UPDATE 1 - Croatia's Q3 GDP down 10% y/y, up 6.9% q/q, meets expectations - Erste

"Detailed structure revealed largely expected movements, with domestic demand decline slowing down," Erste said in an instant comment, following the release of the latest GDP data by Croatia's statistical office earlier in the day.

In quarterly terms, Croatia's gross domestic product (GDP) rose by 6.9% in July-September, compared to a 0.4% growth rate recorded in the same period of 2019.

Household consumption was down by a real 7.5% on the year in the third quarter of 2020, exports plummeted 32.3% and imports fell by 14.1%.

Gross fixed capital formation decreased by 3% year-on-year in the third quarter, while government expenditure increased by 1.5%.

"As outlook goes, the 2nd wave and strong deterioration of epidemiological condition would weigh on the recovery trajectory as both domestic and external demand get affected by containment measures and increased uncertainty," Erste noted.

Erste hopes that Croatia's economy will start recovering as of the second quarter next year, with the normalization of private consumption and EU-backed investments that will support domestic demand. At the same time, Erste expects external demand to be boosted by tourism recovery after the non-existent tourism in the second quarter this year.

"All said, accounting for more supportive tourism role in the 3Q - being confirmed with the 3Q20 GDP figures - we would revise our current 2020 -9.0% call upwards by few notches and in parallel we would trim our 2021 +5.2% call down closer to 4.5%," Erste said.

Croatia's economy shrank by a real 15.1% on the year in the second quarter of 2020 and by 14.9% on a quarterly comparison basis.