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According to the forecasts of most institutions in the current year, Croatia is still struggling in poor economic conditions, which are related to the still declining domestic demand. Already for five years, the Croatian economy is in recession and there are indications that it may also remain in the following year. According to the forecasts by the European Commission, improvement in the economic situation of Croatia and GDP growth will be only in 2015. It is expected that the economic recovery may be due to the acceleration of exports and gradually increasing investment rate.

The dynamics of the country's economy weakened the trend of falling in investment, especially in housing. In addition to the decline of GDP, it also contributed to export, which in previous years was driven by the national economic situation. This was due to the significantly lower sales of petroleum products, food, transport and electrical equipment, crucial in the Croatian exports. The weakening of exports resulted from the increase of competition for Croatian companies in connection with the accession to the European Union (EU). Besides, as a result of the accession to the EU, Croatia lost its privileges in trade with CEFTA countries (including Bosnia and Herzegovina and Serbia), which are its main economic partners.[1]

In Croatia, again a decline in economic activity and rising unemployment, bad situation on the local market and the lack of labor market prospects of improvement continues to hamper private consumption. Croatia has one of the highest unemployment rates in the EU, after Greece and Spain, especially among young people. First of all, it has to do with the stagnation in the construction industry, which provided an adequate number of job places in previous years.

The European Commission predicts that recession is also experienced in Croatia, which continues to face a number of challenges. A slight decline of 0.6 percent is predicted in GDP in 2014. The Croatian economy will grow in 2015, by 0.7 percent.

The European Commission has also identified too much debt of traders and households as a reason for the economic problems of Croatia. Besides, the European Commission sees the factors that weaken the possibility of a rapid improvement in the economic situation of Croatia, as well as insufficiency to stimulate the development of their own funds and the economic situation around Croatia.

In addition, the European Commission welcomes the government efforts to improve the payment of taxes.

Furthermore, the Commission recommended Croatia further structural reforms, in particular, stimulations in private investment: access to bank financing remains limited, especially for small and medium-sized enterprises. For further stabilization of the situation in the banking sector and the promotion of alternative forms of financing is compulsory - for example in the form of a loan guarantee schemes or corporate bonds. In addition, the EC stated that the government has taken effective action in response to the Council recommendations under the excessive deficit procedure.

[1] Polish National Bank, The economic situation in the countries of Central and Eastern Europe, 2014