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Croatia’s Economy through the years

By  Nov 27, 2020

Croatia is one of the fashionable tourist destinations in the Mediterranean. But, despite the popularity of its coasts and income from tourism, the growth of its economy is slow and many of its inhabitants do not have stable employment. This reality has occupied the debate of the politicians who have attended the last elections.

This Balkan republic declared its independence in 1991. After the Second World War (1939-1945), it had been one of the members of the federal republic of Yugoslavia.

The Yugoslav states were communist countries: the state controlled factories and the economy in order to distribute wealth among the inhabitants. However, this model collapsed and shifted to a market or capitalist economy during the 1990s. Adjusting the economic model is always difficult, and the country is still trying to adapt.

Furthermore, the Croatian war for its independence, which is included in the so-called Homeland War, lasted until 1995. It left the country's infrastructure and economy as a whole seriously damaged.

Tourism-based economy

With peace, recovery had to come. Croatia focused on the service sector, especially tourism. It stopped betting on the industry, as it had done in the past.

Currently, according to the Central Intelligence Agency (CIA) of the United States, 70.1% of the economy is based on the third sector, that of tourism and services. Industry contributes to generating 26.2% of the country's wealth, and agriculture only 3.7%.

The 2008 crisis, a hard blow for Croatia

The 2008 crisis shook with great force a state that was still recovering from the war. In the aftermath of the recession, salaries dropped considerably, from 43% of the median salary in Western Europe to 37%, according to the Transform! Europe.

Unemployment was also another serious threat. In 2014, in full recession, it became the third country in the European Union with the most unemployed (17.2% of the working-age population), behind Spain (24%) and Greece (26.5%), according to Eurostat data.

Low unemployment, but low-paying and insecure jobs

Little by little, unemployment fell to 7.7% in 2019, according to World Bank data. In the European Union, unemployment was 6.4%.

Although the situation has improved, the economic crisis left consequences that still linger. In general, wages are very low - Croatia's minimum wage is the sixth lowest in the European Union, according to Eurostat data.

Furthermore, it is easy to be fired and so-called “garbage” contracts abound - temporary, short and poorly paid. One of the toughest jobs is still picking fruit. The rate is about 20 kuna (3.2 dollars) an hour.

The 28th member state of the European Union

Croatia is the 28th member state of the European Union. The country came to the EU immersed in recession and with an unemployment rate of 20%, but will these figures reverse in the short term? The statistics show that EU funds may reactivate its economy, but will not reach the population.

Although the inclusion of this country in the EU may be a boost for its economy, it is not so clear that it is also positive for its population, since it is estimated that a good part of its young people will have to emigrate to other countries of the Eurozone in search of employment.

In fact, to avoid avalanches, Germany or Austria have already announced that they will resort to their right of moratorium to avoid large flows, although in reality it could mean an improvement for their battered pension system.

It is also worth mentioning that Croatia's accession to the group of EU member countries occured without the nation meeting the criteria recommended in the Stability and Growth Pact, 60% debt over GDP and 3% deficit, when statistics Officials gave Croatia a debt over GDP of 63.5% and 5.3% in terms of the deficit.

But day by day, slowly but surely, Croatia is improving its economy slowly, with aid from the EU. The country is now one of the most attractive investment destinations in Europe and one of the indications is the increased trading of shares of Croatian companies and the increasing demand for trading apps among Croats.

 

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