Economy of Croatia

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Economy of Croatia
ZagrebSkyline11.jpg
Rank 72nd (nominal GDP) / 81st (PPP)
Currency Croatian kuna (HRK)
Calendar year
Trade organisations
EU, WTO
Statistics
GDP

Increase$58.058 billion (nominal, 2013)

Increase$77.9 billion (PPP, 2013)
GDP growth
Decrease-0.8% (Real, Q2 2014)[1]
GDP per capita

Increase$13,561 (Nominal, 2013)

Increase$20,904 (PPP, 2013)[2]
GDP by sector
agriculture: 4.7%; industry: 33.1; services: 62.2% (2012 est.)
GDP by component
Private consumption (52.3%)
Public consumption (18.7%)
Investments (32.8%)
Export (50.4%)
Import (54.2%) (2007)
Increase0.1% (2014)[3]
Population below poverty line
18% (2012)
32 (2010)
Labour force
1.745 million (2012 est.)
Labour force by occupation
agriculture: 2.1%; industry: 29.0%; services: 69.0% (2012)
Unemployment positive decrease17.3% (July 2014) [3]
Average gross salary
8,024 HRK / 1,460 $, monthly (June 2014)[4]
5,558 HRK / 1010 $, monthly (June 2014)[4]
Main industries
chemicals and plastics, machine tools, fabricated metal, electronics, pig iron and rolled steel products, aluminium, paper, wood products, construction materials, textiles, shipbuilding, petroleum and petroleum refining, food and beverages, tourism
Decrease 89th [5]
External
Exports Increase$12.74 billion (2013 est.)[6]
Export goods
transport equipment, machinery, textiles, chemicals, foodstuffs, fuels
Main export partners
 Italy 14.9%
 Bosnia and Herzegovina 13.2%
 Germany 10.6%
 Slovenia 8.8%
 Austria 6.8% (2012 est.)[7]
Imports Increase$21.93 billion (2013 est.)[6]
Import goods
machinery, transport and electrical equipment; chemicals, fuels and lubricants; foodstuffs
Main import partners
 Italy 16.7%
 Germany 12.9%
 Russia 7.6%
 China 7.1%
 Slovenia 5.9%
 Austria 4.5% (2012 est.)[8]
FDI stock
Increase$34.27 billion (December 2012)
negative increase$59.75 billion (December 2012)
Public finances
negative increase68% of GDP [9]
Revenues $20.12 billion (2014 Budget)[9]
Expenses $23.25 billion (2014 Budget)[9]
Economic aid EUR179.5 million (0.12% of GNI) (2007)

BBB- (Domestic)
BBB- (Foreign)
BBB+ (T&C Assessment)
(Standard & Poor's)

FITCH: BB (July 2014)
[10]
Foreign reserves
DecreaseUS$13.29 billion (December 2013)[11]
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

Economy of Croatia is a service-based economy with the tertiary sector accounting for 70% of total gross domestic product (GDP). Croatian economy was badly affected by the Global Financial Crisis, and contracted by 6.9% in 2009, 1.4% in 2010, then showed signs of recovery in 2011 with 0.0% real GDP growth, but contracted again in 2012 by 1.8%. Before the global financial crisis of 2008-09, the Croatian economy grew at a healthy 4-5% annually, incomes doubled, and economic and social opportunities dramatically improved. The prolonged crisis is testing this progress, as well as Croatia’s aspirations, as the country is now entering its sixth year of recession, having lost over 12% of its output. Gross Domestic Product (GDP) is estimated to fall by 0.5% in 2014. There is more optimism about the prospect for growth in 2015, with exports projected to pick up in the Eurozone and private investments expected to increase.

Croatia joined European Union on 1 July 2013, and in spite of the rather slow post-recession recovery, in terms of income per capita it is still ahead of some European Union member states such as Bulgaria, Romania, and Latvia.[12] In terms of average monthly wage, Croatia is ahead of 9 EU members (Czech Republic, Estonia, Slovakia, Latvia, Poland, Hungary, Lithuania, Romania, and Bulgaria).[13] With unemployment rate of 18.3% as of June 2014, Croatia has the third highest unemployment rate in the European Union, after Greece (27%), and Spain (26.8%).[14]

The industrial sector with exports of over €1 billion annually is dominated by shipbuilding which accounts for over 10% of exported goods. Food processing and chemical industry also account for significant portions of industrial output and exports. Industrial sector represents 27% of Croatia’s total economic output while agriculture represents 6%. Industrial sector is responsible for 25% of Croatia's GDP, with agriculture, forestry and fishing accounting for the remaining 5% of Croatian GDP.

