CEIZ index for December 2020: An 8.6 percent drop in GDP in 2020

In December 2020, the CEIZ index registered a decrease of 2.12 index points compared to the same month in 2019, while compared to the previous month, the index dropped very mildly by 0.26 index points. When observing the index components, compared to November, the number of tourist arrivals and state budget income from VAT revenues registered a lower seasonally adjusted value in December, while industrial production volume index and retail trade volume recorded a higher value. The average value of the CEIZ index in the last quarter of 2020 was higher by 0.38 index points compared to the third quarter, which suggests that the economic activity, measured in GDP quarterly change rates, accelerated mildly in the fourth quarter compared to the third quarter regardless of the partial lockdown of the economy due to the implementation of epidemiological measures at the end of November and in December. Considering the index value, the quarterly GDP will record an increase of 0.8 percent in the fourth quarter of 2020 compared to the third quarter. The CEIZ index movements also suggest an annual GDP drop of -8.1 percent in the fourth quarter and a GDP drop of -8.6 percent for the entire year of 2020.

* Monthly assessment of GDP growth rate based on CEIZ index value is indicative and should be used primarily as information on the current condition and trend of the business cycle in Croatia.


What is CEIZ?

Coincident Economic Index of the Institute of Economics, Zagreb (CEIZ) is a monthly composite business cycle indicator developed by the Institute of Economics, Zagreb. Its purpose is to provide timely information on the current business cycle condition. Consequently, the CEIZ index value changes simultaneously with the business cycle, thus indicating the present state of the economy. The CEIZ index was constructed by applying in parallel a dynamic factor model and a Markov switching model. Details on the CEIZ index methodology are described in the paper: Rašić Bakarić, Ivana, Marina Tkalec and Maruška Vizek, 2016, “Constructing a Composite Coincident Indicator for a Post-Transition Country”, Ekonomska istraživanja (Economic Research), 29 (1), pp. 434–445. 

The CEIZ index is useful in three ways. First, it is a single-number business cycle indicator containing information that would otherwise have to be accrued by analyzing a large number of economic series. Second, unlike the GDP series, it provides monthly estimates on the state of the economy, thus providing information on fine changes that took place in a short period of time. Third, the CEIZ index is available one to three months prior to quarterly GDP estimates, meaning that policy-makers and the general public can observe the current state of the economy in a timely manner. 

The index is to be interpreted in such a way that the positive values represent economic growth while the negative ones represent a decreased economic activity.