The economic context of Croatia

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

After becoming the 28th member state of the EU on July 1, 2013, the Croatian economy was only able to return to growth in 2015: since 2008, the country had experienced six consecutive years of economic recession, with the GDP falling by 12% (EU data). The economy was severely hit by the crisis linked to the covid-19 pandemic; however, it managed to recover and return to its pre-crisis level in 2021. GDP growth continued in 2022 (+5.9% as per the IMF estimates) thanks to a strong first half of the year on the back of domestic demand, but contracted in the third quarter (-0.4%) due to lower investment and government consumption in a context of tighter financing conditions, supply chain bottlenecks and soaring inflation. In 2023, real GDP is forecast to grow by 3.5% (IMF, 1.2%  according to the EU commission) supported by the accession of Croatia to the euro (which was adopted on 1 January) and Schengen areas, although geopolitical tensions and a weaker global environment are set to weigh on external demand. For 2024, the IMF projects growth at 3% with household consumption as the most important contributor.

Croatia's public debt stood at 72.6% of GDP in 2022, returning around its pre-COVID level, with the ratio expected to decrease further this year (68.6%) and in 2024 (65.9%). In 2022, the general government deficit was estimated at 3.4% of GDP as despite the phasing out of support measures the government adopted several packages to fight inflation and the rise in energy prices. The 2023 budget draft envisages a general government budget deficit equivalent to 2.3% of GDP. The aforementioned rise in global energy and food prices contributed to a spike in inflation, which reached 9.8% in 2022, above the euro area average (8.4%). In 2023, base effects and a steeper decline in energy and food prices than previously expected are set to lower inflation to 5.5% and 3.9% in 2024.

According to IMF estimates, unemployment decreased to 6.9% in 2022, from 8.1% one year earlier, and is expected to follow a downward trend in 2023 (6.6%) and 2024 (6.1%). Real incomes are projected to start recovering in the second half of 2023, benefiting from lower inflation and a still resilient labour market, supporting a mild increase in household consumption. Though the average revenue of Croatians is still below the European one (with an estimated GDP per capita PPP of USD 37,550 in 2022 according to the IMF), Croatia remains the second most developed economy of the Balkan region, after Slovenia.

Main Sectors of Industry

The agricultural sector represents only 2.9% of the country's GDP and employs 6% of the workforce (World Bank, latest data available). Croatia has 1.5 million hectares of agricultural land and more than 1.9 million hectares of forests (FAO). The country is self-sufficient in the production of wheat, corn, sugar beet, fruits, wine and olive oil; however, imports of agricultural products have been on the rise in recent years. The size of the farms is generally small (in most cases less than 3 hectares). According to preliminary figures from the State Bureau of Statistics (DZS), the net added value of the agricultural sector for 2022 was projected at HRK 8.7 billion, marking a growth of 1.1% y-o-y, while the value of real income in agriculture was estimated at HRK 12.7 billion (+0.8% y-o-y).

The secondary sector contributes 19.8% of GDP and employs 28% of the active population. Croatian industry is concentrated in competitive activities: textiles, wood, steel industry, aluminium and the food industry. With more than one-third of the territory covered with forests, the wood industry is one of the fundamental sectors of the economy. The country has limited mineral resources. The manufacturing sector is estimated to contribute 11% of the national value added. Figures from the State Bureau of Statistics (DZS) show that industrial output grew 1.6% year-on-year in 2022, with the manufacture of vehicles registering the highest increase (26.4%).

The service sector represents 60.4% of the country’s GDP, employing 66% of the workforce. The tourism sector, in particular, is among the key segments of the Croatian economy, accounting for almost a quarter of GDP, by far the largest share in the EU. After being hit hard by the economic crisis following the COVID-19 pandemic, the tourism sector recovered in 2022 when Croatia welcomed 18.9 million tourists (37% more than the previous year) and generated USD 13.8 billion in revenues from foreign tourists. According to the latest data by the European Banking Federation, the Croatian banking sector performance kept up a strong tone in the first half of 2022 as ROA (return on assets) remained virtually unchanged at 1.2, while ROE (return on equity) showed ongoing improvement at 9.5%.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	6.2	27.7	66.1
Value Added (in % of GDP)	2.9	19.8	60.4
Value Added (Annual % Change)	8.2	9.1	14.0

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:

63,6/100

World Rank:

79

Regional Rank:

38

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:

5.69/10

World Rank:

59/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Sources of General Economic Information

Ministries

Ministry of Economy, Labour and Entrepreneurship
Ministry of Finance

Statistical Office

Croatian Bureau of Statistics

Central Bank

Croatian National Bank

Stock Exchange

Zagreb Stock Exchange

Economic Portals

Croatian Information Centre