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Economy - overview: In an economy traditionally based on agriculture and livestock, peasants comprised more than half of the Croatian population until after World War II. Pre-1945 industrialization was slow and centered on textile mills, sawmills, brickyards, and food-processing plants. Rapid industrialization and diversification occurred after World War II. Decentralization came in 1965, allowing growth of certain sectors, like the tourist industry. Profits from Croatian industry were used to develop poorer regions in the former Yugoslavia. This, coupled with austerity programs and hyperinflation in the 1980s, led to discontent in both Croatia and Slovenia that fueled the independence movement.

Before the dissolution of Yugoslavia, the Republic of Croatia, after Slovenia, was the most prosperous and industrialized area, with a per capita output perhaps one-third above the Yugoslav average. Privatization under the new Croatian Government had barely begun when war broke out. As a result of the Croatian war of independence, the economic infrastructure sustained massive damage in the period 1991-92.

In 1999, GDP growth has slowed after a period of expansion, and Croatia is facing a recession. This is due mainly to weak consumer demand and a decrease in industrial production.

Croatia faces considerable economic problems stemming from: the legacy of longtime communist mismanagement of the economy; damage during the internecine fighting to bridges, factories, power lines, buildings, and houses; the large refugee and displaced population, both Croatian and Bosnian; and the disruption of economic ties. Inflation and unemployment are rising, and the kuna has fallen, prompting the national bank to tighten fiscal policy. A new banking law passed in December 1998 will give the central bank more control over Croatia's 53 remaining commercial banks. Croatia is dependent on international debt to finance the deficit. A recently issued EURO-denominated bond was well received, selling $300 million, which will help offset economic losses from the Kosovo crisis. Despite the successful value-added tax program, planned privatization of state controlled businesses, and a revised budget with a 7% across that board cut in spending, the government still projects a $200 million deficit for 1999. Western aid and investment, especially in the tourist and oil industries, would help restore the economy. The government has been successful in some reform efforts - partially macroeconomic stabilization policies - and it has normalized relations with its creditors.

The recession that began at the end of 1998 continued through most of 1999, and GDP growth for the year was flat. Inflation remained in check and the kuna was stable. Structural reform has been lagging, however, and problems of payment arrears and a lack of banking supervision continue. The upcoming elections may take HDZ focus off of economic policy. The party has promised two salary increases to public-sector employees before the end of the year which will increase the fiscal deficit.

The death of President TUDJMAN in December 1999, and the defeat of his ruling Coatian Democratic Union or HDZ party in parliamentary and presidential elections in January 2000 has ushered in a new government committed to economic reform but faced with the challenge of halting the economic decline.

GDP: purchasing power parity - $23.9 billion (1999 est.)

GDP - real growth rate: 0% (1999 est.)

GDP - per capita: purchasing power parity - $5,100 (1999 est.)

GDP - composition by sector:
agriculture: 10%
industry: 24%
services: 66% (1996 est.)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 4.4% (1999)

Labor force: 1.65 million (1999)

Labor force - by occupation: agriculture NA%, industry NA%, services NA%

Unemployment rate: 20% (1999 est.)

revenues: $6 billion
expenditures: $4.7 billion, including capital expenditures of $NA (1998)

Industries: chemicals and plastics, machine tools, fabricated metal, electronics, pig iron and rolled steel products, aluminium, paper, wood products, construction materials, textiles, shipbuilding, petroleum and petroleum refining, food and beverages; tourism

Industrial production growth rate: -2% (1999 est.)

Electricity - production: 9.515 billion kWh (1998)

Electricity - production by source:
fossil fuel: 42.72%
hydro: 57.28%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 12.949 billion kWh (1998)

Electricity - exports: 900 million kWh (1998)

Electricity - imports: 5 billion kWh (1998)

Agriculture - products: wheat, corn, sugar beets, sunflower seed, alfalfa, clover, olives, citrus, grapes, vegetables; livestock, dairy products

Exports: $4.5 billion (f.o.b., 1998)

Exports - commodities: textiles, chemicals, foodstuffs, fuels

Exports - partners: Italy 21%, Germany 18%, Bosnia and Herzegovina 15%, Slovenia 12% (1997)

Imports: $8.4 billion (c.i.f., 1998)

Imports - commodities: machinery, transport and electrical equipment, chemicals, fuels and lubricants, foodstuffs

Imports - partners: Germany 20%, Italy 19%, Slovenia 8%, Austria 8% (1997)

Debt - external: $8.1 billion (October 1999)

Economic aid - recipient: $NA

Currency: 1 Croatian kuna (HRK) = 100 lipas

Exchange rates: Croatian kuna per US$1 - 7.591 (January 2000), 7.112 (1999), 6.362 (1998), 6.157 (1997), 5.434 (1996), 5.230 (1995)

Fiscal year: calendar year