INVENTORY OF TEN YEARS IN THE EU Croatia Between Population Exodus and Growth of Goods Exports and Tourism

In a sea of retrospective texts about a decade of Croatia in the European Union, most have dealt with data served by official politics, which has taken the opportunity to flex its muscles before elections. On the other hand, the opposition has not seized the opportunity for a more serious analysis, but has reduced negativity to kneeling, which did not exist ten years ago.

It is undisputed that most macroeconomic indicators are positive and that we live better today than we did ten years ago. However, Croatia is not alone in the world, and other EU member states have recorded growth during this period marked by recession (which in Croatia extended to almost seven hungry years) and pandemic (which caused a record drop in GDP in two years, followed by an equally record growth), only to end with an energy crisis, the war in Ukraine, and double-digit inflation.

During this time, Croatia was primarily marked by a real exodus. We lost one in every ten inhabitants. Authorities (first the SDP, now the HDZ) assure us that this is normal due to liberalization and the opening of a large and rich EU labor market, but most countries did not have such experiences. Of the eight countries that joined the EU in 2004, Lithuania (14.7%) and Latvia (13.5%) lost the most inhabitants in the first ten years, while Estonia (-2.6%) and Hungary (-2.2%) were also in the negative, Poland and Slovakia achieved slight growth, Slovenia grew by 3.3%, and the Czech Republic by 3.9%.

On the other side of the scale is GDP growth of 50.6%. This is significantly higher than the EU average growth (38.3%), but lower than almost all transition countries (only Slovakia’s GDP grew less – 47.2%). However, of the 67 billion euros of last year’s GDP, 8.1 billion (net) came from the EU. Without this amount, Croatian GDP would be 32.7% higher.

A similar story applies to industrial production, which grew by 15.4%, which is on par with the EU average, but slower than all transition countries (Romania is at 17.3%, and all others grew by more than 20%, Poland and Lithuania by more than 60%). When you add a net wage growth of 36.9%, it becomes clear that the growth rates do not have a basis in productivity change, which grew by 25.3%.

Croatia’s exports of goods and services grew by as much as 131.3% in the previous decade (only Ireland achieved higher growth – 268.8%). When it comes to goods exports alone (excluding services, i.e., tourist revenue), Croatia increased it 2.5 times (154.8%), with only Cyprus and Slovenia achieving higher growth. Last year, Croatia reached a 36.3% share of goods exports in GDP, placing it around the middle of the EU ranking, but this is a huge improvement compared to the starting 21.4% share.

However, the openness of the EU also has reciprocity, so imports have also grown, and the coverage of imports by exports rarely exceeds 60% in previous years.

Employment Growth

In ten years, the employment rate has significantly increased – from 57.2% to 69.7% (in the population aged 20 – 64), but only four countries have lower employment (Italy, Greece, Romania, and Spain), and in 2013, only Greece and Romania were behind Croatia.

The unemployment rate is also at record low levels. Ten years ago, we were third in this category (behind Greece and Spain), and in the meantime, we have surpassed Italy, Sweden, and France. However, the decrease in the unemployment rate today is not a prestigious indicator. The May drop below one hundred thousand unemployed means that most of those remaining on the labor market are almost unemployable, and in recent months, entrepreneurs have pointed to the lack of labor as the biggest obstacle. It is little consolation that this is an even bigger minus in other EU countries.

Therefore, wages are becoming an increasingly important factor – not in solving the problem, but merely in alleviating it. The Prime Minister loves to boast about wage growth (in which the public sector leads, especially recently encouraged by higher budget revenues on the wings of inflationary VAT). In ten years, the average monthly wage of a single person without children increased by 36.9% – from 661 euros to 905 euros. However, wages in all transition countries have grown even faster (except Slovenia with 31%), so our single person was only at 41.6% of the European average last year.

The value of agricultural production has increased by 21.1% in ten years, almost three times the EU average. However, while subsidies in the EU account for 14% of agriculture, in Croatia, it is as much as 52%! An additional reason for concern is that Croatia participates in the total agricultural production of the EU with about five per mille, which is certainly too little considering the agrarian potential and climatic advantages. Adding to this the notorious lack of processing capacities, it is sad that we export raw materials, such as wheat, while importing finished products with higher added value, such as bread and pastries.

Unlike agriculture, tourism is the ‘flagship’ industry, in which we have – despite the pandemic – increased our share in the EU from 2.3% to 3.4% over the past decade. While the entire EU stagnated in terms of overnight stays (growth of 0.9%), this category in Croatia grew by 50% – from about 60 million to about 90 million overnight stays. However, when you delve a little deeper, low productivity is also revealed here, i.e., an excessive representation of the least profitable types of accommodation – dormitories and campsites, so revenues here are also too low compared to potential.

We conclude this data mosaic with higher education, specifically the decline in the number of students by 2.2%, while the EU recorded a growth of 7.5%. However, it should be noted that all transition countries have reduced the number of students in the past decade.