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 1990s. 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 64% (2020) of the EU average – only 3 percentage points higher than 10 years ago – and recently declined, partly because the economic downturn was more severe than in most of the EU.
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%) but benefitted from a strong recovery that generated growth of over 10%. The outlook for 2022 is also positive, with expected growth of nearly 5%, driven by the continued rebound in tourism, but also recovery spending from the EU Recovery and Resilience Facility and reconstruction spending following an earthquake in 2020.
ILO calculations show that 6 per cent of all working hours were lost in 2020 due to lockdowns as compared to 2019 (EU27: 7.4 per cent ). The amount of working hours lost in Croatia corresponds to an equivalent of 97,200 full-time jobs. In 2021 working hours fully recovered and strong growth is expected in 2022. 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, and reconstruction spending and the return of tourists boosted growth in 2021. 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. Nevertheless, labour force participation remains relatively low at 52% and the rate of youth neither in employment, education or training has slightly increased during the pandemic to over 12%.
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 edited on 03/22