Croatia benefited from its membership in the European Union over the last five years, evidenced by economic and fiscal indicators. However, additional effort should be made to improve the country's absorption of EU funds, and speed up structural adjustments, Croatian business associations said on Friday.

The Croatian Chamber of Economy (HGK) said that by joining the EU on July 1, 2013 Croatia had achieved one of its main foreign policy objectives and formally became part of the European single market.

The most visible effect of the country’s EU membership in the economy was the removal of administrative and non-tariff barriers, which led to lower business costs. On the other hand, the national economy now faces stronger competition from other member states, HGK said.

Over the last five years, Croatia has increased its exports by 56 percent, with exports to EU member states going up by 70 percent, HGK said, adding that other benefits which contributed to Croatia’s development are the free movement of goods, services, capital, and labour, as well as opportunities to use EU funding to boost the competitiveness of the national economy.

By joining the EU, Croatia also gained access to €10.7 billion in grants from EU’s structural and investment funds. The latest figures provided by the Ministry of Regional Development and EU Funds showed that contracts worth €4.8 billion have been concluded by May 31 this year, which amounts to 45 percent of the total funds earmarked for Croatia, with 8 percent of the total allocation already paid out to end users.

The HGK said that large infrastructure projects such as the construction of the Peljesac Bridge would certainly further increase the rate of absorption of EU funds in the financial period 2014-20.

“In the five years of EU membership businesses have shown a lot of interest in financing their projects via EU funds. However, in getting those funds the most common obstacles identified by businesses are the lack of information, and the complexity of procedures required,” HGK said.

The head of the Croatian Employers’ Association (HUP), Davor Majetic, told state news agency Hina that EU membership presented an opportunity for the development of the national economy.

“Being able to participate in a single market with over 500 million people is an excellent opportunity for the Croatian economy. When you add EU funds are to the picture, which give an additional impetus and access to inexpensive and non-repayable funds – then the benefits of EU membership are clear and unambiguous,” Majetic said.

“EU membership is primarily a tool for Croatia to achieve its strategic plans more easily and ensure a better life for its citizens. Many thought that entering the EU was a goal in itself, and that after that everything would happen on its own,” Majetic said, and added that the fact that Croatia was lagging behind its EU peers was due to “our failures, and our resistance to change and to implementing reforms”.

Economic analyst Damir Novotny said that Croatia’s economy has benefited since joining the EU, as have all other member states.

“Those benefits are evident in the main economic indicators. Public finances have been put in order, fiscal stabilisation has been achieved, and the excessive financing of public needs and public investments has stopped,” he said.

“Interest rates on all types of loans have dropped sharply, gradually approaching the lower level of interest rates in the euro zone. Croatian companies have entered the single market and supply chains in developed member states. In 2017, commodity exports surpassed 100 billion kuna (€13 billion),” he added.

The labour market has also changed, unemployment has dropped, mainly owing to the recovery of the labour markets in the neighbouring EU member states, which are “sucking in” Croatia’s workforce. Due to the full opening of the market upon accession, prices in Croatia have started to swiftly approach the lower level of consumer prices in neighbouring countries in the EU, and interest in investing in Croatia increased, notably in the tourist industry, the most profitable sector of the economy, Novotny said.

Croatia has also initiated structural adjustments, which need to be accelerated in the years ahead. The privatisation of state-owned companies should also continue, so they can attract fresh capital necessary for investing in technology, Novotny said.

Novotny compared Croatia, with about 1,300 state-owned companies, with neighbouring Slovenia, which only has about 40.

“Not one successful member state has so many state-owned companies generating GDP as Croatia,” he said, adding that Croatian state-owned companies, or companies in which political influence is significant, are highly inefficient, strategically oriented only to serve the domestic market, and do not create jobs.

“Utilising the possibilities offered by EU structural funds is another area in which the government must make more effort, notably in the 2021-27 period. It is also necessary to step up the development of institutions without which it won’t be possible to achieve the full benefits of EU accession,” Novotny said.

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