In Q4 2024, Croatian GDP growth in real terms amounted to 3.7% YoY, while for the seasonally adjusted numbers, the growth was 3.6% YoY and 1.4% QoQ. Furthermore, the annual GDP growth in 2024 is 3.8%, which is 0.5 p.p. stronger than in 2023. This means that Croatian GDP growth was among the best performers in the EU along with Denmark(+4.1%), Spain (+3.5%), and Poland (3.7%).
The latest data from the Croatian Bureau of Statistics for the Croatian GDP has been released for Q4 2024, and the numbers are positive, as expected, even more positive than the projections of the Ministry of Finance in Croatia. Despite this result, it showed a slightly slower pace than the 3.9% in Q3 2024, but still, this acknowledges 16th quarter in a row of Croatian GDP growth, with nothing holding it back in future for continuing this trend. The situation in the Eurozone isn’t this positive, where Q4 growth decelerated significantly, with seasonally-adjusted growth of 0.2% QoQ and 1.1% YoY, which shows Croatia`s pace to convergency to EU average, indeed pushing it up.
Annual GDP growth rate* (1996 – 2024)
Source: Croatian Bureau of Statistics, InterCapital Research
*Gross Domestic Product, seasonally adjusted real growth rate
With Q4 as the most recent data point, it’s crucial to analyze the new developments contributing to the continued growth of Croatia’s economy. The biggest driver of GDP growth is household spending, as usual, which saw a 6.3% YoY increase, accelerating by 0.8 p.p. QoQ. This boost is largely attributed to holiday spending and the disbursement of the 13th paycheck, enhancing consumer purchasing power. Significant growth catalysts were observed in the services sector and gross fixed capital formation, increasing by 14.9% and 9.9% YoY, respectively. These sectors benefited notably from a vibrant domestic demand. For instance, exports and imports expanded by 4.7% and 9.9%, respectively, reflecting strong internal consumption and domestic demand. Sector-specific performances showcased substantial gains, particularly in construction, with a 13.2% rise in gross value added, driven by ongoing projects and earthquake renovations. The services sector, including wholesale and retail trade, transportation, and food services, also experienced notable growth, reflecting Croatia’s robust service-based economy. Additionally, we have to mention the General government spending growth of +7.1% YoY, which represents a rise of 1.8 p.p. QoQ. EU funds play a crucial role in boosting Croatia’s economy by injecting significant capital into key sectors, thereby increasing national purchasing power and economic resilience. While this influx of EU support not only fuels growth but also enhances the overall stability of the Croatian market, it also contributes to Croatia’s higher-than-average inflation rate.
Real GDP Growth by Quarter* (2007 2024)
Source: Croatian Bureau of Statistics, InterCapital Research
*Quarterly Gross Domestic Product, seasonally adjusted real growth rate
Real wage growth has significantly impacted this economic upturn, supported by a strong labor market and seasonal employment increases during the holiday period. The construction boom, a result of several years of intensive building and government-supported renovation projects, continues to propel the economy forward. Additionally, Croatia’s reputation for high-quality services aligns with the observed data, reinforcing the sector’s role in the national economic framework. This multifaceted growth, fueled by both domestic factors and strong sectoral performance, underlines the dynamic nature of the Croatian economy as it heads into the new year.
Analysts forecast that the domestic economy will sustain its growth trend from the previous year, though at a slightly more subdued rate of approximately 2.9% relative to 2024. This growth is underpinned by strong personal consumption, supported by a robust labor market with low unemployment, gradual employment gains, and steady wage increases. However, the resurgence in demand from major trading partners in the Eurozone remains uncertain, casting a shadow over this year’s economic prospects. Additionally, the immediate risks to this outlook are primarily linked to the volatile global geopolitical landscape, with ongoing uncertainties and instabilities. As a small and open economy, Croatia is particularly vulnerable to these external shocks, which could significantly influence its economic trajectory.
