In the first three months of 2020 Croatia's GDP grew by 0.4 percent year-on-year, the state statistics bureau said on Friday. It is the slowest quarterly growth rate the country posted in more than five years, and the first sign of the economy's slowdown due to the coronavirus pandemic.

The 0.4 percent growth in Q1 2020 was the 23rd consecutive quarter that Croatia’s GDP posted an increase, albeit at a much slower year-on-year rate in Q4 2019, when it had increased by 2.5 percent compared to Q4 2018.

The latest figure is also the slowest year-on-year growth recorded since Q4 2014, when Croatia’s economy – at the time timidly coming out of a multi-year recession – grew by 0.7 percent.

The national statistics bureau attributed the slowdown to lower household spending a decline in exports.

Croatia had reported its first confirmed coronavirus case in late February, and imposed draconian restrictions and travel bans by late March. The measures had profound effects on the retail sector, as retail turnover in March alone had dropped 7 percent year-on-year, the greatest monthly decline since 2010.

At the same time, industrial output dropped by close to 5 percent in March for the fifth consecutive month. Both exports and imports also fell, due to the unprecedented measures imposed throughout Europe, including the lockdown in Italy, Croatia’s top export market.

Household spending grew in Q1 2020 by 0.7 percent year-on-year, nearly six times slower than in Q4 2019, when it had increased by by 4 percent year-on-year.

The export of goods and services dropped by 3 percent year-on-year, a far cry from Q4 2019 when it had jumped by 5.6 percent year-on-year. As for imports, they fell by by 5.8 percent, while in Q4 2019 they went up 0.1 percent year-on-year.

According to seasonally adjusted data released by the statistics bureau, Croatia’s GDP shrank 1.2 percent in Q1 2020 quarter-on-quarter, but grew by 0.3 percent year-on-year.

Croatia’s economy, heavily reliant on tourism and hospitality industries which account for roughly 20 percent of its GDP and about a quarter of its workforce, is expected to shrink in 2020 due to travel bans and closures of non-essential shops imposed in March.

In April, the government projected that GDP would shrink 9.4 percent in 2020, only to bounce back in 2021 with a 6.1 percent growth. The World Bank had earlier issued a forecast predicting it would shrink by 6.2 percent, while the International Montetary Fund put the figure at  9.0 percent.

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