Economy of Croatia

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1 History
2 Stock exchanges
3 Banking
4 Economic indicators
5 See also
6 External links

[edit] History

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.

By the end of the 1990s, Croatia faced 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
the disruption of economic ties; and
mishandled privatization

Inflation and unemployment rose and the kuna fell, prompting the national bank to tighten fiscal policy. A new banking law passed in December 1998 gave 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 helped 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 projected a $200 million deficit for 1999.

Western aid and investment, especially in the tourist and oil industries, is helping 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 in 1999 was flat. Inflation remained in check and the kuna was stable. However, consumer demand was weak and industrial production decreased. Structural reform lagged and problems of payment arrears and a lack of banking supervision continued.

Due to the upcoming elections, the HDZ government promised two salary increases to public-sector employees before the end of the year which increased the fiscal deficit.

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

The Račan government carried out a large number of structural reforms and with tourism as the main factor, the country emerged from recession in 2000. Due to overall increase in stability, the economic rating of the country improved and interest rates dropped. As a result of coalition politics and resistance from the unions and the public, many reforms are still overdue, especially in the legal system.

The Changing face of Croatian Economy. Eurotower - the newest skyscraper in Zagreb and modern low floor tram produced in Croatia

Unemployment reached a peak of circa 22% in late 2002 due to many overdue bankruptcies. It has since been steadily decreasing, powered by growing industrial production and rising GDP rather than only seasonal changes (tourism). The GDP rose to the level it had in 1990 only 2003.

Most economic indicators remained positive in this period, except for the external debt. The Croatian National Bank had to take steps to curb further growth of indebtedness of local banks with foreign banks (commonly the same foreign banks that own the local ones). The dollar debt figure is quite adversely affected by the EUR/USD ratio — over a third of the increase in debt since 2002 is due to currency value changes.

Tourism is a notable source of income during the summer. With over 10 million foreign tourists a year (as of 2006), Croatia is ranked as the 18th major tourist destination in the world.^[1]

Any negative trends in the large EU economies such as Germany or Italy also have a negative impact on Croatia as they are its biggest trade partners.

The country has applied for membership in the European Union. During the accession, it is expected that agricultural policy will be the biggest stumbling block, as with other recent applicant countries.

By early 2005, the foreign debt of the Government declined in growth, and was surpassed in size by the foreign debt of the banking sector, prompting further interventions by the national bank. As of late 2005, the unemployment rate is 12.7%.^[2]

[edit] Stock exchanges

[edit] Banking

Central bank:

Croatian National Bank

Major commercial banks:

Zagrebačka banka (owned by UniCredito from Italy)
Privredna banka Zagreb (owned by Banca Intesa from Italy)
Hrvatska Poštanska Banka
Hypo-Alpe-Adria Bank (owned by Hypo-Alpe-Adria Bank from Austria)
Raiffeisen Bank Austria (owned by Raiffeisen from Austria)
Erste & Steiermärkische Bank (former Riječka banka, owned by Erste Bank from Austria)
Splitska banka (owned by Société Générale from France)

[edit] Economic indicators

From the CIA World Factbook 2006.

GDP: purchasing power parity - $59.41 billion (2006 est.)

GDP - real growth rate: 4.8% (2007 est.)

GDP - per capita: purchasing power parity - $13,200 (2006 est.)

GDP - composition by sector: agriculture: 6.8% industry: 30.9% services: 62.3% (2006 est.)

Labor force: 1.72 million (2006 est.)

Labor force - by occupation: agriculture 2.7%, industry 32.8%, services 64.5% (2004)

Unemployment rate: 16% official rate; labor force surveys indicate unemployment around 12% (2005 est.)^[3]

Population below poverty line:
national absolute: 11% (2003)
internationally comparable: 4.8% (2003 est.)

Household income or consumption by percentage share:
lowest 10%: 3.4%
highest 10%: 24.5% (2003 est.)

