Economic Outline

Economic Indicators

Croatia’s economic growth has consistently exceeded the EU average over the past four years. According to the Croatian Central Bank, GDP grew by 3.8% in 2024, driven primarily by private consumption, supported by strong real wage and employment growth, along with sustained investment. Government consumption also increased, on the back of a broad public sector wage reform that standardised salaries across institutions and sectors, leading to a significant one-off wage hike. Moreover, the tourism sector, one of the key drivers of economic growth, recorded a positive performance. GDP growth is projected to slow to 3.3% in 2025 and 2.9% in 2026 as consumption growth eases due to slower wage increases. Investment growth will continue, supported by increased absorption of EU funds under the RRF and 2021-27 MFF, albeit at a reduced pace (data EU Commission).

Fitch Ratings estimated Croatia's fiscal deficit at 2.1% of GDP in 2024, up from 0.9% in 2023, primarily due to higher costs from the abovementioned wage bill reform implemented in April 2024. This reform raised total wage costs to 12.8% of GDP, a 1.5 percentage point increase from 2023. Defence spending was estimated at 2% of GDP in 2024, with plans to raise it to 2.5% by 2027 in response to geopolitical risks. Fitch expected the deficit to remain at 2.1% in 2025, below the government's 2.3% target, reflecting past outperformance of deficit targets. A new property and short-term rental tax, effective January 2025, was expected to generate an additional 0.3% of GDP in revenue, with further increases in the following years. However, elevated external uncertainty and potential pre-election spending in May 2025 posed risks to this projection. The deficit is forecast to narrow to 1.7% in 2026. Public debt as a percentage of GDP fell to 57.4% in 2024, with debt reduction expected to continue beyond 2024, although at a slower pace, due to the normalisation of nominal GDP growth, a balanced primary budget position, and Fitch's expectations of higher defence spending. Fitch forecasts public debt/GDP to decline to 53.5% by 2029. General government interest payments are projected to average 3.6% of revenue in 2025-2026. The country’s average annual inflation slowed to 3.0% in 2024, down from 8.0% in 2023 and 10.8% in 2022. Forecasts agree on a further decrease in 2025, at around 2.8%.

According to IMF estimates, unemployment decreased to 5.6% in 2024, from 6.2% one year earlier, and is expected to remain stable at 5.5% over the forecast horizon. Labour shortages persisted despite the rising influx of workers from non-EU countries. Though the average revenue of Croatians is still below the European one (with an estimated GDP per capita PPP of USD 48,811 in 2024 according to the IMF), Croatia remains the second most developed economy of the Balkan region, after Slovenia.

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