Guest Workers Send Us Billions of Euros – Is That Really the Case?

The money that our emigrants send back home has been discussed for years as being very significant for the domestic economy, although statistical data does not provide the most accurate picture. The share of remittances in GDP has persistently increased over the years, and in 2023, total remittances from abroad accounted for 7.34 percent of GDP, making Croatia convincingly the first in the European Union. The latest available data from the Croatian National Bank (HNB) reveals that the amount of personal remittances reached 6.2 billion euros last year. Compared to the previous year, this represents an increase of 10.8 percent or 612 million euros.

Although remittances are generally perceived as money that our citizens working abroad set aside from their salaries and send to their families in Croatia, statistically, this is not entirely accurate. Namely, the largest part of this amount relates to the item ‘compensation to employees’, which includes the salaries of seafarers, as well as those who commute daily to work in neighboring countries while living in Croatia, and other temporary workers abroad. Their incomes last year amounted to 3.35 billion euros, which was 364 million or 12.1 percent higher than the previous year. Compared to 2021, they increased by as much as 55 percent, or by 1 billion and 192 million euros.

Two amounts circulate

The HNB states that the concept of ‘personal remittances’ usually encompasses all personal transfers, i.e., receipts that residents of one country receive from non-resident individuals, whether they are worker remittances or other forms of assistance, as well as compensation for temporarily employed persons abroad. Both of these data are recorded in the balance of payments. Employee compensation under the primary income item in the balance of payments includes compensation from work that Croatian citizens earn while working abroad (income) and compensation from work that foreign workers earn while working in Croatia (expense).

When commenting on the inflows of money that Croatian emigrants send to Croatia, the media usually discusses two amounts, emphasizes Viktor Viljevac, an assistant at the Department of Economic Development at the Faculty of Economics in Zagreb, for Lider.

– The first amount, the item personal transfers, was 2.87 billion euros in 2024. This amount is often added to the second amount, income from compensation to Croatian residents employed temporarily abroad, which was 3.35 billion euros in 2024. Thus, personal remittances amounted to 6.22 billion euros in 2024. In my opinion, neither of these amounts provides an accurate picture of how much money Croatian emigrants send to Croatia, which arises from the fact that the balance of payments, within which data on personal transfers and employee compensation are published, is a tool that cannot fully answer this question – Viljevac assesses.

According to his understanding, personal transfers represent receipts that Croatian residents have received from non-resident individuals, which includes both worker remittances and other types of personal transfers.

– This amount can roughly be considered an inflow of money that non-residents send to Croatia (more precisely, to Croatian residents), with the caveat that some Croatian residents temporarily reside outside the Republic of Croatia. On the other hand, compensation to Croatian residents employed temporarily abroad represents the total gross amount that Croatian residents earn from working abroad. According to the definition from the Balance of Payments Compilation Manual, these amounts also include all taxes and contributions that are paid on the salary and from the salary to the countries where Croatian residents work, and thus it is not possible for the entire amount to be sent to Croatia – says Viljevac.

Not everything comes

Moreover, Croatian residents who temporarily work and live abroad also have living expenses, which means that a good portion of that amount ends up in personal consumption in those countries. Unfortunately, the balance of payments does not answer the question of what percentage of that total gross employee compensation amount, 3.35 billion euros in 2024, these Croatian residents actually send to Croatia.

The balance of payments contains exclusively economic transactions between Croatian residents and non-residents. Since the item of employee compensation refers to Croatian residents who temporarily work abroad, the money they send to their families in Croatia is not recorded in the balance of payments because it involves transactions between Croatian residents, not transactions with non-residents.

However, their gross salaries are recorded in the balance of payments because they are paid by non-resident companies. Considering all taxes, contributions, and costs that are paid from these 3.35 billion euros in employee compensation, it is realistic to expect that the amounts sent to Croatia are less than half. The exact amount could be determined by a detailed analysis of data on cross-border transactions held by commercial banks, which is demanding and complicated – assesses this economist.

Regarding the growth of income from personal transfers in recent years, they amounted to 2.05 billion euros in 2021, and in 2024, the aforementioned 2.87 billion euros, which is an increase of 40 percent. Employee compensation during this period grew by 55 percent. A good part of this increase can be explained by the growth of nominal wages abroad, which also enabled sending larger amounts to Croatia, believes Viljevac.

– Nominal wages of Croatian emigrants have, among other things, increased due to inflation, which, as in Croatia, has allowed companies to increase revenues and raise workers’ wages. Additionally, the increase in wages has certainly been contributed to by the fact that some Croatian emigrants gradually master the language better, acquire new knowledge and skills, and integrate more into society, which translates into better-paid jobs.

Unfortunately, this growth has also been fueled by the continued emigration of Croatian citizens. Although in 2023 the migration balance was positive as 69,000 people moved to Croatia from abroad, while 39,000 moved abroad, Croatian citizens recorded a negative migration balance that year. Specifically, 25,000 Croatian citizens moved abroad, while 11,000 moved to Croatia from abroad. We do not yet have data for 2024, and in 2022, the difference was even more unfavorable – concludes Viljevac.

Money from abroad will certainly continue to come, but how much – only the families of workers abroad know.