How the Croatian economy performed in 2024

Croatia

ZAGREB, 30 Dec (Hina) – Croatia’s GDP continued its relatively strong growth in 2024 and inflation, although still elevated, continued to slow down.

The positive economic situation was confirmed by all three leading global credit rating agencies, which placed Croatia in the A rating category.

After GDP grew by 3.1% in 2023, positive trends continued this year, mainly thanks to increased household consumption and investments.

In the first quarter of 2024, Croatia’s economy grew by 4%, followed by 3.5% growth in Q2, and 3.9% in Q3. The results for Q4, expected at the end of February 2025, remain to be seen but most analysts and domestic and international institutions agree with the government’s forecast of 3.6% GDP growth for 2024.

The European Commission predicts an identical growth rate for Croatia, as do the Croatian Banking Association (HUB) and the Croatian National Bank (HNB), while the World Bank forecasts a slightly lower growth, of 3.5%.

Croatia’s economy is thus growing significantly faster than the averages of the EU and euro area, which, according to the EC’s forecasts, are expected to achieve growth rates of 0.9% and 0.8%, respectively, in 2024.

Although growth will slow compared to this year, Croatia’s GDP is also expected to grow significantly faster than the European average in 2025, with the government projecting a growth rate of 3.2%, driven primarily by increases in personal consumption and investments.

Rising wages and employment, falling unemployment

The EC is slightly more optimistic than the government, forecasting 3.3% growth for the Croatian economy in 2025, a view shared by the HNB. The World Bank projects a slightly lower growth rate, of 3%.

This year, the share of public debt in GDP is expected to fall to 57.4%, with a consolidated general government deficit of 2.1%.

The debt share is projected to continue declining next year to 56%, while the deficit is expected to reach 2.3%. This means Croatia will meet the Maastricht criteria for both indicators in 2024 and 2025.

This year has also been marked by a strong increase in wages, driven by public sector pay reforms, which have resulted in an average wage increase of 32%.

Employment has reached record levels, peaking at nearly 1.75 million workers, while unemployment has hit a record low. The positive labour market trends are expected to continue into next year.

Inflation remains elevated

After inflation rates of 10.8% in 2022 and 8% in 2023, inflation continued to slow this year but it remains elevated. The government projects inflation rates of about 3% in 2024 and 2.7% in 2025.

Nevertheless, high food prices remain a concern, prompting many citizens to shop in neighbouring countries such as Slovenia and Italy.

Prime Minister Andrej Plenković has reiterated that some businesses are excessively raising prices, while Economy Minister Ante Šušnjar has announced a potential expansion of the list of price-capped products, currently set at 30 items.

Price caps on basic goods are only part of the government’s anti-inflation measures, which also include long-term subsidies for electricity, gas, and fuel prices, as well as financial aid for pensioners and socially vulnerable citizens.

A-level credit rating

The sixth anti-inflation package, adopted in mid-March, was worth €503 million, while the seventh package, introduced in early September, amounted to just under €248 million.

Although the latter retained electricity and gas subsidies, it also included a gradual 10% increase in their prices.

Perhaps the most significant highlight of 2024 was the elevation of Croatia’s credit rating to the A category by all three leading global rating agencies.

The first upgrade occurred on 13 September, when Standard & Poor’s raised Croatia’s long-term credit rating from ‘BBB+’ to ‘A-‘ with a positive outlook.

The agency cited positive economic indicators, fiscal consolidation, successful implementation of the National Recovery and Resilience Plan (NPOO), and political stability as key factors.

A week later, Fitch upgraded Croatia’s rating from ‘BBB+’ to ‘A-‘ with a stable outlook, highlighting the economy’s resilience to external shocks, reductions in public debt, and continued integration with the euro area core.

Finance Minister Marko Primorac stated that Croatia’s A-level credit rating positions the country favourably on the economic map for foreign investors.

Prime Minister Andrej Plenković emphasised the benefits of the “historically high” rating for citizens and businesses, particularly in terms of more favourable borrowing conditions.

He noted that Fitch’s assessment sends a strong message about Croatia’s economy and represents recognition for responsible public finance management, economic growth, wage and pension increases, reforms, excellent absorption of EU funds, integration into the eurozone, and an increase in GDP per capita to 78% of the EU average by the end of 2024.

On 8 November, Moody’s became the third agency to upgrade Croatia’s credit rating, raising it by two levels from ‘Baa2’ to ‘A3’ with a stable outlook. Moody’s cited sharp reductions in public debt and continued strengthening of Croatia’s economy through reforms, investments, and immigration-driven workforce growth.

With all three agencies aligning their ratings, the government has achieved its goal of bringing Croatia’s credit rating to the A level. Plenković noted that during his government’s terms since 2016, credit ratings across all three agencies have risen by five notches.

Since the coronavirus pandemic’s onset in 2020, Croatia has seen the largest increase in credit ratings among all countries globally.

New issues of “people’s” treasury bills and bonds

This year, the government continued issuing bonds and treasury bills accessible to citizens. Between February and December, five rounds of “people’s” treasury bills were issued, while government bonds became available for purchase in July.

Including the November 2023 treasury bill issuances and the people’s bonds issued in March 2023, citizens have invested approximately €6.5 billion in state securities, holding about 10% of the country’s public debt.