Results of the Croatian IT Sector in 2024: Is the Worst Behind Us?

November 21, 2024

In the first three quarters of this year, IT companies in Croatia recorded a revenue growth of 12 percent, along with a slight recovery in exports which grew by 11 percent, according to an analysis of the Croatian IT sector for the first nine months of this year presented yesterday at the meeting of the Association of Croatian Software Exporters CISEx by Tajana Barančić, Chairwoman of the Supervisory Board of CISEx. This is a positive development, noted Barančić, as by the end of May 2024, compared to the same period in 2023, revenue growth was 6 percent and export growth was 3 percent, which is not unusual as the first and second quarters of 2023 were very good, as a result of project spillover from the record strong year of 2022.

The highest growth is seen in development centers of foreign companies

The analyzed sample included Croatian IT companies that account for 20 percent of revenue and 27 percent of exports and employ 22 percent of employees in the J62 sector according to the National Classification of Activities.

By the end of May this year, 38 percent of companies in the sample experienced a revenue decline, and 39 percent experienced a decline in exports compared to the same period in 2023. In the first nine months of 2024, 22 percent of companies recorded a revenue decline, while 27 percent of companies in the sample reported a decline in exports, and the percentages of decline for these companies are no longer dramatic, which Barančić assesses as positive.

– The highest average growth continues to be seen in the development centers of foreign companies, where significant growth is expected next year, as well as in companies with established products – said Barančić.

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The average salary in the sector for August was €1822, which is a growth of 5.9 percent compared to August 2023, according to data from the Croatian Bureau of Statistics. However, at the same time, the average salary at the national level grew by 15 percent in the period from January to August 2024 compared to the same period last year. The number of employees in the mentioned sample grew by three percent in September compared to September last year, and the same according to DZS data. So far in 2024, the number of employees has not increased, and currently, the IT sector in Croatia counts just over 35,000 employees.

– In the companies I spoke with, there is moderate optimism for 2025 with a dose of caution. No one expects the record growth rates from 2021 and 2022 to be repeated, but positive changes are visible. The worst is, we hope, behind us in this wave. By the end of the year, I expect an increase in the number of employees in the sector, primarily due to the abolition of the incentive for young people under 30 so many will look to employ their students before the end of the year to retain that incentive for the next five years – emphasized Barančić, reminding entrepreneurs who plan to hire now and in the next three years to apply for the tax incentive under the Investment Promotion Act this year, as things will get a bit complicated next year.

– You still have time to reduce the corporate income tax rate by 50 percent already for 2024 – added Barančić.

A year similar to the last?

Regarding the business of IT companies in the sample until the end of this year, Barančić believes that the growth rate for the entire year will be at least the same as last year, that is, 10 percent, and personally hopes it will be somewhat higher.

– Data from the sample can always deviate from the real state at the level of the entire sector in terms of growth percentage, but they tend to align in terms of trend, which currently looks quite good. Last year, the last quarter was quite strong, so it remains to be seen whether the fourth quarter of 2024 will be significantly stronger than last year’s, which will depend on the overall result for the year – concluded Barančić, adding that expectations in the IT sector may have decreased, but optimism among companies is growing.

Despite the optimism, CISEx President Ivan Bešlić is cautious about predicting future growth given the unpredictability of the market and rising costs. Additionally, at yesterday’s meeting, he announced that the Association will in the future include all ICT companies, not just software exporters, to strengthen Croatia’s position in the global market, enhance knowledge exchange, and open new business opportunities.

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