Distribution of family income - Gini index: 29 (2001)

Inflation rate (consumer prices): 3.3% (2005 est.)

Investment (gross fixed): 28.6% of GDP (2005 est.)

Budget:
revenues: $17.69 billion
expenditures: $19.35 billion, including capital expenditures of $NA (2005 est.)

Public debt: 56.2% of GDP (2006 est.)

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

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: 5.1% (2005 est.)

Electricity - production: 11.15 billion kWh (2003)

Electricity - production by source:
fossil fuel: 33.6%
hydro: 66%
nuclear: 0%
other: 0.4% (2001)

Electricity - consumption: 16.53 billion kWh (2004)

Electricity - exports: 600 million kWh (2004)

Electricity - imports: 5.086 billion kWh (2004)

Oil - production: 20,500 bbl/day (2005 est.)

Oil - consumption: 93,000 bbl/day (2004 est.)

Oil - proved reserves: 93.6 million barrel (14,900,000 m³) (1 January 2002)

Natural gas - production: 1.85 billion cu m (2003 est.)

Natural gas - consumption: 2.99 billion cu m (2003 est.)

Natural gas - exports: 0 cu m (2001 est.)

Natural gas - imports: 1.08 billion cu m (2001 est.)

Natural gas - proved reserves: 24.72 billion cu m (1 January 2002)

Current account balance: -$2.541 billion (2005 est.)

Exports: $10.3 billion f.o.b. (2005 est.)

Exports - commodities: transport equipment, textiles, chemicals, foodstuffs, fuels

Exports - partners: Italy 21.8%, Bosnia and Herzegovina 14.7%, Germany 10.7%, Slovenia 8.1%, Austria 7.3%, (2005)

Imports: $18.93 billion f.o.b. (2005 est.)

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

Imports - partners: Italy 15.9%, Germany 14.9%, Russia 9.1%, Slovenia 6.8%, Austria 5.8%, China 4.7%, France 4.2%, (2005)

Reserves of foreign exchange and gold: $8.8 billion (2005 est.)

Debt - external: $30.62 billion (2005 est.)

Economic aid - recipient: ODA $166.5 million (2002)

Currency: kuna (HRK)

Exchange rates: kuna per US$1 - 5.9473 (2005), 6.0358 (2004), 6.7035 (2003), 7.8687 (2002), 8.34 (2001), 8.2766 (2000), 7.112 (1999), 6.362 (1998), 6.157 (1997), 5.434 (1996), 5.230 (1995)

Fiscal year: calendar year

GDP per county: (source Croatian statistical institute for year 2003)

County			Economy
County		Number of citizens	GDP/Billion of Euros	GDP/Euros per capita
1	Zagreb	779 145	8,257	10 586
2	Istria county	205 825	1,694	8 122
3	Primorje-Gorski Kotar county	306 159	2,129	6 977
4	Lika-Senj county	53 006	0,324	6 109
5	Koprivnica-Krizevci county	125 352	0,697	5 661
6	Varazdin county	185 756	1,019	5 569
7	Dubrovnik-Neretva county	123 047	0,647	5 225
8	Medjimurje county	120 790	0,561	4 736
9	Zadar county	160 506	0,785	4 734
10	Karlovac county	142 313	0,639	4 592
11	Sisak-Moslavina county	182 615	0,832	4 549
12	Virovitica-Podravina county	93 952	0,411	4 453
13	Osijek-Baranja county	329 465	1,462	4 447
14	Split-Dalmatia county	459 818	2,094	4 446
15	Bjelovar-Bilogora county	133 198	0,577	4 414
16	Zagreb county	309 369	1,386	4 385
17	Krapina-Zagorje county	143 465	0,602	4 287
18	Pozega-Slavonia county	84 897	0,364	4 264
19	Sibenik-Knin county	114 344	0,468	4 115
20	Brod-Posavina county	177 558	0,599	3 398
21	Vukovar-Srijem county	195 771	0,688	3 397