Economic and Political Overview

flag Croatia Croatia: Economic and Political Overview

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response

 

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). After accelerating in 2019, the economy was severely hit by the crisis linked to the covid-19 pandemic (-8%, one of the worst-hit countries in the EU). Nevertheless, the recovery of Croatia’s economy resumed in 2021, mostly supported by strong household consumption and a better-than-expected performance of the tourism sector: the IMF estimated a growth of 6.3% for the year as a whole. Domestic demand is expected to be the main engine of growth throughout the forecast period, coupled with government expenditure supported by the EU Recovery and Resilience Facility (amounting to 5.3% of GDP overall in the period 2020-23. Hence, GDP growth is forecast at 5.8% this year (reaching the pre-pandemic level) and 4% in 2023, although downward risks linked to the recrudescence of infections persist, due to the country’s relatively low vaccination rates.

Croatia's public debt stood at around 87% of GDP in 2021, significantly higher than in 2019 (72.8%) as a consequence of the necessary government measures to counter the pandemic and the consequent economic downturn. The normalization of the situation should help reduce the ratio over the forecast horizon, at 83.6% and 80.3% this year and the next, respectively (IMF). In 2021, the general government deficit was estimated at 3.5% of GDP (from 5.7% in 2020), thanks to the strong economic recovery and the gradual phasing out of support measures. Counting on revenue increase, the government deficit is expected to be at 2.4% of GDP in 2022 and narrow further in 2023, at 1.6% (IMF). Meanwhile, the rise in global energy and food prices contributed to an increase in inflation, which stood at 2% in 2021 and should remain stable over the forecast period.

According to IMF estimates, unemployment stood to 8.4% in 2020, heavily influenced by the negative economic impact of the COVID-19 pandemic. The rate is expected to follow a downward trend in 2022 (8%) and 2023 (7.6%), driven by the overall expansion of economic activity. Though the average revenue of Croatians is still below the European average (with an estimated GDP per capita PPP of USD 29,777 in 2021 according to the IMF), Croatia remains the second most developed economy of the Balkan region, after Slovenia.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 60.7556.1763.4068.5373.98
GDP (Constant Prices, Annual % Change) 2.9-8.06.35.84.0
GDP per Capita (USD) 14,945e13,896e15,80817,22318,728
General Government Balance (in % of GDP) 0.4-5.7e-3.5-2.4-1.6
General Government Gross Debt (in % of GDP) 72.888.787.083.680.3
Inflation Rate (%) 0.80.12.65.92.7
Unemployment Rate (% of the Labour Force) 7.89.0e8.48.07.6
Current Account (billions USD) 1.85-0.20-0.06-0.55-0.75
Current Account (in % of GDP) 3.0-0.4-0.1-0.8-1.0

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Main Sectors of Industry

The agricultural sector represents only 3.3% of the country's GDP and employs 6.2% of the workforce (World Bank, latest data available). Croatia has 1.3 million hectares of agricultural land and almost 2.2 million hectares of forests. 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 data by the State Bureau of Statistics (DZS), the value of agricultural production in 2021 increased by 8.1% compared to one year earlier, and the value of real income in agriculture by 3.1%.

The secondary sector contributes 21.5% of GDP and employs 27.7% of the active population. Croatian industry is concentrated in competitive activities: textiles, wood, the 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. Figures from the State Bureau of Statistics (DZS) show that industrial output grew 6.7% year-on-year in 2021.

The service sector represents 58.9% of the country’s GDP, employing 66.1% 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. However, the tertiary sector was hit hard by the economic crisis following the covid-19 pandemic. Tourism, in particular, saw the number of tourists decrease by 64.2% in 2020. Nevertheless, the sector partially recovered in 2021: according to data by the Ministry of Tourism and Sports, Croatia generated the best tourism results in the Mediterranean with 13.8 million arrivals and 84.1 million overnight stays in 2021 (+77% and 55%, respectively).

 
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) 3.3 21.5 58.9
Value Added (Annual % Change) 3.7 -1.3 -8.6

Source: World Bank - Latest available data.

 

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Monetary Indicators 20162017201820192020
Croatian Kuna (HRK) - Average Annual Exchange Rate For 1 MUR 0.190.190.190.190.17

Source: World Bank - Latest available data.

