HR: 3Q24 GDP growth landed at 3.9% y/y

As anticipated, GDP maintained strong growth pace also in 3Q24, with the headline figure accelerating to 3.9% y/y, thus practically matching our expectations (EBCe 4.0% y/y). Looking at the seasonally adjusted data, the q/q economy added solid 0.8%, translating into 4.1% y/y. Detailed structure revealed strong domestic demand momentum continued, as private consumption remained vivid with a 5.5% y/y increase, while investment activity delivered another robust performance (9.2% y/y). Public consumption also moved to a higher gear with 5.3% y/y increase. On the external trade side, we saw further normalization of the exports as figure brought rebound at 1.5% y/y, driven by goods performance (6.3% y/y), while once again services were in red (-1.8% y/y, albeit milder decline than one seen in 2Q24). Imports were up 4.1% y/y, reflecting solid increases in both goods and services and being shaped by strong domestic demand. However, with imports growth outpacing exports increase, net exports contribution had less favorable impact on the headline figure in 3Q24.

As outlook goes, we expect last quarter to wrap up FY24 GDP growth in the region close to 3.5%, thus affirming another strong year, especially comparatively looking at EU average in sub 1% region. Growth should get most of the support from the domestic demand, also remaining the driving force in 2025, though expected at more moderate levels. Fundamentals on labor market side remain supportive, yet wage growth is anticipated to moderate back to single-digit region, while employment gains are also seen softening after strong gains this year, hence disposable income growth while remaining supportive, should lose some steam next year. Considering potentially more cautious consumers, given the increasing global uncertainty, we are expecting private consumption growth to moderate back to 3-4% region in 2025. Similar trajectory is expected also on the investments side. EU fund flows and still potent construction sector remain a tailwind, yet increasing uncertainties related to external demand, despite ECB starting to reverse the rate cuts, may weigh on the private sector, as is quite strong base effect following robust investments profile in last couple of years. External demand outlook remains relatively gloomy, and anticipation of more supportive external demand is less of a baseline scenario at the moment. Apart from weighing on the merchandise exports, tourism outlook is getting more conservative as 2024 confirmed sector struggle to surpass pre-pandemic overnights levels, hence being a risk to anticipation of more neutral net exports contribution to growth in 2025. All things said, we see 2025 growth remaining in decent gear at around 3%, with risks being more tilted to the downside owing to global geopolitical uncertainties and lasting EU growth weakness.