Croatia’s GDP grew by 3.2% in 2025, placing it among the EU’s strongest performers and well ahead of the bloc’s 1.5% average. Growth accelerated into year-end, with Q4 delivering a 3.6% YoY expansion driven by investment, resilient household consumption, and increased government spending. With twenty consecutive quarters of growth, broad-based sectoral expansion across construction, manufacturing and services, and solid retail data heading into 2026, Croatia continues to outperform in an otherwise sluggish European environment. Today, we bring you a brief overview of Croatia’s economic performance in the final quarter and for the year as a whole, complemented by the latest retail trade and inflation data.
Croatia’s economy grew 3.6% YoY in real terms in the fourth quarter of 2025, accelerating from the 2.3% recorded in Q3, the weakest quarter of the year, coinciding with the peak of the tourist season when the prior year base is at its highest. On a seasonally adjusted basis, GDP expanded 3.3% on an annual basis and 1.4% on a quarterly basis, confirming that underlying momentum remained solid through the end of the year. This was the 20th consecutive quarter of growth since Q1 2021. Croatia’s seasonally adjusted quarterly growth of 1.4% in Q4 was among the strongest in the EU, trailing only Malta (2.1%) and Lithuania (1.7%), and well above the euro area average of 0.3%. On an annual basis, the euro area grew 1.4% in 2025 and the EU as a whole 1.5%. Croatian GDP grew 3.2% for the full year, placing it firmly among the top performers in the bloc. Ireland (12.3%), Malta (4.0%), and Cyprus (3.8%) rank above Croatia in the Eurostat table, but these figures should be interpreted with caution, as all three are well-known tax-friendly jurisdictions whose headline GDP can be distorted by multinational profit booking. For a more meaningful picture of living standards in these countries, indicators such as Actual Individual Consumption (AIC) are more appropriate. Stripping those three aside, Croatia alongside Poland (3.6%) stands out as one of the strongest performing economies in the EU, well ahead of Germany and Finland at just 0.2% each.
Croatia real growth GDP YoY on quarterly basis (2000Q1-2025Q4)
Source: DZS, InterCapital Research
Before unpacking the components, two concepts are worth briefly explaining. Gross Value Added (GVA) measures the value that productive activities add to the economy after subtracting input costs, essentially GDP before taxes on products are added and subsidies subtracted, consistently accounting for around 82–83% of Croatian GDP. Actual Individual Consumption (AIC) extends household consumption by adding the individually consumed portion of government spending such as healthcare and education, providing a fuller picture of real living standards. In 2025, GVA reached 57.2 billion EUR, growing 2.8% YoY in Q4, broadly in line with headline GDP.
On the production side, construction was the standout, growing 7.2% in Q4, sustained by EU-funded infrastructure and private development throughout the year. Manufacturing posted its strongest quarterly reading at 6.4%, recovering from a softer mid-year and suggesting a pickup in external demand. Information and communication rebounded to 4.2% after a weak start to the year, while financial services grew a steady 2.9%. Agriculture returned to positive territory at 1.7% following a difficult first half, and real estate dipped slightly to -0.3%, likely reflecting cooling transaction volumes amid elevated borrowing costs. The trade, transport and accommodation cluster grew 2.1%, a solid result given the high post-pandemic base.
Europe GDP YoY growth in 2025 (%)
Source: Eurostat, InterCapital Research
On the demand side, gross fixed capital formation grew 7.0% YoY in Q4, contributing 1.8 percentage points, driven by EU fund absorption into infrastructure and digitalisation and representing the most dynamic demand component for the full year at 6.1%. Government consumption expanded 4.7%, adding 1.3 percentage points, reflecting public sector wage increases and the permanent pension supplement introduced earlier in the year. Household consumption grew 2.6%, contributing 1.6 percentage points, underpinned by real wage growth, low unemployment, and tax-exempt employer bonuses, a strength that is directly visible in the retail data below. Net exports contributed a positive 0.5 percentage points in Q4, though for the full year they subtracted 1.1 percentage points as strong domestic demand pulled in imports, a pattern typical for fast-growing small open economies.