 
 

Find out all the exchange rates daily on our service Currency Converter.

Indicator of Economic Freedom

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:

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

 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

Croatia, which joined the WTO in 2000, depends heavily on foreign trade, which amounts to 90.6% of the GDP (World Bank, latest data available). The country mainly exports petroleum oils, medicaments, human and animal blood, and electrical transformers; while imports are driven by motor cars, medicaments, blood, petroleum oils and crude oil, and telephones.

In 2020, the EU accounted for 69.7% of Croatian exports (mainly towards Germany, Italy, and Slovenia), followed by Bosnia and Herzegovina (8.6%) and Hungary (7.2%). The leading import origins were the EU (81.2%, reflecting the structure of exports’ destinations), China (4.6%), and Bosnia and Herzegovina (2.9% - data Comtrade and Croatian Bureau of Statistics).

In terms of merchandise, Croatia has a structural trade deficit: according to figures by WTO, in 2020 exports of goods totalled USD 17.1 billion (stable y-o-y) while imports decreased by %5.1, at USD 26.7 billion. However, the country is a net exporter of services, with exports – at USD 9.7 billion – far above imports (USD 3.9 billion). According to figures by the World Bank, the overall trade deficit stood at an estimated 6.7% of GDP in 2020, much higher than the level of 0.3% recorded one year earlier (mostly due to a sharp contraction in services’ exports, at -43.4%). Preliminary figures from the Croatian Bureau of Statistics show that in the first ten months of 2021, total exports of the Republic of Croatia amounted to HRK 114.5 billion ( 25.4% higher than in the same period of 2020). In the same period, total imports reached HRK 174.0 billion (+21.9% y-o-y).

 
Foreign Trade Indicators 20162017201820192020
Imports of Goods (million USD) 21,68824,82928,20328,16026,719
Exports of Goods (million USD) 13,73616,06917,40217,18017,167
Imports of Services (million USD) 3,9064,5745,4305,5733,932
Exports of Services (million USD) 13,49015,05416,35417,1629,714
Imports of Goods and Services (Annual % Change) 6.58.47.56.3-13.8
Exports of Goods and Services (Annual % Change) 7.06.83.76.8-25.0
Imports of Goods and Services (in % of GDP) 46.549.351.052.248.9
Exports of Goods and Services (in % of GDP) 47.649.950.252.041.7
Trade Balance (million USD) -8,437-9,517-11,406-11,525-9,779
Trade Balance (Including Service) (million USD) 671595-613-317-3,938
Foreign Trade (in % of GDP) 94.199.1101.2104.290.6

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2020
Germany 12.8%
Italy 12.5%
Slovenia 10.4%
Bosnia and Herzegovina 8.6%
Hungary 7.2%
See More Countries 48.6%
Main Suppliers
(% of Imports)
2020
Germany 15.3%
Italy 12.3%
Slovenia 11.3%
Hungary 7.7%
Austria 6.6%
See More Countries 46.8%

Source: Comtrade, Latest Available Data

 
 

Main Products

17.0 bn USD of products exported in 2020
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses incl. those in the form of transdermal administration or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 3.8%
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals, crude 3.7%
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 3.6%
Human blood; animal blood prepared for therapeutic...Human blood; animal blood prepared for therapeutic, prophylactic or diagnostic uses; antisera and other blood fractions and modified immunological products, whether or not obtained by means of biotechnological processes; vaccines, toxins, cultures of micro-organisms (excl. yeasts) and similar products 3.0%
Electrical transformers, static converters, e.g....Electrical transformers, static converters, e.g. rectifiers, and inductors; parts thereof 2.3%
See More Products 83.6%
26.1 bn USD of products imported in 2020
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 3.7%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses incl. those in the form of transdermal administration or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 3.6%
Human blood; animal blood prepared for therapeutic...Human blood; animal blood prepared for therapeutic, prophylactic or diagnostic uses; antisera and other blood fractions and modified immunological products, whether or not obtained by means of biotechnological processes; vaccines, toxins, cultures of micro-organisms (excl. yeasts) and similar products 3.0%
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 2.7%
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals, crude 2.2%
See More Products 84.7%

Source: Comtrade, Latest Available Data

 
 

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Main Services

Source: United Nations Statistics Division, Latest Available Data

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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
Search Engines
Pogodak
Croatian Web directory
Economic Portals
Croatian Information Centre

