2015-2016, government chaos
From 2011, the various governments adopted an EU pre-accession strategy. They implemented structural reforms financed by European funds (10.7 billion euros). The main sectors concerned were transport infrastructure, energy efficiency, SME competitiveness and ecological transition.
At the start of Kolinda Grabar-Kitarović's (HDZ) term of office in early 2015, Croatian politics became divided against the backdrop of a major migration crisis. The shift to the far right brought back familiar rhetoric (traditional and patriotic values, anti-abortion laws, identitarian withdrawal). Six months after the formation of this thirteenth radical government, with an ultracatholic Prime Minister (Tihomir Orešković) and a revisionist Minister of Culture (Zlatko Hasanbegović), social discontent is growing. A motion of no-confidence denounced the drift of this hard right, which proclaimed education reform or control of the media, while fuelling suspicions of conflicts of interest around Tomislav Karamarko, the Deputy Prime Minister. With the ruling MPs and the Social Democratic Party (SDP) unable to reach an agreement, Parliament was dissolved on June 20, 2016. In the early parliamentary elections (September 11, 2016), the HDZ managed to hold on to power, thanks in particular to the support of the conservative Most party, which is close to the Catholic Church. In the second round of the presidential election (2019-2020), Zoran Milanović, president of the SDP and prime minister between 2011 and 2016, defeated the outgoing president.
Political stability restored
Andrej Plenković has been appointed Prime Minister of the new coalition. This former diplomat and MEP will bring a degree of stability. He is committed to maintaining a centrist, center-left (SDP-HNS-HSU) course of "normal Croatia" and pro-Europeanism, while wishing to turn his back on the populist, nationalist wing of his predecessor. Seven new ministers, notably in Education and Construction, follow his liberal program, which remains focused on restructuring the administration and public enterprises. Some will be privatized. In 2017, the government is on all fronts: tax reform, state downsizing, review of civil servants' benefits, pension and hospital reforms, demographic crisis, abortion rights.
Tourism, a real economic boon
By focusing on fiscal consolidation and monetary stability, the country was able to join the European Exchange Rate Mechanism (ERM II) in 2020. But the global health crisis linked to Covid-19 and the two earthquakes in the north of the country (March and December 2020) accentuated the recession (-8%), widening the current account deficit. With the closure of the country's borders, the Croatian economy's dependence on the tourism sector (20-25% of GDP) was cruelly felt. Relatively unaffected by the first wave of the virus, Croatia has experienced a second and third wave of more severe outbreaks, with a total of 1,265,075 registered cases and 17,652 deaths. By the end of 2021, all travel restrictions will be lifted, and the Ministries of Tourism and Health will jointly create a safety label (Safe Stay in Croatia). This permanent communication, for industry professionals who apply health recommendations, reassures travelers. In November 2021, Emmanuel Macron visited Zagreb to sign a Franco-Croatian partnership with his counterpart Zoran Milanović, with the aim of moving towards greater economic, scientific and cultural cooperation. This was the first official visit by a French president to Croatia since the country's independence.
While the year 2022 did not fully offset the impact of the pandemic on the economy, the upturn in tourism has raised hopes of a return to normal. But Russia's invasion of Ukraine has caused growth forecasts to be revised downwards. From the start of the war (February 2022), Croatia adopted the EU's principle of solidarity with Ukraine, unlike its neighbor, pro-Russian Serbia. Mitigating the impact of the war in Ukraine on the agri-food sector is the Croatian government's main concern. A number of emergency compensatory measures have been adopted to guarantee energy security and food supplies to the market.
At the end of 2023, with a GDP of around 69.46 billion euros, slower growth forecasts and persistent inflation, Croatia remains, after neighboring Slovenia, the most advanced economy in Southeast Europe. The rebound in domestic demand and, above all, the surge in tourism are boosting the economy. A veritable manna of foreign currency and foreign investment, capital is concentrated on the Adriatic coast, the archipelagos, the capital and the historic cities.
Changeover to the euro, Schengen area: reasons for hope
This mono-industry presents other risks. Its environmental impact is compounded by low overall industrial productivity (wood, textiles, electrical transformers, turbines, car parts, ships, pharmaceuticals, agri-food). As imports increase, agriculture and fishing depend on the European market. To undertake the reforms needed for sustainable economic development, particularly in energy and transport, Croatian public investment continues to benefit from European structural funds. With €6 billion in stimulus funds, by 2023 Croatia will still be the largest per capita recipient of Community funds.
The unanimous agreement of European interior ministers on Croatia's entry into the Schengen area has eliminated vehicle queues at the Hungarian and Slovenian borders. Free movement across this vast EU territory should also benefit tourism. In return, Croatia must ensure rigorous control of Europe's external borders, where migratory pressure remains high (Western Balkan route). It must also commit to greater police cooperation in the fight against organized crime and terrorism.
Full membership of the euro zone brings with it a major currency change, which is expected to bring economic and financial benefits to the country, but it also brings with it the risk of inflationary pressures. Price rises were immediately felt as soon as the currency was introduced (January 2023). Shopkeepers, telecoms operators, banks, the hotel and catering industries and all tourist services in general took advantage of the situation to boost their profits, a fact that is making many Croatians nostalgic. As a reminder, the kuna, the former local currency, was abolished and reintroduced in 1994 to guarantee the country's monetary autonomy, following its declaration of independence in 1991.
Youth unemployment still a cause for concern
The unemployment rate, which was close to 9% at the height of the pandemic, has fallen to 6.8% in 2023. It affects over 20% of young people under the age of 25. As a result, as the population ages, young Croatians, with or without qualifications, are emigrating en masse, particularly to Europe. Most of those who remain in the country wish to work or retrain in the tertiary sector, in tourism services, while the gross monthly income per inhabitant is €1,162.39, with major disparities between regions. According to the Executive's forecasts, a better orientation of employment, more equitable tourism benefits and a probable reduction in income tax should support household consumption and restore confidence in the future.