Croatian development in the 20th century[15]

Croatian agricultural sector subsists from exports of blue water fish, which in recent years experienced a tremendous surge in demand, mainly from Japan and South Korea. Croatia is a notable producer of organic foods and much of it is exported to the European Union. Croatian wines, olive oil and lavender are particularly sought after.

Tourism is traditionally a notable source of income, particularly during the summer months, but also more recently during the winter months as well, due to an increase in popularity of snow sports such as skiing. With over 10 million foreign tourists annually, tourism generates revenue in excess of €7 billion. Croatia is ranked among the top 20 most popular tourist destinations in the world, and was voted world's top tourism destination in 2005 by Lonely Planet.[16]

One of the sales promotion actions to increase purchase of domestic products

Trade plays a major role in Croatian economic output. In 2007 Croatia's exports were valued at USD 12.84 billion (24.7 billion including service exports). According to Healy Consultants, trade in Croatia is bolstered by its low trade-weighted average tariff of just 1.2%.[17] Croatia has a stable market economy accompanied by a strong and stable currency, the Kuna.

Croatia and Slovenia, the two westernmost republics in what was formerly SFR Yugoslavia, accounted for nearly half of the total Yugoslav GDP, and this was reflected in the overall standard of living which in Croatia's case was more than 50% above Yugoslav average, and close to 90% in Slovenia. Nevertheless, since the late 1980s and the beginning of economic transition, Croatian economy experienced difficulties due to deindustrialization, war destruction and the loss of Yugoslav and Comecon markets.

Persistent economic problems still remain and include a rather high unemployment rate (9.6% in 2007),[18] and the slow progress of necessary economic reforms. Of particular concern is the heavily backlogged judiciary system, combined with inefficient public administration, especially regarding the issues of land ownership and corruption in the public sector. Unemployment is regionally uneven: it is very high in eastern and southern parts of the country, nearing 20% in some areas, while relatively low in the north-west and in larger cities, where it is between 3 and 7%. Unemployment has been constantly declining by 5% over the last 7 years.[19]

Gross Domestic Product[edit]

Slavonia, breadbasket region of Croatia.

Fiscal year: calendar year

GDP per county: (source Croatian statistical institute for year 2005)[not in citation given]

Rank County Number of citizens GDP (millions of euros) GDP/euros per capita
1 Zagreb 779,145 10,070 12,908
2 Istria County 205,825 1,884 9,126
3 Primorje-Gorski Kotar County 306,159 2,547 8,337
4 Lika-Senj County 53,006 378 7,136
5 Varaždin County 185,756 1,261 6,787
6 Koprivnica-Krizevci County 125,352 845 6,744
7 Dubrovnik-Neretva County 123,047 785 6,382
8 Zadar County 160,506 945 5,887
9 Medjimurje County 120,790 684 5,662
10 Sisak-Moslavina County 182,615 1,001 5,478
11 Karlovac County 142,313 777 5,460
12 Split-Dalmatia County 459,818 2,472 5,374
13 Zagreb County 309,369 1,640 5,294
14 Bjelovar-Bilogora County 133,198 704 5,285
15 Osijek-Baranja County 329,465 1,736 5,260
16 Krapina-Zagorje County 143,465 732 5,101
17 Pozega-Slavonia County 84,897 411 4,835
18 Virovitica-Podravina County 93,952 451 4,803
19 Sibenik-Knin County 114,344 498 4,368
20 Vukovar-Srijem County 195,771 788 4,028
21 Brod-Posavina County 177,558 654 3,785
Total Croatia 4,442,000 31,263 7,038

GDP per county: (source Croatian statistical institute for year 2006)[not in citation given]

