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The Croatian economy was badly affected by the financial crisis which, together with slow progress of economic reforms, resulted in six years of recession and a cumulative decline in GDP of Croatia formally emerged from the recession in the fourth quarter of , and had a continuous GDP growth since.
The Croatian economy reached pre crisis levels in , but due to the Coronavirus pandemic its GDP had decreased by 8. However Croatia bounced back supported by strong private consumption , the better-than-expected performance of tourism industry and the boom merchandise exports , that in the first nine months of amounted to This made Croatian export’s record year as the score from was exceeded by 2 billion euros.
Tourism is one of the main pillars of the Croatian economy, comprising Croatia is working to become an energy powerhouse with its floating liquefied natural gas LNG regasification terminal on the island of Krk [38] and investments in green energy , [39] [40] particularly wind energy , [41] solar and geothermal energy , having opened 17 MW Velika 1 [ hr ] geothermal power plant in Ciglena in late , that is the largest power plant in continental Europe with binary technology [42] [43] [44] and starting the work on the second one in the summer of In Croatia joined the list of countries with its own automobile industry, [50] with Rimac Automobili ‘s Nevera started being produced.
The company also plans to build battery systems for different manufacturers from the automotive industry [51] [52]. During the 19th century, the Kingdom of Croatia had a high ratio of population working in agriculture. Many industrial branches developed in that time, like forestry and wood industry stave fabrication, the production of potash, lumber mills, shipbuilding.
The most profitable one was stave fabrication, the boom of which started in the s with the clearing of the oak forests around Karlovac and Sisak and again in the s with the marshy oak masses along the Sava and Drava rivers. Shipbuilding in Croatia played a huge role in the s Austrian Empire , especially the longe-range sailing boats.
Sisak and Vukovar were the centres of river-shipbuilding. Agriculture and the breeding of cattle were the most profitable occupations of the inhabitants. It produced corn of all kinds, hemp , flax , tobacco, and great quantities of liquorice. The first steps towards industrialization began in the s and in the following decades the construction of big industrial enterprises took place.
However, the industrial production was still lower than agricultural production. Industrialization was faster in inner Croatia than in other regions, while Dalmatia remained one of the poorest provinces of Austria-Hungary. According to estimates, roughly , Croats emigrated from Austria-Hungary between and In 8. In Croatia became part of the Kingdom of Yugoslavia , which was in the interwar period one of the least developed countries in Europe.
Most of its industry was based in Slovenia and Croatia, but further industrial development was modest and centered on textile mills, sawmills, brick yards and food-processing plants. The economy was still traditionally based on agriculture and raising of livestock, with peasants accounting for more than half of Croatia’s population.
The economic system of NDH was based on the concept of “Croatian socialism “. The fulfillment of basic economic interests was primarily ensured with measures of repression. Its currency was the NDH kuna. The Croatian State Bank was the central bank, responsible for issuing currency. As the war progressed the government kept printing more money and its amount in circulation was rapidly increasing, resulting in high inflation rates.
By almost all domestic and foreign-owned capital had been nationalized. The industrialization plan relied on high taxation, fixed prices, war reparations , Soviet credits, and export of food and raw materials. Forced collectivization of agriculture was initiated in A rapid improvement of food production and the standard of living was expected, but due to bad results the program was abandoned three years later.
Throughout the s Croatia experienced rapid urbanization. Decentralization came in and spurred growth of several sectors including the prosperous tourist industry. In the mids, Yugoslavia lifted emigration restrictions and the number of emigrants increased rapidly. In , workers from Croatia were employed abroad, mostly in West Germany. This, coupled with austerity programs and hyperinflation in the s, led to discontent in both Croatia and Slovenia which eventually fuelled political movements calling for independence.
In the late s and early s, with the collapse of socialism and the beginning of economic transition , Croatia faced considerable economic problems stemming from: [75]. At the time Croatia gained independence, its economy and the whole Yugoslavian economy was in the middle of recession.
Privatization under the new government had barely begun when war broke out in As a result of the Croatian War of Independence , infrastructure sustained massive damage in the period —92, especially the revenue-rich tourism industry.
Privatization in Croatia and transformation from a planned economy to a market economy was thus slow and unsteady, largely as a result of public mistrust when many state-owned companies were sold to politically well-connected at below-market prices. With the end of the war, Croatia’s economy recovered moderately, but corruption, cronyism, and a general lack of transparency stymied economic reforms and foreign investment.
