About the ILO in Croatia

Can a tourism-dependent economy rebound after Covid-19?

The three decades since Croatia’s independence in 1991 were turbulent. The country experienced a dramatic 30 per cent drop of GDP because of the war in the 1990ies. GDP only reached its pre-war level more than 10 years later in 2003. However, the unemployment rate remained high and labour force participation was low.

Croatia again was hit by an economic contraction because of the Great Recession. The economic crisis led to a 13% decline of GDP (2009-14) which was the second largest contraction in the EU after Greece. The unemployment rate doubled to 18% in 2014 and the youth unemployment rate increased to a record high of almost 50% (2013). EU membership supported the recovery (2015-19) which was robust and broad-based. However, Croatia is only slowly catching up with the rest of EU. The country’s GDP per capita stands at 65% (2019) of the EU average – only 5 percentage points higher than 10 years ago.
The Covid-19 pandemic hit the tourism-dependent economy particularly hard. Croatia faced a strong recession in 2020 with a decline of GDP of 8 % (EU27: 6%). The European Commission forecasts a GDP growth rate of 5% for 2021, but recovery remains highly contingent on the lifting of travel restrictions and the pace of vaccination campaigns both in Croatia and in visitors’ countries of origin.

ILO calculations show that 5 per cent of all working hours were lost in 2020 due to lockdowns as compared to 2019 (EU27: 8 percent). The amount of working hours lost in Croatia corresponds to an equivalent of 89,000 full-time jobs. The loss in working hours does not automatically lead to the same reduction of employment as working-hour losses include various components: shorter hours, being employed but not working, unemployment, and inactivity. Relatively strong fiscal measures of the Government (estimated at 8 per cent of GDP in 2020) including wage subsidies and access to credit helped to mitigate the labour market impact. These interventions explain why the employment rate remained stable in 2020 (67 per cent) when compared to previous years.

A returning labour market challenge during the current recovery from the pandemic will be the shrinking population caused by low birth rates and continued emigration. Labour shortages are particularly pronounced in the construction and service sectors.

The ILO in Croatia

Croatia is a member state of the ILO since 1992. 

The ILO has assisted Croatia in its economic and labour market transformation and in its accession to the EU in 2013. Main areas of work included social dialogue, collective bargaining, labour law, social protection, employment policies, fair migration, and local economic development. Since then the cooperation focuses on specific technical requests from Croatia such as transition from the informal to the formal economy or compliance with International Labour Standards.

Text last updated 8/21.