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Croatia Watch: Resilient Consumption vs. Struggling Industry in 2024
The high-frequency indicators painted a mixed picture throughout 2024, reinforcing the notion that personal consumption remains a key pillar of economic growth in the last quarter of 2024. On the other hand, industrial production has recorded its second consecutive year of decline.
In 2024 consumption holds strong while industry falters
Retail trends remained solid in December, supported by a resilient labor market, where employment and real wages continued to rise throughout 2024 amid gradually easing inflationary pressures. Additionally, the strong post-season tourism performance provided an extra boost to retail trade. Finally, robust domestic demand is reflected in the exceptionally strong growth of consumer lending (+15.5% yoy in Nov 2024), likely driven in large part by the need to finance durable goods purchases.
For the whole of 2024, real retail sales posted a 7.3% yoy increase. Given that retail trade is a proxy for personal consumption, which accounts for a significant portion of GDP, these trends will undoubtedly be reflected in the Q4 GDP figures, set to be published by the statistical office on February 27.
Looking ahead, real wage growth, further (albeit more moderate) employment gains, and the sustained strength of the tourism sector should continue to fuel consumer confidence, supporting both personal spending and retail trends. However, a slightly moderate pace of annual retail trade growth should come as no surprise, given the high base effect from the strong performance in the previous year.
Industry: A Second Year in the Red
On the flip side, while industrial production surprised to the upside with a 5.3% yoy increase in December, for 2024 as a whole, industrial output declined by 2.4%, with contractions seen across all main industrial groupings. This marks the second consecutive annual drop, reflecting weakened foreign demand and structural weaknesses within the industry.
The recovery in demand from key foreign trade partners (Euro area) remains highly uncertain, and the outlook for 2025 is far from optimistic. At the same time, it is important to note that Croatia’s industrial production is characterized by a relatively high share of resource-based output and a low share of high-tech and medium-high-tech manufacturing, which significantly impacts its competitiveness.
In the current environment—dominated by various risks that could further weaken activity among major trading partners (such as potential shifts in U.S. trade policy)—caution is warranted when assessing the prospects for domestic industrial recovery. However, we do not anticipate a third consecutive year of decline.
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Elizabeta SABOLEK-RESANOVIC
Croatia Before joining the Croatian Economics and Financial Research Team in 2012 Elizabeta spent six years in investment banking. She participated in numerous debts and equity capital markets transactions on the Croatian capital market. She is acting as economic analyst responsible for Croatian macro issues, fiscal and monetary policy analysis, local financial markets etc. She studied Accounting and Finance. In free time she enjoys all outdoor activities with her family.
Petar BEJUK
Croatia Petar joined the Economics and Financial Research team as a student in late 2021. He graduated from the Faculty of Economics in Zagreb in 2023. During his studies, he discovered his interest in macroeconomics, especially monetary policy. In his work so far, his interest has broadened to a whole range of areas of economic importance, where he would like to improve his economic knowledge and analytical skills. He enjoys spending his free time with his family and friends.
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