Rank County Number of citizens GDP (millions of euros) GDP/euros per capita
1 Zagreb 779,145 10,924 14,005
2 Istria County 205,825 2,070 10,048
3 Primorje-Gorski Kotar County 306,159 2,787 9,107
4 Lika-Senj County 53,006 410 7,735
5 Varaždin County 185,756 1,401 7,540
6 Koprivnica-Križevci County 125,352 945 7,535
7 Dubrovnik-Neretva County 123,047 880 7,154
8 Zadar County 160,506 1,052 6,554
9 Medjimurje County 120,790 758 6,275
10 Sisak-Moslavina County 182,615 1,084 5,927
11 Karlovac County 142,313 840 5,903
12 Bjelovar-Bilogora County 133,198 780 5,855
13 Split-Dalmatia County 459,818 2,649 5,758
14 Zagreb County 309,369 1,800 5,806
15 Osijek-Baranja County 329,465 1,900 5,757
16 Krapina-Zagorje County 143,465 802 5,588
17 Pozega-Slavonia County 84,897 462 5,435
18 Virovitica-Podravina County 93,952 506 5,382
19 Sibenik-Knin County 114,344 570 5,000
20 Vukovar-Srijem County 195,771 872 4,455
21 Brod-Posavina County 177,558 728 4,097
Total Croatia 4,440,000 34,220 7,707

GDP per county: (GDP for year 2007 - source Croatian National Bank)[citation needed]

Rank County Number of citizens GDP (millions of euros) GDP/euros per capita
1 Zagreb 779,145 11,812 15,140
2 Istria County 205,825 2,254 10,942
3 Primorje-Gorski Kotar County 306,159 3,124 10,210
4 Lika-Senj County 53,006 466 8,790
5 Varaždin County 185,756 1,577 8,480
6 Koprivnica-Krizevci County 125,352 1,045 8,310
7 Dubrovnik-Neretva County 123,047 974 7,920
8 Zadar County 160,506 1,184 7,375
9 Medjimurje County 120,790 848 7,020
10 Zagreb County 309,369 2,018 6,520
11 Karlovac County 142,313 915 6,447
12 Sisak-Moslavina County 182,615 1,170 6,397
13 Bjelovar-Bilogora County 133,198 843 6,338
14 Split-Dalmatia County 459,818 2,915 6,336
15 Osijek-Baranja County 329,465 2,066 6,275
16 Krapina-Zagorje County 143,465 884 6,155
17 Virovitica-Podravina County 93,952 562 5,978
18 Pozega-Slavonia County 84,897 502 5,906
19 Sibenik-Knin County 114,344 642 5,600
20 Vukovar-Srijem County 195,771 924 4,720
21 Brod-Posavina County 177,558 772 4,340
Total Croatia 4 440 000 37,497 8,450

GDP per county: (Preliminary GDP Data for year 2008 - source Croatian National Bank, first time grey market included)[citation needed]

Rank County Number of citizens GDP (millions of euros) GDP/euros per capita
1 Zagreb 779,145 15,035 19,270
2 Istria County 205,825 2,882 14,050
3 Primorje-Gorski Kotar County 306,159 3,970 12,975
4 Lika-Senj County 53,006 644 12,145
5 Varaždin County 185,756 2,052 11,095
6 Koprivnica-Krizevci County 125,352 1,365 10,915
7 Dubrovnik-Neretva County 123,047 1,287 10,475
8 Zadar County 160,506 1,552 9,700
9 Medjimurje County 120,790 1,118 9,315
10 Karlovac County 142,313 1,201 8,465
11 Sisak-Moslavina County 182,615 1,535 8,435
12 Bjelovar-Bilogora County 133,198 1,121 8,430
13 Krapina-Zagorje County 143,465 1,194 8,355
14 Zagreb County 309,369 2,545 8,230
15 Split-Dalmatia County 459,818 3,745 8,145
16 Osijek-Baranja County 329,465 2,670 8,110
17 Virovitica-Podravina County 93,952 757 8,060
18 Pozega-Slavonia County 84,897 683 8,040
19 Sibenik-Knin County 114,344 867 7,605
20 Brod-Posavina County 177,558 1,107 6,250
21 Vukovar-Srijem County 195,771 1,172 6,010
Total Croatia 4,440,000 48,502 10,890


History[edit]

Pre-1990[edit]

In an economy traditionally based on agriculture and raising of livestock, peasants accounted for more than half of Croatia's population until after World War II. Pre-1945 industrialization was slow and centered on textile mills, sawmills, brick yards and food-processing plants.

