Explosive Growth of Public Procurement, Reached 20 Percent of GDP

Alongside tourism, another highly lucrative segment has reached twenty percent of GDP. No, it is not about industrial production. Nor about IT. Nor about any other economic sector. The record amount, which equals even one-fifth of Croatia’s GDP, has been achieved by public procurement, and with the growth of this share, the economy’s dependence on the state has further increased.

Just ten years ago, public procurement accounted for about 12 percent of Croatia’s GDP, which is in line with the average of OECD member countries and two percentage points lower than the European Union average. However, since 2016, this share has been steadily increasing. By 2019, it reached 16.5 percent, and the year marked by the COVID pandemic, 2020, brought a rapid increase in public procurement to nearly 19 percent of GDP.

Much of this can be attributed to a significant increase in contracts financed by EU funds, which amounted to 2.8 billion euros last year, but even if these were excluded from the calculation, the share of public procurement in GDP in 2022 would have been nearly 15 percent.

– The value of public procurement has historically ranged from 12-15 percent of GDP value, both in Croatia and in the EU. In Croatia, this meant that the values of public procurement were around 40 billion kuna in 2017, over 54 billion in 2019, and the year 2022 brought a significant jump to over 75 billion kuna – presented the figures Ivan Serdarušić, a board member and director for EU funds and public procurement at PJR consulting.

The significance of European funds in public procurement is evident from the largest contracts/framework agreements in recent years. In 2022, among the 10 largest, half were financed by the EU, as was the case in 2020, while in 2019 there were six such contracts. Among them is, for example, the execution of reconstruction and construction works of the second track on the section Križevci – Koprivnica, worth 2.4 billion kuna, and the contract for works on the construction of the second track on the section Hrvatski Leskovac – Karlovac worth 1.7 billion kuna.

In which years the most business opportunities are expected in public tenders, how long this period of increased public procurement, investments, and non-repayable EU funds will last, and why the inflow from the EU could decrease in the long term, consequently returning public procurement to some standard frameworks, read in the new printed and digital edition of Lider.