Article Tools

Modest Increase in Croatian Purchase Power

Published: October 1, 2013; 11:40 · (Vindobona)

Croatian per capita consumer spending is forecast to increase by a modest 18% to 2017.

Modest Increase in Croatian Purchase Power / Picture: © Flickr

BMI reports that Croatian per capita consumer spending is forecast to increase by a modest 18% to 2017, compared with a regional growth average of 39%. The country comes last in BMI's Central and Eastern Europe (CEE) Retail Risk/Reward Ratings, although it outperforms significantly in the risk component.

Among all retail categories, automotives will be the outperformer between 2013 and 2017, with BMI forecasting unit sales to increase by 68% during this period, from 42,591 units in 2013 to 71,570 units by 2017. Croatia is the second largest car market in the countries of former Yugoslavia in terms of market share and the number of cars per capita. The country is enjoying some success with niche electric car production. DOK-ING and Rimac Automobili have exhibited electric concept cars at the Frankfurt Motor Show.

Over the last quarter, BMI has revised the following forecasts and views:

- Although Croatia's economic recovery will remain sluggish over the coming months, we believe the economy is now bottoming out. BMI forecasts real GDP growth of -0.4% in 2013 and 1.1% in 2014, from -2.2% in 2012, and believes a modest recovery in private consumption throughout H2 2013 and the robust tourism sector will ensure that growth picks up modestly in 2014.

- BMI sees private consumption subtracting 0.7 percentage points (pp) from growth in 2013, as high unemployment, stagnant wage growth and low disposable incomes continue restraining Croatian consumers' ability to spend. While BMI does not expect any significant uptick in private consumption any time soon, BMI believes spending should recover modestly throughout H2 2013 and into 2014. BMI sees the country's successful July accession to the EU having a positive impact on stability and consumer sentiment going forward, while Croatia's inflationary dynamics should also be modestly supportive of real incomes. BMI therefore sees private consumption adding 1.0 pp to growth in 2014, which should help pull the country out of its five-year negative growth trajectory.