The balance of payments current account deficit in the second quarter of 2020 amounted to €667 million or 92% more year on year, primarily due to a strong fall in the export of services, notably a drop in tourism revenue of 84% to €371 million, a Croatian National Bank (HNB) report showed on Wednesday.

The deficit in the current and capital account of the balance of payments in Q2, 2020 amounted to €320 million, which is significant deterioration compared to the same period last year, when it recorded a surplus of €26 million, the HNB’s report notes.

“That is a consequence of a strong fall in net services exports, particularly tourism revenue, considering the lockdown measures introduced in the spring after the coronavirus pandemic outbreak, which made it impossible to conduct any tourism activities or for foreign guests to arrive. Contrary to that, an improvement was recorded in the balance of payments due to a significant reduction of the deficit in foreign trade which improved the balance of payments in the primary income account,” central bank analysts said in their comment on the balance of payments.

Despite the exceptionally favourable achievements in the first quarter and the fall in nominal GDP in Q2, if we observe the past four quarters, the surplus in the current and capital account of the balance of payments in the period until the end of June this year amounted to €2.9 billion or 5.6% of GDP, which is 0.8 percentage points more than in all of 2019, the analysts said.

Strong decrease in trade deficit but even greater fall in surplus in services trade

“The coronavirus pandemic and subsequent epidemiological measures in the country and abroad had an unfavourable impact on international trade,” the HNB analysts said.

A noticeable fall in commodity exports of 17.5% was registered in Q2 year-on-year. However, the fall in commodity imports of 27% was even more pronounced, which, due to the significantly larger import base, resulted in a strong decrease in the commodity trade deficit of €1.1 billion.

According the the HNB’s data, commodity exports in Q2 were valued at €2.6 billion, which is almost €550 million less y-o-y. At the same time, commodity imports contracted by close to €1.7 billion to €4.5 billion in Q2 this year.

Hence the deficit in commodity trade in Q2 this year amounted to €1.9 billion or €1.1 billion less y-o-y (when the deficit was just over €3 billion).

However, at the same time the surplus in services trade contracted by €1.9 billion mostly due to the fall in tourism revenue of 84%, the analysts said.