Croatia's GDP continued its relatively strong growth in 2024 and inflation, while still high, slowed further. The positive economic situation was confirmed by all three leading global rating agencies, which placed Croatia in the A rating category.

After GDP grew by 3.1% in 2023, the positive trend continued this year, mainly thanks to increased household consumption and investments.

In the first quarter of 2024, the Croatian economy grew by 4%, followed by growth of 3.5% in Q2 and 3.9% in Q3. The results for Q4, which are expected at the end of February 2025, remain to be seen, but most analysts and domestic and foreign institutions agree with the government’s forecast of 3.6% GDP growth for 2024.

Government expects a growth rate of 3.2%

The European Commission predicts an identical growth rate for Croatia, as do the Croatian Banking Association (HUB) and the Croatian National Bank (HNB), while the World Bank forecasts a slightly lower growth rate of 3.5%.

This means that the Croatian economy is growing significantly faster than the average for the EU and the eurozone, which are expected to achieve growth rates of 0.9% and 0.8% respectively in 2024 according to the European Commission’s forecasts.

Although growth will slow compared to this year, Croatia’s GDP is also expected to grow significantly faster than the European average in 2025. The government is forecasting a growth rate of 3.2%, which is primarily due to the increase in private consumption and investments.

Rising wages and employment, falling unemployment

The European Commission is somewhat more optimistic than the government and forecasts growth of 3.3% for the Croatian economy in 2025, a view shared by the HNB. The World Bank expects a slightly lower growth rate of 3%.

This year, the share of public debt in GDP is expected to fall to 57.4%, with a consolidated general government deficit of 2.1%. Next year, the debt ratio is expected to fall further to 56%, while the deficit is expected to reach 2.3%. This means that Croatia will fulfil the Maastricht criteria for both indicators in 2024 and 2025.

This year was also characterised by a strong increase in wages, driven by wage reforms in the public sector, which led to an average wage increase of 32%. Employment has reached a record high of almost 1.75 million workers, while unemployment has reached a record low. The positive trends on the labour market are expected to continue next year.

Inflation remains high

After inflation rates of 10.8% in 2022 and 8% in 2023, inflation has slowed further this year but remains elevated. The government expects inflation rates of around 3% in 2024 and 2.7% in 2025.

Nevertheless, high food prices remain a cause for concern and are prompting many citizens to shop in neighbouring countries such as Slovenia and Italy. Prime Minister Andrej Plenkovic has reiterated that some companies are raising prices excessively, while Economy Minister Ante Susnjar has announced a possible expansion of the list of price-restricted products, which is currently set at 30 items.

The price caps on everyday goods are just one part of the government’s measures to combat inflation, which also include long-term subsidies for electricity, gas and fuel prices as well as financial aid for pensioners and socially vulnerable citizens.

Credit rating at A level

The sixth anti-inflation package, which was adopted in mid-March, totalled 503 million euros, while the seventh package, which was introduced at the beginning of September, amounted to just under 248 million euros. Although the latter provided for the continuation of subsidies for electricity and gas, it also included a gradual price increase of 10.

Perhaps the most important highlight of 2024 was the upgrade of Croatia’s credit rating to category A by all three leading global rating agencies. The first upgrade took place on 13 September, when Standard & Poor’s raised Croatia’s long-term credit rating from ‘BBB+’ to ‘A-‘ with a positive outlook. The agency cited positive economic indicators, fiscal consolidation, the successful implementation of the National Recovery and Resilience Plan (NPOO) and political stability as decisive factors.

A week later, Fitch upgraded Croatia’s rating from ‘BBB+’ to ‘A-‘ with a stable outlook, emphasising the economy’s resilience to external shocks, the reduction of public debt and continued integration into the eurozone core.

Finance Minister Marko Primorac explained that Croatia’s A credit rating puts the country in a favourable position on the economic map for foreign investors.

A strong message about Croatia’s economy

Prime Minister Andrej Plenkovic emphasised the benefits of the “historically high” rating for citizens and businesses, particularly in terms of more favourable credit conditions.

He noted that Fitch’s rating sends a strong message about the Croatian economy and is a recognition of responsible management of public finances, economic growth, wage and pension increases, reforms, excellent absorption of EU funds, integration into the eurozone and the increase in GDP per capita to 78% of the EU average by the end of 2024.

On 8 November, Moody’s became the third agency to upgrade Croatia’s credit rating by two notches from ‘Baa2’ to ‘A3’ with a stable outlook. Moody’s justified this with the sharp decline in public debt and the continued strengthening of the Croatian economy through reforms, investments and immigration-related labour force growth.

By harmonising the ratings of all three agencies, the government has achieved its goal of raising Croatia’s credit rating to the A level. Plenkovic noted that during his government’s term in office, the credit rating of all three agencies has risen by five notches since 2016. Since the outbreak of the coronavirus pandemic in 2020, Croatia has seen the largest increase in creditworthiness of any country in the world.

New issues of “people’s” treasury bills and bonds

This year, the government has continued to issue bonds and treasury bills for citizens. Five rounds of “people’s” treasury bills were issued between February and December, while government bonds have been available for purchase since July.

Including the treasury bills issued in November 2023 and the People’s Bonds issued in March 2023, citizens have invested around 6.5 billion euros in government securities and thus hold around 10% of the country’s public debt.