Looking at Croatia only as a country you would visit in summer for a vacation would be rather short-sighted. In recent years, it has become an economic machine that performs significantly better than the rest of Europe. And this is thanks to a relatively simple recipe, which even Czechia could take inspiration from.

At a time when external shocks are not exactly rare, Croatia is one of the fastest-growing economies in Europe. In the last four years, it has consistently beaten the average of EU economies by a fairly significant margin. Last year it grew by a solid 3.2 percent, roughly the same as another European growth leader, Poland.

Croatia has also become an important player in European energy security, its startup scene is producing unicorn companies, and the Zagreb stock index has seen several years of solid growth.

The path to success was long. After the 2008 crisis, Croatia went through a long recession, and real recovery only came after the Covid pandemic. The main reasons are two: joining the Schengen Area and adopting the euro on January 1, 2023.

Eliminating currency risk helped significantly. It sharply reduced transaction costs in important export sectors and especially in tourism. Croatia is still extremely dependent on tourism: travel and related services generate about one-fifth of the country’s GDP, which is the highest share in the entire EU.

Did adopting the euro cause inflation?

After January 1, 2023, and in the following summer season, media reported sharp price increases across Croatia, which euro skeptics attributed solely to the adoption of the euro.

However, analyses by the European Central Bank and the Croatian central bank show that the impact on inflation was minimal – rounding effects increased inflation by only 0.3 to 0.4 percentage points.

Price growth was mainly driven by the energy crisis and a Europe-wide inflation wave.

In 2024, three major credit rating agencies – Standard & Poor’s, Fitch, and Moody’s – moved Croatia into the prestigious “A” investment rating category. One reason is that Croatian public debt relative to GDP is falling. At the end of 2024 it stood at around 57%, about 14 percentage points lower than before the pandemic in 2019.

A thousand kilometers of new highways

A key factor behind Croatia’s strong economy is its ability to draw money from EU funds. In February, the Ministry of Regional Development stated that over 13 years of EU membership, Croatia received €20 billion more than it contributed to the EU budget. Per capita, it is the largest net recipient of EU funds.

These funds were mainly directed into energy and transport infrastructure. The most expensive example in recent years is the Pelješac Bridge, connecting a peninsula in southern Croatia to the mainland.

The 2.4 km bridge connects Croatian territory with its southern coastal exclave separated by a short stretch of Bosnia and Herzegovina. It has been in operation since 2022 and cost over half a billion euros, of which about €357 million was funded by the EU Cohesion Fund.

The EU has also massively supported the expansion of Croatia’s highway network, which has grown by about 1,000 km in the 21st century. Major highways such as the A1 (Zagreb–Split) and the Istrian Ypsilon were built even before EU membership.

Debt crisis in 2017

This rapid expansion was not without problems. In 2017, Croatian road companies were close to collapse due to debt of €5.2 billion from earlier construction, representing over 11% of GDP at the time. The World Bank had to step in.

However, the highway network turned the Adriatic coast into a destination reachable by car from Central Europe in one trip, bringing tens of billions of euros in tourism revenue over time.

First unicorn companies

Croatia is aware of its unhealthy dependence on tourism and is working on diversification toward higher value-added sectors. A strong but still relatively small tech sector has emerged.

A country with one-third the population of Czechia has already produced two unicorns:

• Infobip (software company)
• Rimac Automobili (electric sports cars and battery components)

The math app Photomath was also a unicorn candidate until it was acquired by Google in 2023 for an estimated €220–550 million.

The most promising startups today include:

• Gideon (robotics and AI in logistics)
• Project 3 Mobility (autonomous driving project linked to Rimac)

Stock market growth

The Zagreb stock exchange has also seen strong performance in recent years. Since 2023, the main index has grown in the low double digits annually. However, the market remains small and is dominated by a few large banks.

LNG terminal on Krk

After the war in Ukraine began, Croatia became an important player in European energy security thanks to a floating LNG terminal on the island of Krk, launched in 2021.

Its original capacity was 2.9 billion cubic meters per year, enough for domestic needs. After the invasion of Ukraine, Central European countries sought alternatives to Russian gas, so capacity was increased to 6.1 billion cubic meters annually.

The project was completed recently with funding from the EU REPowerEU program. Today it serves not only Croatia but also Slovenia, Hungary, and Austria.