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Croatia Economy Part II
Croatia and the EU and Industrial Development
Croatia has been one of the Balkan countries most focused (and most successful) to join the EU. It was ready to implement the many reforms which were required to join the EU. Still, after the crisis, implementation of the economic reforms was very slow, and it led to a recession which lasted for solid six years with a tremendous drop in the GDP over the years. Croatia recently started to slowly rise from the downfall, and some progress in GDP was recorded in 2014, 2015, and 2016. Economic analysts are positive that this positive trend will continue.
As we said, Croatia was always EU-oriented and joined the World Trade Organisation in 2000 and NATO in 2009. The special moment when the second Balkan country made it into the Union was in 2013 when Croatia officially joined the EU. This was also very significant for the whole region where the countries exporting to Croatia had to follow new export rules and fulfill the EU standards to keep Croatia as a trading partner.
Since Croatia is a true seaside country, it is also known for shipbuilding which accounts for 10% of exports in the country. The industrial sector accounts for 27% of economic output, while agriculture declined tremendously and makes up for only 6% of the economy.
As we mentioned, Croatia relies heavily on tourism and the service sector, especially from May to October when the tourism sector is booming. Slowly, winter tourism is also developing in Croatia by offering skiing, and other winter joys. The average number of visiting tourists is 14 million. Croatia is one of the 20 most popular tourism destinations in the world, with celebrity tourists like Beyoncé and Jay-Z.
The national currency is Kuna (HRK), and it is relatively stable. It was introduced in 1994, succeeding the transitional, short-term currency the Croatian Dinar. The Kuna is relatively strong given its existence of only 20+ years, and there are no major fluctuations or drops in value. 1 USD equals 6.79582 HRK. When Croatia entered the EU, it decided to keep the HRK as the main currency along the euro.
As a member of the EU, Croatia’s economy also depends on the economies of other EU members, especially its major trade partners Germany, Italy, and Slovenia. Surprisingly, Croatia is far ahead of some other EU countries in terms of monthly salaries. Unemployment is at 17%, which is very high for EU standards.
The Future of the Country
As already mentioned, Croatia had and still has a long way to decline unemployment and to improve its economy further. Some of the main goals to enhance the economy include population growth, preserving of natural resources, sustainable production and consumption and interconnection of Croatia. In 2016, a stop to employment decline has been recorded after seven months of continuous decline. The country’s government consists of the conservative national party HDZ and the recently formed party Bridge of Independent Lists which is pro-market oriented. The government’s goals include tax cuts and pro-market policies. Also, they aim to cut public spending and reduce the public debt.
Croatia shows an enormous effort in fighting economic challenges and readjusting to the new EU reforms and legislation. In fact, Croatia is the most stable country in the region which turned to efficient methods in eradicating corruption and non-transparency. Namely, all Balkan countries have a high corruption rate which originates from a corruptive government and ”political adequacy” (referring to gaining benefits, getting jobs due to ties to politicians and their parties). Croatia made it almost out of the vicious cycle and has become a more transparent and trustworthy country.
After the war, privatization was conducted in an inefficient manner by giving an advantage to influential people and selling state-owned businesses at lower prices. The country is still fighting the consequences of such misconduct in the 1990s. Nevertheless, Croatia is closer every day to an efficient government and transparent handling of affairs.
Croatia Stock Exchange has come a long way by mastering many obstacles from suspension in the 1940s to the 1990s war and recession in 2007/2008. The country showed a serious commitment to rise from the ashes and become one of the most developed countries in the region. Croatia’s economy has recorded significant improvement and growth after the country gained independence and was free to make decisions on its own. Unfortunately, like the rest of Europe, the country was also heavily affected by the recession and has been recovering since then. We can say that Croatia has almost recovered completely by now and that the Croatian capital market has become very popular with foreign investments as the regional leader. It is a stable, safe and well-regulated market which did not remain unnoticed by investors.