Girl from LikaGirl in traditional costume from the Lika region/Photo: Nena Lukin

On the 1 July 1 2013, Croatia became a full member of the European Union. According to the 2011 Census, Croatia has a population of 4.2 million. The country is divided into 20 counties and the City of Zagreb, its capital and the largest city. The main industry is tourism, while processing and petrochemical industry had a great role before the recession. The potential of the domestic economy lies in wind power, hydropower and solar energy, substantial agricultural areas, significant fresh water resources, along with the traffic infrastructure.


DubrovnikDubrovnik ancient stone walls/Photo: Inia Herenčić

The lands that today comprise Croatia were part of the Austro-Hungarian Empire until the close of World War I. In 1918, the Croats, Serbs, and Slovenes formed a kingdom known after 1929 as Yugoslavia. Following World War II, Yugoslavia became a federal independent socialist state under the strong hand of Marshal Tito. Although Croatia declared its independence from Yugoslavia in 1991, te Homeland War lasted for four years, before occupying Serb armies were mostly cleared from Croatian lands, along with a majority of Croatia's ethnic Serb population. Under UN supervision, the last Serb-held enclave in eastern Slavonia was returned to Croatia in 1998. In April 2009, Croatia joined NATO; and on 1 July 2013 became the 28th member of the European Union.


ZadarZadar landmarks reflected in a puddle of water/Photo: Jerolim Vulić

After six years of consecutive recession, in 2015 Croatia experienced economic growth of 1,2 percent in the second quarter of 2015, which was preceded by an increase of 0,5 percent in he firs quarter of 2015. The economy benefited from a rebound in domestic demand driven by low commodity prices as well as a recovery in the Eurozone. More recent economic data paint a mixed picture of the economy: current unemployment rate dropped to an almost-six-year low in July, reaching 15,9%, but gross foreign debt accounted for 108,4 percent of GDP at the end of 2014. The alarming weight of the country’s external debt has been increasing the pressure for desperately-needed structural reforms. Youth unemployment rate is at 43,10% that puts Croatia among EU countries with the highest unempoyment rate of youth.

Prolonged economic distress and persistent structural weaknesses underline the development challenges that even a relatively prosperous country can face. Croatia's GNI per head of USD 13,994 qualifies it as a high-income economy. Many of the country’s problems stem from a long-standing failure by policymakers to enact reforms to improve competitiveness and encourage job-creating investment. Croatia’s business environment remains difficult.

The country ranks 88th of 185 countries in the World Bank’s Doing Business rankings, lower than any current EU member state and many neighbors in Southeast Europe. State ownership remains pervasive; benefits are poorly targeted; red tape strangles even the simplest transactions; labor laws remain highly restrictive. Labor force participation rates, at just 51%, are the lowest in Europe – lower even than in Greece.

Tourism is still the main hope for further growth in 2015 and 2016. Tourism generated 7.4 billion euro for Croatia in 2014, which was 17.2 per cent of its annual GDP. Although figures grew by 2.8 per cent in 2014 compared with 2013, they are still below the figures recorded at the pre-recession peak of 2008. 

In these conditions, EU funding is increasingly seen as Croatia's salvation, particularly in addressing unemployment, encouraging business sector and overcoming regional disparities. Over 80 billion kuna has been put at Croatia's disposal in the 2014-2020 financial period from the European Union structural and investment funds. However, the capacities of key stakeholders at the local level, in counties and municipalities remained weak and insufficient to design quality projects, apply for funding and subsequently implement projects.


MotovunTown of Motovun in Istria/Photo: Inia Herenčić

On the 1 July 2013, Croatia became the 28th member of the EU after a decade of carrying out all the reforms needed to bring it into line with EU laws and standards. Joining the EU strengthens stability in the entire Western Balkans region, expands the area where EU standards apply, be it in energy, transport or environmental protection.

Although the country's financial resources are limited, it is rich in experiences that are relevant for other countries, drawing both on its success in overcoming the consequences of conflict and on the lessons learned in the arduous process of European integration.

In the global 2014 human development index, or HDI ranking, Croatia ranks 47th of 187 countries and places in the “very high human development” category. This ranking puts Croatia at 47 which is below the average of other highly ranked countries, including Slovenia ranked 25, Czech Republic 28, Slovakia 37 and Hungary 43. However, it is better ranked than the other countries of South Eastern Europe, which are also in the group of countries with high Human Development Index, including Bulgaria ranked 58, Serbia 77, FYR Macedonia 84 and Bosnia and Herzegovina 86.

Life expectancy in Croatia is estimated at 77 years, and GNI per capita at USD 19,025. The report also states that the mean years of schooling for Croats are 11 years, while the expected years of schooling are estimated at 14,5 years.

In the coming months, new parliamentary elections in Croatia are looming between the end of this year and late February 2016, but experts remain cautious weather it will lead to changes in the economy.