The early s were characterized by high inflation rates. In the Croatian dinar was introduced as a transitional currency, but inflation continued to accelerate.
The anti-inflationary stabilization steps in decreased retail price inflation from a monthly rate of In Croatia introduced the kuna as its currency. As a result of the macro-stabilization programs, the negative growth of GDP during the early s stopped and turned into a positive trend. Post-war reconstruction activity provided another impetus to growth. Consumer spending and private sector investments, both of which were postponed during the war, contributed to the growth in — In March Croatia agreed with the Paris Club of creditor governments and took In July an agreement was reached with the London Club of commercial creditors, when Croatia took In around 60 percent of Croatia’s external debt was inherited from former Yugoslavia.
At the beginning of value-added tax was introduced. The central government budget was in surplus in that year, most of which was used to repay foreign debt. However, the consumer boom was disrupted in mid , as a result of the bank crisis when 14 banks went bankrupt.
After several years of successful macroeconomic stabilization policies, low inflation and a stable currency, economists warned that the lack of fiscal changes and the expanding role of the state in the economy caused the decline in the late s and were preventing sustainable economic growth.
The country emerged from the recession in the 4th quarter of and growth picked up in Economic growth in the s was stimulated by a credit boom led by newly privatized banks, capital investment, especially in road construction, a rebound in tourism and credit-driven consumer spending.
Inflation remained tame and the currency, the kuna, stable. In Croatia generated 5, billion kunas in total income from the shipbuilding sector, which employed 13, people. Unemployment reached its peak in late , but has since been steadily declining. In , the nation’s economy would officially recover to the amount of GDP it had in Unemployment continued falling, powered by growing industrial production and rising GDP, rather than only seasonal changes from tourism. Unemployment reached an all-time low in when the annual average rate was 8.
Most economic indicators remained positive in this period except for the external debt as Croatian firms focused more on empowering the economy by taking loans from foreign resources.
The Croatian National Bank had to take steps to curb further growth of indebtedness of local banks with foreign banks. Economic growth has been hurt by the global financial crisis. However, in , the crisis gained momentum and the decline in GDP growth, at a slower pace, continued during In the GDP stagnated as the growth rate was zero. Croatia joined the European Union on 1 July as the 28th member state.
The Croatian economy is heavily interdependent on other principal economies of Europe, and any negative trends in these larger EU economies also have a negative impact on Croatia. Italy, Germany and Slovenia are Croatia’s most important trade partners. The annual average unemployment rate in was In external debt rose by 2. During the Croatian economy started with slow but upward economic growth, which continued during and conclusive at the end of the year seasonally adjusted was recorded at 3.
In the first quarter of , Croatian GDP rose by 0. Economic activity also plunged in Q3 when GDP slid by an additional Preliminary data point to tourism-related expenditure already exceeding levels, which has been supportive of both employment and consumption. At the same time, imports rose The coverage of imports by exports for the first nine months is Specifically, on the EU market, only a lower export result is recorded in relations with Sweden , Belgium and Luxembourg.
Italy is again the main market for Croatian products, followed by Germany and Slovenia. Apart from the high contribution of crude oil that Ina sends to Hungary to the Mol refinery for processing, the export of artificial fertilizers from Petrokemija also has a significant contribution to growth.
For , the Commission revised downwards its projection for Croatia’s economic growth to 5. Commission again confirmed that the volume of Croatia’s GDP should reach its level during , while in the GDP will grow by 3. The Commission warned that the key downside risks stem from Croatia’s relatively low vaccination rates , which could lead to stricter containment measures, and continued delays of the earthquake-related reconstruction.
On the upside, potential entry into the Schengen area and euro adoption towards the end of the forecast period could benefit investment and trade. Maraska liqueur factory in Zadar. Tourism is a notable source of income during the summer and a major industry in Croatia.
Its positive effects are felt throughout the economy of Croatia in terms of increased business volume observed in retail business, processing industry orders and summer seasonal employment. The industry is considered an export business, because it significantly reduces the country’s external trade imbalance.
Length of a tourist stay in Croatia averages 4. The bulk of the tourist industry is concentrated along the Adriatic Sea coast. Opatija was the first holiday resort since the middle of the 19th century. By the s, it became one of the most significant European health resorts.
Inland areas offer mountain resorts, agrotourism and spas. Zagreb is also a significant tourist destination, rivalling major coastal cities and resorts.
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