Download Croatia Country Report

The Eurasia Center/EBC
4927 Massachusetts Ave NW
Washington, DC 20016
www.eurasiacenter.org
Email: [email protected]
Croatia: Country Report
Thriving after Political Unrest and on the Path to EU Accession:
Formerly part of the Austro-Hungarian Empire and Communist Yugoslavia, and then a Serboccupied authoritarian state, Croatia has become a sovereign state with a steadily growing
economy since its independence in 1991.
Currently, Croatia has been in a recession since 2009 after tourism drastically declined. The
global financial crisis also led to reduced exports, a large part of Croatia’s economy. After
experiencing several years of recession, in 2015 Croatia’s GDP grew at a rate of 1.6%. However,
Croatia is still dealing with major economic issues such as a high unemployment rate and little
foreign investment.1 The Fiscal Accountability Act will keep the country on track with
conservative spending despite any fluctuations possible with the upcoming parliamentary
elections.2
After Gen. Ante Gotovina was convicted by the UN War Crimes Tribunal in April 2011, Croatia
officially completed its accession negotiations to the European Union. The EU accession treaty
1
The CIA World Factbook (https://www.cia.gov/library/publications/the-world-factbook/geos/hr.html)
World Bank: Croatia’s economic recovery slow in 2011” (http://daily.tportal.hr/124045/World-BankCroatia-s-economic-recovery-in-2011-slow.html)
2
was signed in December 2011 and Croatia became the EU’s 28th member state in 2013.3 Croatia
has also been a NATO member since 2009.
Economic Indicators:
Croatia reports a GDP of $91.1 billion (PPP)4
Croatia is currently experiencing slight deflation, with an inflation of rate -.5%.
Croatia is still struggling with its national debt, amounting to $62.09 billion.
Credit is becoming increasingly accessible, though it has become more difficult to start a
business.5
• Main exports include transportation equipment, machinery, textiles, fuel and chemicals.
•
•
•
•
Economic Structure:
• The service sector of the economy accounts for the largest part of the GDP, at 70.4% according
to estimates. Industries such as the plastic, chemical and metallurgy industries make up the
second largest sector, accounting for 27.6% of the economy. Agriculture plays a relatively
small role in the economy, making up 1.9% of the GDP.6
• Despite the recent opening up of the economy and democratic political reforms, the
unemployment rate remains high, with an official rate of 19.3%.
• Croatia’s main export partners are Italy (13.4%), Bosnia and Herzegovina (9.9%), Germany
(11.4%), Slovenia (12.5%), and Austria (6.6%).
• Croatian currency ‘kuna’ had experienced strong growth against the dollar until 2015 where it
slipped to 6.93 per $1.
3
BBC News: Croatia country profile (http://news.bbc.co.uk/2/hi/europe/country_profiles/1097128.stm)
Ibid.
5 International Finance Corporation
(http://www.doingbusiness.org/data/exploreeconomies/croatia/#starting-a-business)
6
CIA World Fact Book, https://www.cia.gov/library/publications/the-world-factbook/geos/hr.html
4
Political Considerations:
The Republic of Croatia is a parliamentary democracy since gaining independence from
Yugoslavia in 1991. 7 Croatia has a bicameral legislature as well as three branches of
government and a Constitution that has been revised in 2000 and in 2001. Kolinda GrabarKitarovic became president in February of 2015. Tihomir Oreskovic has been the Prime Minister
since January of 2016, however he was ousted in a no-confidence vote in June. He has remained
on as the interim Prime Minister until a government can form.
Attractions:
Innovation:
The Croatian economy has been experiencing a steady growth rate, a growing GDP, high public
investment, a competent banking system, reliable infrastructure, as well as a fast-growing
tourism industry. Technological innovation for the internet, satellites, other products have caught
the attention of the European Space Agency.8
Stability:
The government and economy had been stabilizing until June of 2016. In June, Prime Minister
Tihomir Oreskovic lost a vote of no-confidence. He remains in power due to the Croatian law
that states elections cannot be held earlier than 30 days or later than 60 days after parliament is
dissolved. Elections are planned for September 2016. While Croatia’s economy has seen some
growth in the past year, it still is struggling with attracting foreign investment as well as the issue
of particular regions receiving more development than others.
