Croatia ran a current account surplus of €4.4 billion in the Q3 2021, which is an increase of €2.4 billion from the same period of 2020, primarily as a result of a marked increase in revenues generated by foreign tourists, the central bank said on Friday.

If the capital account surplus of €325 million is added, the total current and capital account surplus in the third quarter of this year was €4.7 billion, which is an increase of €2.5 billion from the same period of the previous year.

“The surge in the surplus, which almost amounted to the record high of the third quarter of 2019, was foremost due to the noticeable increase in revenues from travel services and, to a much lesser extent, the rise in net remittance income and better use of EU funds. In contrast, the increase in the current and capital account surplus was mitigated by the continued deepening of the foreign trade deficit and, to a smaller extent, higher profitability of banks and enterprises in foreign ownership, which was associated with the rapid domestic economic recovery from the pandemic crisis and the rebound of domestic demand,” the central bank HNB said.

“If the last four quarters are observed, the surplus in the current and capital account in the period up to the end of September 2021 totaled 6.0% of GDP, which was 3.9 percentage points more than in the entire 2020,” it added.

Imports grow faster than exports

The goods account ran a deficit of €2.9 billion, which is an increase of €800 million compared with the same time last year and is the result of higher imports than exports (29.4% vs 24.4%).

“The annual growth rates were lower than in the quarter before (when exports and imports grew annually by 45.8% and 41.5%, respectively), but this was mostly due to the gradual waning of the base effect associated with the last year’s outbreak of the coronavirus pandemic,” the HNB said.

“Developments in the third quarter of 2021 largely reflect the surge in domestic and foreign demand for goods and the rise in global prices of raw materials. The impact of these factors is particularly visible in comparison with goods trade in the pre-crisis period. Total goods exports and imports were larger by 13.7% and 16.8%, respectively, in the third quarter of 2021 than in the same period of 2019, with the deficit growing by 21.2% in the same period,” it added.

Revenues from foreign tourists exceed those from record 2019

The services account ran a surplus of €6.9 billion, which is an increase of 92.6% from the same period of 2020.

“The rise in the surplus in foreign trade in services in the third quarter of 2021 (by €3.3bn from the same period of the previous year) was due to a doubling of income from tourist spending of foreign guests during the peak tourist season relative to 2020, which was also 2.2% larger than the record high from the third quarter of 2019. Much better tourism performance over the summer months compared with Mediterranean competitors was mostly attributable to the favorable epidemiological situation and the fact that most guests use road transport as a means of arrival in Croatia due to the proximity of the main tourist-generating markets,” the HNB said.

€6.8 billion in revenues was generated by foreign tourists in the third quarter of 2021, compared to €3.4 billion in Q3 2020 and €6.6 billion in Q3 2019.

Data for the first three quarters of this year show a strong recovery of consumption by foreign tourists compared with the same period of last year and a fall compared with the record 2019.

Revenues from consumption by foreign tourists totalled €8.3 billion in January-September 2021, up by €3.9 billion or 90.2% from the same period of 2020 and down by €1.2 billion or 12.4% from the same period of the record 2019.

Deterioration in primary income account balance

The primary income account ran a deficit of €152 million, compared to a surplus of €39 million at the same time in 2020.

“The deterioration in the balance in the primary income account in the third quarter of 2021 relative to the same period of 2020 (of €0.2bn) was a result of larger expenditures on direct equity investments due to the increase in profitability of foreign-owned banks and enterprises (primarily in accommodation activities). These developments were mitigated by the growth in revenues from compensation of persons temporarily employed abroad and lower interest expenditures on the external debt of domestic sectors (particularly the government sector). At the same time, the overall surplus in the secondary income and capital transaction accounts edged up (by €0.1bn) owing to the continued enhanced absorption of EU funds and larger revenues from personal transfers,” the HNB said.