Investment Property in Croatia

Economy

Emerging from Communism

Croatia has a mainly service-based economy and, with 8.5 million visitors a year, tourism is a major contributor to this. There is some light industry, although the country isn't known for this, and there is no ready supply of raw materials to promote heavy industrial activities.

Adapting economy

War damages and de-industrialisation have slowed the development process further, while the old markets of the rest of Yugoslavia have disappeared. The country's economy and investors are adapting to the changing market and the different demands of exporting to the west of Europe rather than the east.

Working towards EU membership

With Croatia preparing to join the European Union, Europe has become the most important market for the country, both for tourist visitors and for export markets. This has also led to the economy beginning to recover some ground and become more stable. In 2005, the Stabilization and Association Agreement with the EU came into force, further strengthening ties between Croatia and Europe, advancing the case for accession and promoting economic recovery.

Economic obstacles

The Croatian economy is not without its problems though. The estimated GDP is $12,158 per capita, just 42% of the EU average. There is also a problem with a deficit of exports, and Croatia has high debt levels with other countries, running at a level of around 50% of the GDP.

High unemployment

Employment demographics are relatively simple – up to 65% of the working population is involved in the service industries, around 30% in industry, and the rest in the traditional agricultural occupations which still survive. The high unemployment rate of 16% is likely to be absorbed reasonably quickly as investment grows and demobilised armed forces personnel retrain into new professions.

Growth potential

The good news is that experts are predicting that growth will come quickly, and inward investment is already increasing, particularly in greenfield investments. On top of this, inflation is under control and the Kuna is stable enough to provide a good platform for growth before joining the European Union and adopting the euro.

Positive future

Levels of foreign direct investment (FDI) are increasing: according to the Croatian National Bank, Croatia attracted €2.83 billion of FDI in 2006, which was the highest yearly amount since 1993 and almost double the level for 2005. Once EU accession has been agreed, and as long as the government remains stable, Croatia should be a contributor, rather than a drain, on Europe's economic power.