Today, we will look into the market cap to GDP ratio, or the “Buffet Indicator” as it is sometimes referred to, due to the fact that it was popularized by the famous investor Warren Buffett, which compares the market capitalization of all publicly-traded stocks on a single market with the country’s GDP.
This ratio compares the “price” of the companies on capital markets, prices include expectations and risk premia which lift market capitalization, and the real economy, produced goods and services within the country. The logic that lies within this ratio should give us rough aggregate pricing data in one country. The higher the ratio is, the more “expensive” companies on the capital market are, compared to the real economy. The ratio can rise if equity prices increase faster than GDP, or if GDP declines while market capitalization is stable. Remember that market cap is a point in time stock, GDP is a yearly flow, and timing effects matter a lot.
Buffet indicator-region only, in %
Source: OurWorldIndata, InterCapital research
It was one of the indicators of the approaching storm and later the crisis in 2008, which severely damaged the equity markets. As Buffett said, “The ratio has certain limitations in telling you what you need to know. Still, it is probably the best single measure of where valuations stand at any given moment,” so it is often used to determine whether the stock market is overvalued or undervalued.
In the regional view above, Croatia sits at the top for most of the period, typically around 30 to 40 percent, with visible cycles. Poland is more volatile and has trended lower in recent years. Slovenia moves steadily in the mid-teens. Romania gradually rises from single digits toward the low teens as the market deepens. Bulgaria jumped after 2016 into the low twenties, then slipped back as nominal GDP outpaced listed market growth. Differences reflect valuation, free float, sector mix, the number of listings, growth in the economy, and the thin supply of new issues. GDP growth rates also diverge over time. Croatia has posted strong GDP growth, yet still sits near the top of the ratio. Historically, Croatia and Poland have leapfrogged, and they still vie for the lead. As of the end of August 2025, the Zagreb Stock Exchange market capitalization of equity securities is EUR 31.75b compared with EUR 28.95b at the end of 2024, a rise of about 9.65 percent. Two IPOs between the end of 2024 and today, Žito and ING-GRAD, contributed materially to this year’s increase. From 2022 to August 2025, equity market capitalization has risen by a little over 76 percent from EUR 18.02b in 2022, reflecting both recovery from the 2022 contraction and higher primary activity.
Buffet indicator-region and world, in %
Source: OurWorldIndata, InterCapital research
Add the world and the United States to the picture, and the message from the second chart becomes clear. We plot the same regional series as above and overlay the United States as the leader of global capital markets, the World average, and Germany as a large European benchmark so we can place our region in a world and a European frame. Bearish commentary from media, analysts, and fund managers often cites record market caps versus GDP and warns about bubbles, this chart shows the backdrop to those claims. The World and the United States move in a very similar trend, climbing through the 2010s, surging in 2020 and 2021, compressing in 2022 when rates reset, then recovering in 2023 and 2024. The United States sits structurally higher because it hosts the largest exchanges, concentrates many of the world’s biggest listed companies, enjoys broad free float and deep liquidity, and has a strongly market driven investing culture among households and institutions. This setup amplifies upside in expansions, can deepen drawdowns in risk off phases, and often supports faster rebounds afterward. In 2024, the United States prints about 213 percent of its GDP. The World aggregate is roughly 130 percent, although outliers can skew this figure so treat it with caution. Germany, used here as a European proxy, sits near 44 percent, close to the global average, consistent with a more bank financed model, a heavier industrial and value tilt, and a thinner mega cap layer. Our region is lower still, which is consistent with smaller markets, lower free float, and fewer listings. Read this as context rather than a timing signal, a contraction is possible either through price or through time as nominal GDP outpaces market caps, but the when is uncertain, and elevated regimes can persist as long as earnings and liquidity support them. Note, investment funds, unit trusts, and companies whose only business goal is to hold shares of other listed companies are excluded.
There is one Croatia-specific nuance worth flagging. Even with the above exclusions, the effective or investable ratio is likely lower than the headline because liquidity and free float are limited in several large constituents. A single example is INA. Average daily turnover in 2024 is roughly EUR 4k per day, while market capitalization is about EUR 4.98b. Such a large but illiquid name has an outsized influence on the numerator and pushes the Buffet Indicator higher than what an investor can realistically access. In other words, treat the headline as an upper bound for Croatia; the real, investable picture is softer.
Use the Buffet Indicator as a temperature check, not a timing tool. Regional markets sit well below the World and far below the United States, which tells you as much about market depth and supply as about valuation. Over the next year, the path of the ratio will depend on nominal GDP and equity supply. If GDP keeps growing and new listings remain scarce, ratios can drift higher without a rerating. If larger privatizations or fresh supplies arrive, the ratio can move for structural reasons. For portfolios, stay anchored on earnings quality, cash conversion, and balance sheet strength, and let these charts provide context, not a trading signal.