COVID-19 Causes Record Quarterly Drop of Croatian GDP

The most important news in Croatia was quite unpleasant, although not exactly unexpected. State Statistic Institute published preliminary estimates of country's GDP in second quarter of 2020. It fell 15.1 pct compared with second quarter of 2019. This represents a record drop in history of modern Croatia, at least from 1995, the last year of the war, when the regular statistics have begun.

Needless to say, like in almost any other country in the world, massive drop in GDP was due to COVID-19 pandemic or, to be precise, various government measures against the spread of disease which included traffic bans, shop and bar closures and lockdowns. Those measures, which lasted between mid March and early June, are sometimes credited for relatively small number of infections and even smaller number of deaths (180 on August 28th), but to say they caused major disruption and, in many cases, the full stoppage of economic activity, is an understatement. In light of today's data, the decision of Andrej Plenković's government to hold early election in July instead of September makes perfect sense, because voters could still believe that the economy would be saved from catastrophic ruin just as general population have been saved from the massive dying.

15.1 pct drop is, according to some economists, bigger than expected and is bigger than EU average. Some economists predict that the drop at the end of the year might be around 10 pct. Like in all years, final result and general health of Croatian economy will depend on tourist season, which is going to reflect on data in third quarter.

The predictions about tourism season range between cautious optimism - based on reported numbers of foreign tourists somewhat larger than expected during the peak of lockdown - and increasing worries that the spectacular drop during the peak of tourism season might have cascading effect on the rest of Croatian economy in months and years to come.