Looking ahead, InterCapital’s December 2025 Macro Outlook, authored by Ivan Dražetić, CFA, recipient of theConsensus Economics award for best macroeconomic predictions in Croatia, projects a mild moderation to +2.6% GDP growth in 2026, as the era of double-digit wage growth gradually comes to an end and personal consumption normalises. Investment remains the key growth engine, with EU budget transfers expected to sustain around 2.5–3.0% of GDP through the coming years, anchored by large infrastructure projects including the railway upgrade programme valued at roughly 6 billion EUR over the coming decade. The current account deficit is projected at around 2.0% of GDP, reflecting the same strong domestic demand dynamics visible throughout 2025. On the fiscal side, the deficit is expected at 3.0% of GDP, with public debt continuing its downward path toward 56.4% of GDP by 2026, a trajectory that has not gone unnoticed by rating agencies or bond markets.
Retail Trade
In addition, talking about retail trade in Croatia, we can see that real retail turnover increased for the 34th consecutive month on an annual basis, confirming the continued resilience of domestic consumption. In January 2026, working day adjusted retail trade turnover rose 3.0% YoY in real terms, driven primarily by strong growth in food, beverages and tobacco sales, which increased 6.1% YoY, as well as non-food products excluding fuels, which grew 5.4% YoY, indicating broad-based consumer demand. In contrast, retail sales of automotive fuels and lubricants declined 5.7% YoY, partially offsetting the overall expansion in retail activity. On a monthly basis, however, retail turnover declined 1.2% MoM in real terms, reflecting weaker sales of automotive fuels and lubricants, which fell sharply by 11.3% MoM, while non-food products decreased slightly by 0.5% MoM, whereas food sales increased 1.9% MoM. That was expected as the month of December is an active month for retail consumption. Overall, the data suggest that despite some short-term volatility at the monthly level, Croatian retail trade continues to show solid annual growth, supported by sustained household consumption, in line with the growth of wages.
Inflation
Inflation in Croatia remained relatively elevated in February 2026, with consumer prices increasing 3.8% YoY according to the flash estimate, while on a monthly basis, prices rose 0.3% MoM. The overall inflation dynamics continue to be primarily driven by services, which recorded the strongest annual growth of 7.7% YoY, highlighting persistent domestic price pressures, particularly in labour-intensive sectors. Energy prices also contributed to the increase, rising 4.3% YoY and 1.4% MoM, while prices of food, beverages, and tobacco increased 3.6% YoY and 0.2% MoM, indicating continued but more moderate price pressures in essential consumer goods. In contrast, non food industrial goods excluding energy recorded a slight decline of 0.1% YoY and fell 0.6% MoM, suggesting easing price pressures in goods categories, likely reflecting normalization in supply chains and weaker goods inflation across Europe. According to the harmonised index of consumer prices, which ensures comparability across the European Union, inflation in Croatia stood slightly higher at 3.9% YoY in February, confirming that while inflation has moderated significantly from previous peaks, it remains above the levels typically observed across the euro area, largely due to strong services inflation and resilient domestic demand. Based on the data shown in the upper part of this blog, it is not unusual to have elevated inflation when growth is persistent, as said, for 20 quarters. Besides that, with unemployment on these levels, inflation is expected to be higher.
Croatia CPI YoY (Sep 2015-Feb 2026)
Source: DZS, InterCapital Research
Croatia rounds off 2025 as one of the EU’s most dynamic economies, with broad-based, investment-led growth well above the EU average. As one EU funding cycle closes and a new one opens, Croatia enters 2026 from a position of genuine macroeconomic strength, a resilient consumer, rising wages, and a diversifying sectoral base all point to an economy that has structurally shifted gears. Credit rating agencies have taken note with successive upgrades, and perhaps most tellingly, the spread between Croatian and German government bonds has narrowed to around 35 basis points, a historic low that reflects the confidence international investors place in Croatian sovereign debt. The persistence of services inflation remains the key domestic risk to monitor, but the fundamentals heading into 2026 are as solid as they have been in a generation.