HomeIco

Home

 InternalIco

Internal
Deutsch|English
Insights Successfully investing in Croatia

Successfully investing in Croatia

PrintMailRate-it

​​published on 7 June 2024 | reading time approx. 4 minutes

 

    

How do you assess the current economic situation in Croatia?

Croatia’s real GDP grew by 3.1 percent in 2023 as a result of increasing household and government con­sumption, higher investment activity and a positive evolution of net exports. Private consumption was supported by significant increases in real wages against the backdrop of a tight labour market. The decline in exports of goods was more than offset by the increase in exports of services and lower imports. 
​Croatia’s GDP is forecast to grow by 3.3 percent in 2024 and 2.9 percent in 2025, largely driven by strong household consumption. The labour market is expected to remain tight, with employment continuing to grow and the unemployment rate reaching new lows. Inflation is projected to continue its gradual decline over the forecast horizon. The general government debt is set to decline despite higher deficits.
  
At the same time, a pick-up in the absorption of EU funds, and easing of financing conditions should result in a moderate acceleration of investment activity. Exports of goods are expected to strengthen further as demand from the main trading partners increases. However, supply constraints during the peak tourism season and possibly emerging price competitiveness losses are expected to slightly slow down the expansion of services exports. As imports decelerate with domestic demand, the external sector’s contribution to growth is set to turn marginally positive. 

    

How would you describe the investment climate in Croatia? Which sectors offer the largest potential?

The Republic of Croatia has a large investment potential. Key sectors are: car industry, ICT sector, pharma­ceutical industry, food industry, metal industry, energy sector , agriculture and tourism.
  
Personal consumption growth is expected to accelerate in 2024 and be the main driver of growth. The growth in services exports is expected to slow down given the strong performance in recent years and the reduced price-competitiveness of the Croatian tourism sector.
   
The north-western region of the country offers the largest competitive advantages because Croatia's capital city Zagreb – the Croatian economic hub – is located in this region. Other two relevant regions include Central and Eastern Croatia as well as the Adriatic Coast. The central-eastern part offers good investment opportunities for agriculture and the coastal region mainly for tourism.
   
Other factors that attract foreign investors include natural resources, well-developed financial services and high-quality telecommunications infrastructure. Also, Croatia has attractive tax incentives, double taxation agreements with many countries and is part of the EU's single customs area.
  

What challenges do German companies face during their business ventures into Croatia?

Challenges include a judiciary plagued by case backlogs and a lack of expertise in commercial affairs, an overly complex and sometimes non-transparent bureaucracy, the country's relatively high costs, and both real and perceived issues of corruption.
  
More than half of foreign trade exchange of Croatia takes place with EU countries. Croatia’s most important foreign trade partners are Italy, Germany, Slovenia, Bosnia and Herzegovina, Hungary and Austria. Between 1993 and 2023, Croatia received foreign direct investments in the amount of 45.22 billion euros, 10.77 percent coming from Germany.
  
Key challenges for Croatia's economy include low employment and activity rates, burdensome and complex business environment, low efficiency and high fragmentation of public administration, judiciary, fragmented and ineffective social protection system and the low quality of education.
  
After a recent survey run by AHK in 2024, almost 90 percent of the members of the German- Croatian Chamber would reinvest their money in Croatia (118 companies participated in the survey).​

       

Does the war in Ukraine have effects on Croatia’s economy and investment climate?

Croatia strongly participates in the economic, financial, humanitarian and political support to Ukraine. The countries established diplomatic relations on 18 February 1992. Croatia has an embassy in Kyiv and an honorary consulate in Donetsk. Ukraine has an embassy in Zagreb and honorary consulates in Malinska and Split. 
  
Transportation, utilities, agriculture, plastics, chemicals/fertilizers and metal industries are among those hardest hit by higher crude oil prices. The supply and price of global food commodities have also been directly impacted by the war. To conclude, the spill-over effects of the war in Ukraine, including higher energy prices, negatively affect Croatia's tourist industry.​

      

Are there any local differences in the implementation of applicable laws? If so, how does this affect businesses?

Although the applicable laws and regulations are the same throughout the Republic of Croatia, there are cases where the implementation and interpretation of laws varies depending on the location and region. 
 
Therefore, the local circumstances should be examined in advance, if possible, in order to avoid any unex­pec­ted situations. If differences do exist, they will be mainly visible in the fact that the authorities will set different requirements for starting your business, even though the requirements are laid down in the laws or in the imple­menting regulations. In that regard, it is recommended to seek prior advice from experienced local specialists in areas such as law and taxes. 
 
Basically, however, it should be noted that the differences in the implementation of applicable laws are slowly becoming less significant, which is good news for potential investors. Major contributing factor for that is the digitalisation and improvement of the efficiency of public administrations, and improvement of digital connec­tivity and infrastructure in more rural areas.  

   ​ 

In your opinion, how will Croatia develop?

Access to EU funds, i.e. the so-called Recovery and Resilience Facility (RRF), and the implementation of the National Recovery and Resilience Plan (NRRP), under which Croatia can access tens of billions in grants and soft loans over the next four years, offer a great opportunity for investment in the private sector.. A stimulating investment environment will lead not only to the growth of domestic but also foreign investment.​

Insights
Internationalisierung 

Internationalisation – On to new shores

Contact

Contact Person Picture

Radu-Dragos Dobrescu

Partner, Office head

+ 385 1 4920 468

Send inquiry

How we can help

​Rödl & Partner in Croatia
Skip Ribbon Commands
Skip to main content
Deutschland Weltweit Search Menu