Croatia
Economic Overview
In 2004, Croatia experienced a slower economic growth than in the preceding two years. At the same time, the country made progress in reducing external imbalances, and inflation.
Real GDP growth fell from 4.3% in 2003 to 3.8% in 2004, but for the first time since 2000 net export of goods and services contributed positively to the GDP with 0.5%, thus partially compensating for the drop-off in the overall investment rate, which collapsed from 16.8% in 2003 to barely 4.4 % in 2004.
Employment grew by 1.2% in 2004 as compared to 2.5% in 2003. At the same time registered unemployment was 1.1 % lower on average in 2004 than in 2003, ending by only 0.2 % down at the end of 2004 as compared to the end of 2003. Lower unemployment was accompanied by a moderate net wage growth of 3.8 % and gross wage growth of 4.2 %.
Consumer prices rose by 2.1% on average in 2004, but the end-year inflation reached as high as 2.7 % overall. Increased oil and natural gas prices contributed mostly to inflation in 2004. Additionally, Croatia's current account deficit fell to to 4.6 % of the GDP in 2004 from 6.9 % in 2003, mainly as a result of improved merchandise trade. Merchandise exports in 2004 grew by 18.5 %, while imports grew by only 6.2 %. The most important contributors to export growth were shipbuilding, refined petroleum products, production of electrical machinery, equipment and apparatus, fur and leather products, non-ferrous metals and other metal products.
In 2004 tourism revenues retained their steady level as compared to 2003. Future growth in tourism revenues may require further investments in accomodation facilities and services.
In February 2005, Croatia started implementing the provisions of the Stabilisation and Association Agreement with the EU. The reforms carried out with a view to coming closer to EU membership improved the business environment, which is increasingly attracting foreign investors after the commencement of accession negotiations and the now concrete prospects for joining the EU within reasonable time.
In 2005, GDP real growth rate was 3.2%, with the share of the services sectors, industry, and agriculture in its composition being 60.8%, 31%, and 8.1% respectively. Insdustrial production alone rose by 4.5%. Exports amounted to USD 10.3 bln., with the main export partners being Italy, Bosnia and Herzegovina, Germany, Austria and Slovenia. Imports were estimated at USD 18.93 bln., coming chiefly from Italy, Germany, Russia, Slovenia, Austria, and France.
Public debt represented 52.1% of the GDP in 2005, while External debt was estimated at USD 29.28 bln. as of June 30th 2005.