Croatia - From tiny country recovering from recession to World Cup runner-up

Croatia is located in Southeastern Europe, on the Balkan Peninsula, with a population of about 4.3 million people. They are currently the richest country of the former Yugoslavia, with an average GDP of about $23,000 per year.

The economy was severely affected by the 1991-1995 war. Because of that event, Croatia not only witnessed a sharp decline in GDP, but also missed out on the first wave of investment to Central and Western Europe, after the fall of the Berlin Wall.

During the period 2000 - 2007, the country's economy began to grow steadily, with an average rate of 4-6%.Tourism and consumer spending contributed greatly to this growth. Inflation and the local currency, the kuna, were also kept under control during this period.

However, this process did not last long. The global financial crisis gave Croatia's economy a big shock.The country fell into recession for the next six years, with GDP growing continuously negatively from 2009 to 2014.In 2009, Croatia's GDP fell by 7.4%. And public debt as a percentage of GDP reached a record high - 84% in 2014.

By the third quarter of 2014, the country’s economy began to improve. In 2015, Croatia officially emerged from recession. To date, their recovery has entered its fourth year, although the recovery momentum is still considered fragile.

Compared to European countries, Croatia is the country with the most tourism-dependent economy, with this sector contributing nearly 20% of GDP.Deputy Prime Minister and Economy Minister Martina Dalić acknowledged last year that tourism is important for Croatia. However, she said manufacturing also contributes 17-18% of GDP. Other services, including transport and finance, also help Croatia grow.

However, the country knows that it cannot rely on just one sector for its development. Recently, it has been trying to diversify its economy. Croatian President Kolinda Grabar-Kitarovic is a strong supporter and promoter of this process.

In 2016, Croatia began adjusting its tax laws to stimulate growth based on domestic consumption and foreign investment. Earlier this year, the government also announced an economic reform plan, which will begin next year.

Croatia is the youngest member of the European Union (EU), having only joined in 2013.The benefits of access to the single market have helped Croatia pull itself out of recession. It has also helped integrate the country into the global economy, and pushed tourism growth to record levels.

But these factors have not been enough to return Croatia to pre-2009 levels. Its GDP is still 1% lower than it was before the crisis. Youth unemployment remains high at 33%. Croatia also faces uneven development and a brain drain as young workers move to other EU countries with higher incomes.

Of the 32 countries participating in this year's World Cup finals, Croatia is also among the countries with the lowest GDP, with just $54 billion last year.However, the impact of the world's biggest football tournament on this economy is not inferior to that of major countries.

According to Total Croatia News, in just under a month, especially the first 3 weeks of the World Cup, Croatians spent almost as much as in December - the busiest shopping month of the year. The World Cup helped many companies and stores in this country have a booming month of business.

Kanaan, a Croatian potato chip maker, said it had to turn down orders because it couldn’t keep up with demand. Demand for the product has increased by more than 1.5 times compared to normal days, as people often snack while watching football.

“We have had to limit large deliveries and reject 30% of orders. Since the World Cup began, the factory in Donji Miholjac has been running 24/7. We produce up to 120 tons of products per week. We have done everything that needed to be done early, but it is still not enough,” said a representative of the company.

AboveReutersKonzum, the country’s largest retail chain, also said snack sales were up 100% last week compared to the same period last year, when Croatia beat England in the semi-finals. Beer consumption also skyrocketed. Some stores sold five times as many TVs as last year.

The number of visitors to hotels, restaurants and cafes - popular places to watch football - also increased by 100% compared to normal days. In total, Croatian residents and tourists spent nearly 13 billion kuna ($2.05 billion) during the World Cup, according to the Croatian tax office.

“This is a great opportunity to promote Croatia globally. I predict that more tourists will come here. But of course, we should not focus on this alone. Croatia must use this opportunity to attract investment as well,” concluded Mladen Vedris, an economist in Croatia.

On Russian soil, Croatia played impressively and lmade a miracle when they entered the World Cup final for the first time. In the final, they lost to the French team with a score of 2-4. The generation of Luka Modric, Mandzukic, Rakitic, Perisic... although they could not bring the World Cup championship to Croatia, left beautiful images for the whole world about a team of people with a resilient fighting spirit and beautiful playing style.