Troubled Spots:
High unemployment:
Unemployment is high, continuing to hover around 19.3%. Employment protection legislation is
a possible cause of the unemployment, limiting the flexibility of the firing and hiring processes.
Corruption:
Corruption charges against members of the Croatian Democratic Union (HDZ), recently voted
out of parliamentary power in December 2011, are challenging party unity, though party officials
are asserting that the current trouble will strengthen them overall. An example of such
allegations is that of Ivan Mravak, the former director of the Croatian electric company who may
have paid officials for a shorter prison term.9 Also, the struggles with an ineffective legal system,
7
U.S. Department of State, Background Note: Croatia (http://www.state.gov/r/pa/ei/bgn/3166.htm#econ)
The World Bank, “Croatia: Supporting Innovation and Boosting Competitiveness”
(http://lnweb90.worldbank.org/ecaim/multimedialib.nsf/country/croatia)
9 SETimes.com “Can HDZ overcome its current hurdles?”
(http://www.setimes.com/cocoon/setimes/xhtml/en_GB/features/setimes/features/2011/12/20/feature-03)
8
opaque private and public sectors, and extreme backlog of cases deters investors. However,
Croatia has made significant strides to reduce corruption including digitalization, judicial reform,
and a national anti-corruption crackdown, which included the arrest of several civil servants in
the Croatian Privatization Fund, the Zagreb land registry and the Zagreb taxation headquarters on
bribery charges.10
Environmental Issues:
Croatia struggles with air pollution (from metallurgical plant emissions), damage to coastal water
systems (from industrial and domestic waste), and deforestation. To combat these problems,
environmental management has decentralized, thus empowering local administrations to
construct environmental policies specific to their areas.11 Also, the UNDP, Global Environment
Facility, Croatian Fund for Environment Protection and Energy Efficiency, Government of
Croatia, and other organizations are giving citizens the tools to reduce their carbon footprints
mostly via an enthusiastic media campaign. This increase in “green” education and greener
consumerism may reduce individual greenhouse gases by one ton per person per year, according
to UNDP.12 And, Croatia’s track record is already impressive, with CO2 emissions rising only
1.6 metric tons per capita to 5.3 in the past twenty years.13
Demographics:
Of the 4.48 million citizens in Croatia, only 58% live in an urban setting. The official language is
Croatian, and citizens are predominantly Roman Catholic.14 Other ethnic groups in Croatia
include Serb 4.5%, other 5.9% (including Bosnian, Hungarian, Slovene, Czech, and Roma), with
many of these people using their respective languages. The life expectancy is 75.8 years, with
females outliving males with expectancies of 79.6 and 72.2 respectively.15
Acknowledgements:
Research: Denise Paarlberg, updated by Jared Martin, Research Assistants, under the
supervision & coordination of Dr. Gerard Janco, President Eurasia Center/Eurasian Business
Coalition.
10
Business Anti-Corruption Portal: Croatia Country Profile (http://www.business-anticorruption.com/country-profiles/europe-central-asia/croatia/snapshot/)
11 Encyclopedia of the Nations: Croatia - Environment
(http://www.nationsencyclopedia.com/Europe/Croatia-ENVIRONMENT.html#b)
12 United Nations Development Program “A Changing Climate in Croatia”
(http://europeandcis.undp.org/home/show/AA93973E-F203-1EE9-B2FE6954DA37EC62)
13 The World Bank - Data (http://data.worldbank.org/country/croatia)
14 BBC News: Croatia country profile (http://news.bbc.co.uk/2/hi/europe/country_profiles/1097128.stm)
15 Index Mundi: Croatia Demographics Profile 2012
(http://www.indexmundi.com/croatia/demographics_profile.html)