Page 12 - bneMag Dec22

12 I Companies & Markets bne December 2022
Croatia GDP growth y/y
post-socialist economies, and has overtaken two of the old EU members – Portugal and Greece – in per capita GDP terms.
Slovenia had a strong starting point when it embarked on the transition. Since then, the small country’s post-independence history has been a series of firsts: it was the first Southeast European country to join the EU, the first emerging European country to join the eurozone and the first from the region to switch from borrower to donor status at the World Bank. It also outperforms the rest of the region, or at least is one of the leaders, on most human development indicators.
Montenegro’s recovery continues
Montenegro’s story is different from those in Croatia or Slovenia as its growth was driven by the recovery in tourism, together with consumption – the latter spurred on by a hike in the minimum wage.
“Economic activity was driven by an increase in private consumption and exports, benefiting from a surge in real disposable income and the recovery in tourism, employment
“GDP in Croatia continued to strongly expand in the first half of 2022 despite high and rising inflation
and geopolitical tensions”
and remittances,” said the European Commission. These trends continued, albeit at a slower pace, into Q3
“In contrast, gross fixed capital formation recorded only marginal growth, while government consumption registered slight contraction over the year.”
“[E]conomic activity was driven by an increase in real disposable incomes owing to further recovery in tourism, employment growth, and household lending,” said the World Bank.
"By June, the growth of exports outpaced that of imports, supported by further tourism recovery and higher metal and electricity prices.”
However, the World Bank added, the industrial sector fared less well, as unfavourable hydrological conditions caused domestic hydropower production to fall.
Slowdowns ahead
Despite their strong performance in 2022, both Croatia and Slovenia are already experiencing slowdowns, related to rising inflation (charts: Croatia, Slovenia) and slowing growth in their main trading partners.
Source: Croatia state statistics agency
Other projections for the Croatian economy’s performance in 2022 range from 5.9% from the IMF to as high as 6.4% from the World Bank and 6.5% from the EBRD.
“GDP in Croatia continued to strongly expand in the first half of 2022 despite high and rising inflation and geopolitical tensions,” said the World Bank in its autumn 2022 Europe and Central Asia Economic Outlook. During this period, “Exports of goods and services maintained double-digit growth, and domestic demand remained robust.”
The EBRD said that Croatia fully recovered from the pandemic already in 2021 when GDP expanded by 10.2%. That was
due to a combination of private consumption, exports and investment. The strong growth continued into 2022, with GDP expanding by 7.4% year on year in H1.
The government has continued to support the economy, announcing a package worth 4.9% of GDP in September, under which electricity prices will be capped while vulnerable households will receive energy subsidies.
Solid foundations in Slovenia
Slovenia’s growth is expected to come in a little behind Croatia’s this year. Both the EBRD and the IMF recently upgraded their forecasts for the country in 2022 following its stronger-than- expected performance in the first half of the year.
In September, the EBRD upgraded its GDP growth projection by 2.5 pp to 6%, citing the positive impacts from both domestic and foreign demand in the second quarter. The following month the IMF also upgraded its forecast by 2 pp from its April projection.
Rating agency Moody’s commented when affirming Slovenia's credit rating at A3 on “the [Slovenian] economy's resilience
to shocks, solid medium-term prospects for growth and coping with the energy crisis from the perspective of public finances”. It also noted Slovenia's liquidity reserves, at 16.4% of the country’s GDP, are a “good support factor for public finances in these times of crisis”.
bne IntelliNews previously highlighted Slovenia as Emerging Europe’s ‘secret success story'; the country is richest of the
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