Privatization and the drive toward a market economy
had barely begun under the new Croatian Government when war broke out
in 1991. As a result of the war, the economic infrastructure sustained
massive damage, particularly the revenue-rich tourism industry. From
1989 to 1993, GDP fell 40.5%. With the end of the war in 1995, tourism
and Croatia's economy recovered moderately. However, corruption, cronyism,
and a general lack of transparency stymied meaningful economic reform,
as well as much-needed foreign investment.
Croatia's economy turned the corner in 2000 as
tourism rebounded. The economy expanded in 2002, stimulated by a credit
boom led by newly privatized and foreign-capitalized banks, some capital
investment, most importantly road construction, further growth in tourism,
and gains by small and medium-sized private enterprises.
Croatia has a high-income market economy. International
Monetary Fund data shows that Croatian nominal GDP stood at $69.357
billion, or $15,633 per capita; at the same time in 2008 purchasing
power parity GDP was $82.407 billion or $18,575 per capita.
According to Eurostat data, Croatian PPS GDP
per capita stood at 63.2 per cent of the EU average in 2008. Real GDP
growth in 2007 was 6.0 per cent. and at the same time average gross
salary of a Croatian worker during the first nine months of 2008 was
7,161 kuna (US$ 1,530) per month In 2007, the International Labour Organization-defined
unemployment rate stood at 9.1 per cent, after falling steadily from
14.7 percent in 2002. The registered unemployment rate is higher,
though, standing at 13.7 percent in December 2008.
In 2009, economic output was dominated by the
service sector which accounted for 73,6% percent of GDP, followed by
the industrial sector with 20,5% and agriculture accounting for 5,9%
of GDP. According to 2004 data, 2.7 percent of the workforce were employed
in agriculture, 32.8 percent by industry and 64.5 in services.
The industrial sector is dominated by shipbuilding,
food processing, pharmaceuticals, information technology, biochemical
and timber industry. Tourism is a notable source of income during the
summers, with over 11 million foreign tourists in 2008 generating a
revenue of ˆ8 billion. Croatia is ranked as the 18th most popular
tourist destination in the world. In 2008 Croatia exported goods to
the value of $14.4 billion (FOB) ($26.4 billion including service exports).
The Croatian state still controls a significant
part of the economy, with government expenditure accounting for as much
as 40% of GDP. Some large, state-owned industries, such as the country's
shipyards, continue to rely on government subsidies but with EU membership
looming, Croatia is forced to restructure debt ridden shipyards as it
is a prerequisites for Croatia before it joins the EU. Subsidies for
loos making industries also reduce needed investments in to education
and technology needed to ensure the economy's long-term competitiveness.
Of particular concern is the backlogged judiciary
system, combined with inefficient public administration, especially
issues of land ownership and corruption. Another main problem includes
the large and growing national debt which has reached over 34 billion
euro or 89.1 per cent of the nations gross domestic product. Because
of these problems, studies show that the population of Croatia generally
has negative expectations of the country's economic future.
Croatia has so far weathered the global financial
crisis reasonably well, but faces significant challenges in 2010 largely
due to Croatia's external imbalances and high foreign debt, which in
longer term presents problems for Croatian financial sector due to higher
cost of borrowing to cover current account deficit.
The country has been preparing for membership
in the European Union, its most important trading partner. In February
2005, the Stabilisation and Association Agreement with the EU officially
came into force and by the end of 2009 Croatia has closed 17 EU accessions
chapters, with remaining 16 to be completed by the end of first half
of 2010. Croatia is expected to join the EU sometimes in 2011 or January
first 2012 together with Iceland.