The Croatian economy is one of the strongest in Southeast Europe, and in terms of its GDP (51.5 billion euros in 2018) is even stronger that the economies of some members of the European Union. After the collapse of the socialist system, it underwent transition to an open market economy, which especially related to industrial production.
During the Austro-Hungarian Empire, the economy of the area of Croatia was mainly agricultural, although that period was marked by the beginning of the industrial age. Domestic capital was limited, so Austrian and Hungarian capital dominated, and production mainly made use of natural resources (forests) and agricultural products. With the simultaneous development of transport, primarily the railways, the development of the first significant industrial centres became possible (Rijeka, Zagreb, Osijek, Karlovac and Sisak). The conditions for the development of industry became more favourable after Croatia became part of the state of Yugoslavia, within which Croatia, alongside Slovenia, was the most developed region, with a wider market, protected by customs duties.
After the Second World War, under the socialist economy, there was rapid industrialisation and the development of the economically backward, previously agricultural areas. The Yugoslav self-management socialist system was specific, different and more dynamic than the centralised, planned economies of the other Eastern European states. Property, which became state-owned through nationalisation, was transferred into social ownership according to that model. The main management body in enterprises was the workers’ council, through which the workers decided, at least formally, on production and distribution. The highest growth rate was recorded from 1953 to 1963, when the Yugoslav, and so also the Croatian, economy was one of the most dynamic in Europe. But already in the 1970s, growth began to slow and in the 1980s the economy showed signs of crisis, including high inflation. Croatia, however, along with Slovenia, was still the most economically developed republic in Yugoslavia, especially in the areas of agriculture, industrial production, construction, the oil industry, ship building and tourism.
After the break-up of Yugoslavia, the Croatian socialist and semi-market economy was transformed into a system based on private ownership and an open market economy. This transition, however, was delayed and hindered by the aggression against Croatia and the adjustment of economic policies to the needs of defence. Economic development was burdened by a large amount of war damage, estimated in 1999 to amount to USD 37.1 billion (160% of its GDP), which also made transformation and privatisation more difficult. In addition, the transformation process by which the former public (social) ownership became state owned and then privately owned, was undertaken in agreement between the political and business elite, frequently without the actual purchase of enterprises or investment in them. The transition therefore had many negative social and economic effects: the impoverishment of the population, a rise in corruption and economic crime, and the devastation of industry.
The Croatian dinar was introduced as a temporary currency at the end of December 1991, and the Croatian kuna (HRK) was launched as the new national currency in 1994. From October 1993, Croatia began to conclude stand-by agreements with the International Monetary Fund and it received its first loan from the World Bank and the European Bank for Reconstruction and Development in 1994, which eased the economic situation, but led to the country’s growing debt. After the immediate difficulties of the war had been overcome, Croatia moved into a phase of increasing Gross Domestic Product (GDP). The highest growth rate of 5.2% was recorded in 2002, and in 2003 GDP reached its level before the war (USD 24.8 billion, 1990). The rising trend of GDP continued until 2008, when a fall and then stagnation occurred, caused primarily by the worldwide recession. The Croatian economy began to recover from recession in 2015 and, ever since then, there has again been economic growth and a constant rise in GDP.
At the end of the 1990s, the largest proportion of GDP was accounted for by the service sector (59%) followed by industry (32%) and agriculture (9%), which was similar to most developed countries. Over the last couple of years, due to the cycles of recession in the global economy, there have been negative trends in all branches of the economy, except in tourism.
In 2017, of the total number of employed, 62.8% were employed in privately owned enterprises and institutions, 33.2% in state owned companies, 3.9% in mixed companies and 0.1% in cooperatives. The largest number of workers is employed in the manufacturing industry, public administration and education, commerce, health care and tourism. In May 2019, the unemployment rate stood at 7%.