The Croatian Chamber of Commerce (HGK) said on Friday that this year's growth rate could easily exceed 6%, noting that it expects a further slowing of economic activity in the last quarter of the year.

The HGK was commenting on the initial estimate of GDP growth for the third quarter of 2022, released by the National Bureau of Statistics (DZS) today, according to which the economy grew by 5.2% compared with the third quarter of 2021. Although it is slower growth than in the previous quarter, when GDP had grown by 8.7% year on year, it is the sixth quarter in a row to see the economy recovering from the COVID-19 crisis. Compared with the second quarter of 2022, the economy declined by 0.4%.

“The slowing of economic activity in Croatia was actually expected, but it should be borne in mind that this year the average real GDP growth rate could easily be above 6%,” said Goran Saravanja, chief economist at the HGK.

In the first three quarters of 2022, the Croatian economy grew at an annual rate of 7.1%.

All key GDP components are contributing to growth this year, and investment activity in the third quarter increased by 8% year on year, Saravanja noted.

“We expect a further slowing of economic activity in the last quarter considering a recent decline in orders in Germany, which is already becoming visible to some extent in official statistics,” he added.

While the EU’s GDP grew by 0.2% from the previous quarter, Slovenia (-1.4%), the Czech Republic (-0.4%), Hungary (-0.4%) and Austria (-0.1%), whose industrial sectors are more closely tied to Germany than the Croatian industrial sector is, recorded a slowdown in the third quarter.

“It seems to us that the government’s growth forecast for 2023 of 0.7% and OECD’s of 0.8% are the most realistic among those that we follow,” Saravanja said, adding that the external environment, notably economic movements in the euro area, pose the biggest downside risk to the economic outlook.

“Entry into the euro area in slightly over a month and likely accession to the Schengen area will in the long term certainly put wind in the sails of businesses and economic circumstances in Croatia,” Saravanja said.