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That the economy contracted by . yoy in Q a surprise to the downside marks Croatia out as an underperformer in the CEE region, most Links of London which have now struggled back into positive annualised growth. Croatian Consumer Will Growth To Return, But Only Just Remain Weak Croatia GDP Breakdown By Expenditure, With private consumption Percentage Point Contributions To Growth And Real Growth And Change yoy making up of Croatian GDP, any firm bounce in growth is contingent on a robust return to spending. However, we hold to our core view that this will not occur in , for a number Links of London T Charm reasons. First, the labour market remains weak, which will prevent any marked improvement in consumer spending. Unemployment came in at . in May which, although the lowest reading since December , nevertheless represents a . percentage point increase on Source CrostatBMI Projections the same period last year. Indeed, we forecast only a moderate drop to . by the end of the year, which will prevent a rapid uptick in domestic demand. A second major factor Tourists Not Returning contributing to the demand destruction is the poor Croatia Tourist Arrivals, Change performance of the allimportant tourism sector. Links of London Teddy Charm arrivals fell by an average . yoy over the first five months of , despite an . contraction in the same period last year. While we acknowledge that July and August could yet see a surge in tourist numbers, we note that leading indicator data suggest that the recovery in Croatia's key sources of tourism in Western Europe is petering out. As a result, we do not believe that a Source Crostat robust uptick in tourist numbers is likely through to the end of the year. The ongoing effects of the weak private consumption situation can be seen both on governme which fell by . yoy in March and the trade account. Indeed, Links of London The Man On The Moon Charm exports rose by Tax Receipts Falling . yoy over the first four Croatia Government Revenues And months of , imports fell by Expenditures, Change yoy . indicating the extent to which the external recovery is racing ahead of the domestic one.