Croatia is holding its spot among Europe’s fastest-growing economies. Q2 brought another solid performance, with GDP accelerating both QoQ and YoY. Growth reached 3.4% YoY in Q2 and averaged 3.2% YoY in H1 2025, in real terms. After a 2.9% rise in Q1, momentum picked up further, marking the 18th consecutive quarter of uninterrupted expansion.
The Croatian Bureau of Statistics published its first release of Q2 GDP data last week. As expected, the results were positive: real GDP increased 3.4% YoY, following Q1’s 2.9% growth. Seasonally adjusted GDP rose by 1.2% QoQ and by 3.2% YoY compared to Q2 2024. While Q2 looks strong, it is useful to focus on H1 because of calendar effects; Easter fell in Q1 last year (March 31), but in Q2 this year (April 20). This shifted household spending between quarters, and combined with the retail boycott at the start of the year, it likely inflated Q2 consumption growth.
With that in mind, household consumption rose 4.0% YoY in Q2, but in H1, growth was “only” 2.9% YoY. Personal consumption contributed EUR 19.6bn to GDP in H1. This reflects stronger turnover in retail trade and hospitality, supported by earlier signals: real retail sales grew on both a quarterly and annual basis, net wages rose by an average of 6.7% YoY in H1, and tourism recorded over 5% more overnight stays in Q2 (4.3% in H1). Rising real wages and aggregate payroll remain the foundation of consumption growth, with personal consumption projected to expand by +3.0% YoY in 2025 and +2.7% YoY in 2026.
Real GDP growth rate on a quarterly basis (Q1 2020-Q2 2025, YoY)
Source: CBS, InterCapital Research
General government consumption grew 2.4% YoY in Q2, slowing after +5.8% in Q1. For H1, growth averaged around 4% YoY. General government consumption contributed EUR 7.8bn to GDP. Pressures on the labor market are somewhat contained by structural changes: in the first five months of 2025, around 100k foreign workers received permits, while about 33k retirees also work part-time, helping ease public sector wage and employment strain.
Gross fixed capital formation maintained its positive trend: +5.2% YoY in Q2 and +4.9% YoY in H1. Investments in fixed capital contributed EUR 8.7bn to GDP. Public investment continues to underpin growth, the government plans around EUR 6bn in rail infrastructure projects by 2030 (about EUR 1bn annually), while large private projects include a EUR 380m cargo terminal in Rijeka and the LNG terminal scale-up in Omišalj worth EUR 40m.
Exports and imports both grew in H1, but imports outpaced exports. Total exports increased 3.4% YoY (goods +7.5%, services −0.8%), contributing EUR 15.2bn to GDP. Imports grew 5.9% YoY (goods +4.5%, services +14%), contributing EUR 20.3bn to GDP. Merchandise trade continues to drive a negative balance in 2024, with the trade deficit reaching EUR 18.8bn (22% of GDP), but this was mostly covered by services exports, particularly tourism. The current account deficit stood at −1.2% of GDP, with expectations that falling energy prices in the coming years could help narrow the gap.
Croatia’s economy continues to show resilience, with growth momentum still intact despite external headwinds. Solid domestic demand, rising investment, and strong industrial production underpin expansion, even as imports outpace exports and the trade deficit remains wide. Calendar effects, migrant labor inflows, and robust wage growth shaped the H1 dynamics, while large-scale public and private projects will continue to support investment in the years ahead. With our expectation of nominal GDP growth around +6.0% YoY in 2025 (3.0% real growth + 3.0% GDP deflator) and a fiscal deficit of about –2.5% of GDP, fiscal consolidation remains on track. This also means that public debt should decline to 57.4% of GDP in 2025 and further to 55.0% in 2026. Risks remain on the external side, from trade imbalances to energy prices, but for now, Croatia stays firmly among Europe’s faster-growing economies.