By Zoran Radosavljevic
ZAGREB, March 27 (Reuters) - Croatia's economy posted a surprising mild rise in the last quarter, data showed on Friday, but analysts said there was no doubt it was poised for a serious downturn this year.
Analysts had expected a first contraction since 1999 but the state statistics office reported a year-on-year quarterly rise of 0.2 percent, mostly thanks to stronger public spending and state investments in the small European Union candidate.
"It's mostly the government that helped the GDP, but this rise is really irrelevant for this year, the effect will wear out soon," said Zdeslav Santic of Raiffeisenbank, who put this year's forecast at -3.2 percent.
"There are further downside risks, when we see how much euro zone countries are cutting their forecasts," he said.
Indications that the global crisis was already taking a huge toll abound.
Almost 15,000 people, most of them young people armed with resumes, rushed to a job fair, the first of its kind, held in a sports hall in Zagreb this week in search of opportunities as unemployment rose steadily in the past few months.
The government's APIU investment agency said the outlook for foreign investment had considerably declined.
"The planned investments for 2009 have been reduced. The number of queries we receive from investors has also decreased, as well as the number of planned visits to potential site locations," an APIU official said.
Sime Svetina, manager of DIN Novoselec, a leading furniture and parquet maker, said demand had sharply fallen this year.
"The whole wood-processing sector in Croatia has seen a drop in sales of between 20 and 50 percent in the last three months. We had to lay off about 10 percent of workforce and I don't expect any recovery soon."
He said foreign demand was unlikely to pick up and Croatia's industry was burdened by high state spending and liquidity problems, while construction works, which fuelled the GDP in recent years, had virtually ground to a halt.
Hrvoje Stojic of Hypo Group Alpe Adria said his revised 2009 GDP forecast was a contraction of 4.5-5.0 percent.
"The biggest worsening trigger is the increasingly bad global recession, with further uncertainties about our fiscal policy and the outcome of the tourist season," he said.
Hoteliers have said they expected a 10 percent fall in foreign bookings this year, indicating that tourism revenues -- which amount to almost 20 percent of GDP -- were likely to shrink, with few signs that a recovery was possible in 2010.
"It will be great if the contraction ends up smaller than 5 percent," Stojic said. (Reporting by Igor Ilic and Zoran Radosavljevic, Editing by Andy Bruce)