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Successfully investing in Croatia

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​​published on 6 October 2025 | reading time approx. 4 minutes

 

    

How do you assess the current economic situation in Croatia?

After accelerating to 3.8 percent in 2024, Croatia's real GDP growth could decelerate on average to close to 3.0 percent in 2025 and 2026. Government consumption is set to rise, mainly due to a comprehensive public sector wage reform that substantially harmonized public salaries across institutions and sectors, but also resulted in a large one-off increase in wages. 

Investment is expected to remain strong, also supported by a further acceleration in expenditure funded by the RRF, with the absorption of funds under the 2021-27 Multiannual Financial Framework (MFF) expected to pick up towards the end of the forecast period. Exports of goods are forecast to rebound solidly, despite relatively weak demand growth in Croatia’s main trading partners’ economies. 

However, exports of services, mainly tourism, are projected to decline in real terms, largely due to persistent significant price increases of touristic services. Overall, the contribution of net exports to growth is expected to turn negative, in a context of strongly expanding domestic demand. Private consumption was supported by significant increases in real wages against the backdrop of a tight labor market. The decline in exports of goods was more than offset by the increase in exports of services and lower imports.

The labor market is expected to remain tight, with employment continuing to grow and the unemployment rate reaching new lows and inflation is projected to continue its gradual decline over the forecast horizon. 

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 offers significant investment potential. Key sectors are: car industry, ICT sector, pharmaceutical industry, food industry, metal industry, energy sector, agriculture and tourism.

Social spending and public investment are widening the deficit. After a modest deficit recorded in 2024, public finances are expected to continue deteriorating in 2025, mainly on the back of increased public investment, social spending and the implementation of a public sector salary reform.

Other factors that attract foreign investors include natural resources, well-developed financial services and high-quality telecommunications infrastructure. In addition, Croatia has attractive tax incentives, double taxation agreements with many countries and is part of the EU's single customs area. The top three export commodities continue to be: mineral fuels, oils, distillation products; electrical, electronic equipment and machinery, nuclear reactors, boilers.
  

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. 

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). Risks to this outlook include higher than expected wage increases coupled with possible supply constraints in tourism, which could add to price pressures and hurt exporters’ competitiveness. In addition, potential supply bottlenecks in construction could delay the absorption of EU funds.

       

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

Croatia strongly continues to participate in the economic, financial, humanitarian and political support to Ukraine. The countries established diplomatic relations on 18 February 1992. Transportation, utilities, agriculture, plastics, chemicals/fertilizers and metal industries are among those that are 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 digitalization and improvement of the efficiency of public administrations, and improvement of digital connectivity and infrastructure in more rural areas.​

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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.

GDP in Croatia is expected to reach 87.18 Billion USD by the end of 2025, according to Trading Economics global macro models and analysts’ expectations. In the long-term, the Croatia GDP is projected to trend around 89.62 USD Billion in 2026 and 92.31 Billion USD in 2027, according to the econometric models.

Croatia’s labor market is still robust, so that the year 2025 is expected to see continued, although subdued, employment growth, with the unemployment rate dropping below 5 percent and wage growth decelerating. Following the 3.3% increase in the number of employed persons in 2024, employment continued to grow relatively strongly at the beginning of 2025.

Employment could increase by 2.5 percent on an annual level in 2025 and slow down gradually to 1.8 percent in 2026. The number of unemployed persons is expected to decrease further over the projection horizon, although the decrease should be less pronounced than the increase in the number of employed persons, given the historically low unemployment and the unemployment rate that stands below the long-term average.

Taking into account the agreement concluded between the public sector trade union and the Government of the Republic of Croatia, the average nominal gross wage could be anticipated to rise by 8.5 percent in 2025 and the real wage by 5.5 percent. Wages are expected to continue to increase over the remainder of the projection horizon, albeit at a slower pace.

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