With a jump from eighth to fifth place among 16 countries in the CEE region regarding location attractiveness for investment, Croatia is becoming increasingly appealing to foreign investors, with more than 80 percent willing to reinvest in Croatia, revealed an analysis of this year’s economic research by the German-Croatian Chamber of Industry and Commerce (AHK) among managers and entrepreneurs from 1620 companies across 16 Central and Eastern European countries.
For comparison, neighboring Slovenia took first place in the investment location attractiveness ranking, while Estonia held that position in 2021. Ahead of Croatia in this parameter are Slovenia, Poland, the Czech Republic, and Estonia. The confirmation that investors are coming and inquiring about the investment climate in Croatia was provided by Stefanie Ziska, director of AHK, during the presentation of the research results.
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The situation is bad, but still better than before
Croatian entrepreneurs from 141 companies surveyed in the research rate the business situation in the country positively despite challenges, with the most positive aspects being Croatia’s entry into the Eurozone and Schengen. However, as explained by Marjan Vučak, president of the German-Croatian Chamber and CEO of Meggle Croatia, more than one-fifth of respondents consider the economic situation in Croatia to be poor, although this is still an improvement compared to last year.
When it comes to the perception of the economic situation, countries in Central and Eastern Europe rate the economic state of their own countries almost identically to the participants in the research in Croatia. Regarding business prospects for 2023, 55 percent of respondents are pessimistic and believe the situation will remain unchanged, while 23 percent optimistically believe the situation will improve. The reasons for such results are the economic conditions caused by the war in Ukraine, high inflation, and the consequences of the pandemic. Nevertheless, the majority of respondents consider the current situation in their sector to be satisfactory and good, despite the uncertain economic situation.
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Digitalization Against Labor Shortages
Vučak also highlighted that for the first time in the research, a very high percentage of entrepreneurs in Croatia identified the lack of good, educated labor as a challenge. The majority of entrepreneurs are trying to solve the labor shortage problem by educating employees, as well as through automation and digitalization. Additionally, one-fifth of surveyed employees see importing labor from abroad as a solution.
Besides labor, all entrepreneurs in Eastern and Central Europe are troubled by rising energy and raw material costs. However, the risks of rising energy and raw material prices, as well as disruptions in supply chains, are global issues faced by all countries in all regions. Therefore, Schalk Opperman, a member of the AHK Board and CEO of Merck, believes this will not affect the competitiveness of companies.
Interestingly, half of the respondents indicate that the number of employees in their company will increase, while five percent estimate that the number of employees will decrease. Furthermore, the majority of respondents believe that salaries will rise by 10 to 20 percent in 2023.
Insufficient Fight Against Corruption
Daniel Matić, a member of the AHK Board and CEO of Allianz Croatia, emphasized that countries investing in green energy will undoubtedly be more successful in the future than those that do not focus on it.
Positive aspects of doing business in Croatia include membership in the European Union, employee qualifications, adequacy of higher education, payment discipline, infrastructure, productivity, and employee commitment to better work results. Insufficient efforts against corruption are highlighted as the biggest drawback of doing business in Croatia. Entrepreneurs also cite tax burdens, the tax system, public administration, and the lack of transparency in public procurement as shortcomings.
According to a total of 21 aspects of doing business, Croatia has an average rating of 3.16 out of 5, which, as concluded by the participants of the press conference, is a good result compared to other countries in Eastern and Central Europe.
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