The Croatian economy contracted 0.7% in the second quarter, less than in the previous quarter and than expected. The National Bureau of Statistics released an initial estimate on Friday according to which Gross Domestic Product in the second quarter of 2013 dropped 0.7% in relation to the corresponding period of last year, the seventh consecutive quarter of economic decline. By comparison, in the first quarter of the year GDP slid 1.5%.

Seven economic analysts polled by Hina news agency had projected a decline of 1%, their forecasts ranging from 0.8% to 1.4%.

Upon the release of the preliminary estimate of the Q2 GDP, Grcic held a news conference in Zagreb at which he interpreted the latest GDP data as an indicator of mild recovery in the coming period.

Grcic explained that all GDP components, except the component referring to the import, rose in Q2. However, the statistics regarding the import undid the positive effects in personal consumption, investments and exports.

"Evidently, some trends are changing, and after long time we have a positive contribution by investments, notably by investments made by the state," Grcic said.

According to him, state investments jumped by 30% in the first half of 2013 compared to H1 2012.

After negative statistics in 15 quarters, personal consumption shows signs of recovery, which Grcic interpreted as the signs of the stabilisation of personal consumption which is "the most important component of GDP".

The deputy PM expects a zero growth or even a positive growth rate in Q3 of this year.

He is hopeful that the cabinet of Prime Minister Zoran Milanovic will manage to restructure the industry by the end of this year and that successful outcomes of pre-bankruptcy settlements will have a good effect on GDP.

He said that the government was looking forward to the first real effects from the privatised shipyards and from the recovery of the construction sector.

He said that eight European countries had a lower GDP than Croatia in Q2, and that the recovery in the entire Europe would produce positive effects on Croatia's exports.

The minister admitted that "the real state of affairs is tough and much work and much more efforts are still needed to help the Croatian economy and salvage thousands of companies".

Asked by reporters whether the government would change its preliminary estimate of a positive GDP of 0.7% in 2013, Grcic said the cabinet would soon present draft guidelines for a three-year period and that he thought that the projections would be revised down.