One of the fertile agricultural regions, near the Neretva river

Rapid industrialization and diversification occurred after World War II. Decentralization came in 1965 and spurred growth of several sectors including the prosperous tourist industry. Profits gained through Croatia's industry were used to develop poor regions in other parts of former Yugoslavia, leading to Croatia contributing much more to the federal Yugoslav economy than it gained in return[citation needed]. This, coupled with austerity programs and hyperinflation in the 1980s, led to discontent in both Croatia and Slovenia which eventually fuelled political movements calling for independence. Foreign remittances contributed $2 billion annually to the economy by 1990.[20]

Before the dissolution of Yugoslavia in 1991, SR Croatia was the second most prosperous and industrialized area (after SR Slovenia), with a per capita output more than one-third above Yugoslav average. Privatization under the new Croatian government had barely begun when war broke out in 1991. Economic infrastructure was directly affected by the Croatian War of Independence and sustained massive damage, particularly in 1991 and 1992.

War years[edit]

By the end of the 1990s, Croatia faced considerable economic problems stemming from:

  • damage during the internecine fighting to bridges, factories, power lines, buildings, and houses;
  • the large refugee and displaced population, both Croatian and Bosnian
  • the disruption of economic ties; and
  • mishandled privatization

Croatia, along with the remainder of the former Yugoslavia, experienced a serious depression. President Franjo Tuđman initiated the process of privatization and de-nationalization in Croatia. The new government's inefficient and slow legal system, combined with the wider context of the Croatian war of Independence, led to numerous cases of mishandled privatization efforts, collectively known as the Croatian privatization controversy. This, along with the sudden loss of access to former Yugoslav markets, led to mass bankruptcies, and swelled the ranks of the unemployed by thousands.

Inflation and unemployment rose sharply and the kuna fell,[citation needed] prompting the national bank to tighten its fiscal policy. A new banking law passed in December 1998 gave the central bank more control over Croatia's 53 commercial banks and Croatia became dependent on international debt to finance its deficit.

Successful value-added tax program, planned privatization of state controlled businesses, and a revised budget with a 7% cut in spending across that board also happened.

Western aid and investment, especially in the tourist and oil industries, is a significant factor in the further development of the economy. The government has been successful in reform efforts — partially macroeconomic stabilization policies — and it has normalized relations with its creditors.

In 1998 the government founded The Business Innovation Center of Croatia – BICRO, in order to implement technology development and innovation support programs, as an important paradigm of future development.

The recession that began at the end of 1998 continued through most of 1999, and GDP in 1999 was flat.[citation needed] Inflation remained in check and the kuna was stable. However, consumer demand was weak and industrial production decreased. Structural reform lagged and problems of payment arrears and a lack of banking supervision continued.

Years after war[edit]

The new government led by former communist leader Ivica Račan carried out a small number of structural reforms. With tourism as the main contributing factor the country emerged from recession in 2000 and fell into another one in 2002. Due to overall increase in stability, the economic rating of the country improved and interest rates dropped.

Unemployment reached a peak of around 22% in late 2002. It has been steadily declining after the new government HDZ took over the office, powered by growing industrial production and rising GDP, rather than only seasonal changes from tourism, until the global crisis of 2008. During this time, Croatia focused more on empowering the economy by taking loans from foreign resources.[21] In 2003, the nation's economy would officially recover to the amount of GDP it had in 1990.[21] Between the years 2003 and 2007, Croatia’s private-sector share of GDP increased from 60% to 70%[22]

Most economic indicators remained positive in this period, except for the external debt.[21] The Croatian National Bank had to take steps to curb further growth of indebtedness of local banks with foreign banks. The dollar debt figure is quite adversely affected by the EUR/USD ratio — over a third of the increase in debt since 2002 is due to currency value changes.