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Political Outline

Current Political Leaders
President-elect: Zoran Milanović (assuming office on 18th February 2020)
Prime Minister: Andrej Plenković (since 19 October 2016)
Next Election Dates
Presidential: 2024
Assembly: 2024
Main Political Parties
Croatia has a multi-party system. The major political parties are:

- Croatian Democratic Union (HDZ): centre-right, socialist, conservative, advocates political and economic liberalisation, typically dominated the political scene since 1991 and is the current leader of the ruling coalition
- Social Democratic Party (SDP): centre-left, ex-communist party, it is the main opposition party
- Homeland Movement (DP): croatian nationalism, social conservativism, euroscepticism
- Croatian People's Party (HNS): centre, liberal, advocates economic reforms. Supports the current government
- Bridge of Independant Lists (MOST): centre, centre right, fiscal conservatism, liberalism
- Croatian Peasant Party (HSS): agrarian, green liberalism
- Civic Liberal Alliance (GLAS): liberalism, social liberalism
- Human Blockade (ŽZ): populism, pro-Russia
- Independent Democratic Serb Party (SDSS): serb minority politcs, advocates for social democracy
- Istrian Democratic Assembly (IDS-DDI): Istrian Regionalism, liberalism
- Bandić Milan 365 - Labour and Solidarity Party (BM 365): social-democracy, populism

Type of State
Republic based on parliamentary democracy.
Executive Power
The President is the chief of the state, elected by popular vote for a five-year term (renewable once). He can dissolve the Parliament and call for election and is also the commander-in-chief of the armed forces. The President appoints the Prime Minister (generally the leader of the majority party) and the Cabinet with the consent of Parliament. The Prime Minister holds the executive powers.
Legislative Power
Legislative power is unicameral. The 151 members of parliament, called the Sabor, are elected by universal suffrage for a four-year term. 8 seats are reserved to ethnic minorities (Serbs, Hungarians, Czech, Slovaks, etc.).
The Constitution has been amended to transfer part of the powers of the President to parliament.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
56/180
Evolution:
59/180

Source: World Press Freedom Index, Reporters Without Borders

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
1/7
Civil Liberties:
49/60

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Croatia, please visit the official governmental portal Koronavirus.hr, which provides infographics on data by the Croatian Institute of Public Health.
For the international outlook you can consult the latest
situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures

To find out about the latest public health situation in Croatia and the current sanitary measures in vigour, please consult the official governmental portal Koronavirus.hr including the up-to-date information on the containment measures put in place (in Croatian). For public health recommendations, refer to the website of the Croatian Institute of Public Health (in Croatian).
Visit the website of the Croatian government for updates on the restrictions.

Travel restrictions

The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.

Import & export restrictions

For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the portal of the Croatian Customs Administration (in Croatian).
An
export license is required to export personal protective equipment outside of the European Union.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Croatia on the
International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

To know about the economic measures taken by the Croatian government to address the impact of the COVID-19 pandemic on the national economy, please visit the official governmental portal Koronavirus.hr, which provides information on the measures taken by each Ministry for the domains under their responsibility (in Croatian). The website of the Ministry of Economy, Entrepreneurship and Crafts provides further info on the support schemes (in Croatian). For a detailed analysis of the economic and fiscal measures, consult the guide by Deloitte.
The information on the EU’s economic response to COVID-19 and the actions to minimise the fallout on the EU member states’ economies of the COVID-19 outbreak is available on the websites of the
European Commission and the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Croatian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Croatia in the
IMF’s Policy Tracker platform.

Support plan for businesses

For the information on the local business support scheme and taxation measures established by the Croatian government to help businesses to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the official governmental portal Koronavirus.hr, which provides information on the measures taken by each Ministry for the domains under their responsibility (in Croatian). Further information in English can be sourced on the guide by Deloitte.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters

The government of Croatia can issue guarantees to commercial banks of exporters and to the Croatian Bank for Reconstruction and Development (HBOR) under the export guarantee fund. Furthermore, the European Commission has approved a EUR 790 million Croatian guarantee scheme for companies with export activities affected by the coronavirus outbreak.
The European Commission adopted a Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak, which enables short-term export credit insurance to be provided by the State where needed.

 

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