current account deficit will remain, reflecting the main weaknesses of the Croatian economy. The main contribution to the shortfall that in 2008 could be eight percent of GDP will come from the deficit in trade in goods," Zivkovic-Matijevic said.
Croatia's merchandise trade gap in the 10 months through October widened to $11.135 billion from $9.367 billion a year earlier.
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