Tourism is a notable source of income during the summer. With over 10 million foreign tourists a year (as of 2006), Croatia is ranked as the 18th major tourist destination in the world.[23]

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 as they are its biggest trade partners. The country is a member of European Union.

Since the global crisis hit the country in 2009, the unemployment has been steadily rising, resulting in the loss of more than 100,000 jobs.[24] While the unemployment was 9.6% in the late 2007,[18] as of January 2014 it peaked at 22.4%.[3] Gini coefficient is 0,32.[25] As of September 2012, Fitch ratings agency unexpectedly improved Croatia's economic outlook from negative to stable, reafirming Croatia's current BBB rating.[26]

Stock exchanges[edit]

Banking[edit]

Croatian National Bank Building in Zagreb

List of banks in Croatia

Central bank:

Major commercial banks:

Central Budget[edit]

Overall Budget:[27]
revenues:

  • $21.75 billion (114.2 billion Kuna)2007 (official figure)
  • projected for 2008 - 124.2 billion Kuna (24.85 billion USD)


expenditures:

  • $22.8 billion, (119.2 billion Kuna) 2007(official figure)
  • projected for 2008 - 128.7 billion Kuna (25.74 billion USD)

Expenditure for 2007:

  • Education - 10.5 billion Kuna
  • Health Care - 21.4 billion Kuna
  • Welfare & labour - 38.4 billion Kuna
  • Interior and Justice - 6.6 billion Kuna
  • Defense - 4.7 billion Kuna
  • Finance - 11.1 billion Kuna
  • Agriculture - 3.3 billion Kuna
  • Culture and Sport - 1.2 billion Kuna
  • Other - 17.0 billion kuna

Expenditure for 2008 = projected:

  • Education - 12.4 billion Kuna
  • Health Care - 22.4 billion Kuna
  • Welfare and labour - 41.3 billion Kuna
  • Interior and Justice - 6.6 billion Kuna
  • Defense - 5.45 billion Kuna
  • Finance - 12.0 billion Kuna
  • Agriculture - 3.6 billion Kuna
  • Culture and Sport - 1.2 billion Kuna
  • Other - 23.8 billion Kuna

Economic indicators[edit]

Graphical depiction of Croatia's product exports in 28 color-coded categories.

From the CIA World Factbook 2012.

GDP: purchasing power parity - $79.14 billion (2012 est.)

GDP - real growth rate: -1.8% (2012 est.)

GDP - per capita: purchasing power parity - $18,100 (2012 est.)

GDP - composition by sector: agriculture: 4.7% industry: 33.1% services: 62.2% (2012 est.)

Labor force: 1.745 million (2012 est.)

Labor force - by occupation: agriculture 2.1%, industry 29%, services 69% (2012)

Unemployment rate: 20.4% (2012 est.)[18]

Population below poverty line:
national absolute: 11% (2003)
18% (2009)
21.1% (2012)

Household income or consumption by percentage share:
lowest 10%: 3.3%
highest 10%: 27.5% (2008 est.)

Distribution of family income - Gini index: 29 (2001) 32 (2010)

Inflation rate (consumer prices): 4.7% (2012)

Investment (gross fixed): 18,4% of GDP (2012 est.)

Budget:
revenues: $19.3 billion (2012 est.)
expenditures: $20.99 billion, (2012 est.)

Public debt: 52.1% of GDP (2012 est.)

Agriculture - products: wheat, corn, sugar beets, sunflower seed, barley, alfalfa, clover, olives, citrus, grapes, soybeans, potatoes; livestock, dairy products

Industries: chemicals and plastics, machine tools, fabricated metal, electronics, pig iron and rolled steel products, aluminium, paper, wood products, construction materials, textiles, shipbuilding, petroleum and petroleum refining, food and beverages; tourism

Industrial production growth rate: 5.2% (2007 est.) -5.3% (2012 est.)

Electricity - production: 11.99 billion kWh (2005)

Electricity - production by source:
fossil fuel: 33.6%
hydro: 66%
nuclear: 0%
other: 0.4% (2001)

Electricity - consumption: 14.97 billion kW·h (2005)

Electricity - exports: 3.634 billion kW·h (2005)

Electricity - imports: 8.746 billion kW·h (2005)

Oil - production: 27,190 barrels per day (4,323 m3/d) (2005 est.)

Oil - consumption: 99,000 barrels per day (15,700 m3/d) (2004 est.)

Oil - proved reserves: 69.14 million barrels (10.992×10^6 m3) (1 January 2006)

Natural gas - production: 1.477 billion cubic metres (2005 est.)

Natural gas - consumption: 2.58 billion cubic metres (2005 est.)

Natural gas - exports: 0 cubic metres (2005 est.)

Natural gas - imports: 1.103 billion cubic metres (2005 est.)

Natural gas - proved reserves: 27.16 billion cubic metres (1 January 2006)

Current account balance: −$4.385 billion (2007 est.)

Exports: $12.02 billion f.o.b. (2007 est.)

Exports - commodities: transport equipment, textiles, chemicals, foodstuffs, fuels

Exports - partners: Italy 23.1%, Bosnia and Herzegovina 12.7%, Germany 10.4%, Slovenia 8.3%, Austria 6.1%, (2006)

Imports: $26.54 billion f.o.b. (2007 est.)

Imports - commodities: machinery, transport and electrical equipment, chemicals, fuels and lubricants, foodstuffs

Imports - partners: Italy 16.7%, Germany 14.5%, Russia 9.7%, Slovenia 6.8%, Austria 5.4%, China 5.3%, (2006)

Reserves of foreign exchange and gold: $13.67 billion (31 December 2007 est.)

Debt - external: $45.29 billion (30 June 2007 est.)

Economic aid - recipient: ODA $125.4 million (2005)

Currency: kuna (HRK)

Exchange rates: kuna per US$1 – 5.7089 (2013), 5.3735 (2007), 5.8625 (2006), 5.9473 (2005), 6.0358 (2004), 6.7035 (2003), 7.8687 (2002), 8.34 (2001), 8.2766 (2000), 7.112 (1999), 6.362 (1998), 6.157 (1997), 5.434 (1996), 5.230 (1995)

See also[edit]

References[edit]

  1. ^ [1]
  2. ^ "GDP per capita, PPP (current international $) - Croatia". 
  3. ^ a b c http://www.dzs.hr
  4. ^ a b Average Net Earnings from Croatian Bureau of Statistics
  5. ^ "Doing Business in Croatia 2012". World Bank. Retrieved 2011-11-21. 
  6. ^ a b http://www.dzs.hr/
  7. ^ "Exports Partners of Croatia". CIA World Factbook. 2012. Retrieved 2013-07-24. 
  8. ^ "Import Partners of Croatia". CIA World Factbook. 2012. Retrieved 2013-07-24. 
  9. ^ a b c [2]
  10. ^ "Sovereigns rating list". Standard & Poor's. Retrieved 26 May 2011. 
  11. ^ [3]
  12. ^ Per capita GDP
  13. ^ List of countries in Europe by monthly average wage
  14. ^ http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-31052013-BP/EN/3-31052013-BP-EN.PDF
  15. ^ Velkonija, Mitja (2006). Religious Separation and Political Intolerance in Bosnia-Herzegovina. Political Culture Publishing & Research Institute. ISBN 9536213761. 
  16. ^ Top Destinations for 2005
  17. ^ "Croatia Company Formation". Healy Consultants. Retrieved 3 September 2013. 
  18. ^ a b c Ekonomski Indikatori
  19. ^ stat inf 78 do 117.cdr
  20. ^ Europa Publications Limited. Eastern Europe and the Commonwealth of Independent States 1999: 1999. Routledge, 1999. (pg. 279)
  21. ^ a b c http://euce.org/eusa/2011/papers/2f_adams.pdf
  22. ^ http://www.qfinance.com/country-profiles/croatia
  23. ^ untitled
  24. ^ http://www.balkaninsight.com/en/article/croatia-loses-battle-with-crisis
  25. ^ http://www.dzs.hr/Hrv_Eng/publication/2011/14-01-02_01_2011.htm
  26. ^ http://www.balkaninsight.com/en/article/fitch-unexpectedly-improves-croatian-economic-outlook
  27. ^ Ministarstvo financija Republike Hrvatske - Državni proračun

External links[edit]