Industry and economy
Privatization and the drive toward a market economy had barely begun under the new Croatian Government when war broke out in 1991. As a result of the war, the economic infrastructure sustained massive damage, particularly the revenue-rich tourism industry. From 1989 to 1993, GDP fell 40.5%. With the end of the war in 1995, tourism and Croatia's economy recovered moderately. However, corruption, cronyism, and a general lack of transparency stymied meaningful economic reform, as well as much-needed foreign investment.
Croatia's economy turned the corner in 2000 as tourism rebounded. The economy expanded in 2002, stimulated by a credit boom led by newly privatized and foreign-capitalized banks, some capital investment, most importantly road construction, further growth in tourism, and gains by small and medium-sized private enterprises.
Croatia has a high-income market economy. International Monetary Fund data shows that Croatian nominal GDP stood at $58.585 billion, or $13,205 per capita, in 2007. The IMF forecast for 2008 is $69.357 billion, or $15,633 per capita. In purchasing power parity terms, total GDP was $78.824 billion in 2007, equivalent to $17,767 per capita. For 2008, it is forecast to be $82.407 billion, or $18,575 per capita.
According to Eurostat data, Croatian PPS GDP per capita stood at 63 per cent of the EU average in 2008. Real GDP growth in 2007 was 6.0 per cent. The average gross salary of a Croat during the first nine months of 2008 was 7,161 kuna (US$ 1,530) per month In 2007, the International Labour Organization-defined unemployment rate stood at 9.1 per cent, after falling steadily from 14.7 percent in 2002. The registered unemployment rate is higher, though, standing at 13.7 percent in December 2008.
In 2007, 7.2 percent of economic output was accounted for by agriculture, 32.8 percent by industry and 60.7 percent by the service sector. According to 2004 data, 2.7 percent of the workforce were employed in agriculture, 32.8 percent by industry and 64.5 in services.
The industrial sector is dominated by shipbuilding, food processing and the chemical industry. Tourism is a notable source of income during the summer, with over 11 million foreign tourists in 2008 generating a revenue of €8 billion. Croatia is ranked as the 18th most popular tourist destination in the world. In 2006 Croatia exported goods to the value of $10.4 billion (FOB) ($19.7 billion including service exports).
The Croatian state still controls a significant part of the economy, with government spending accounting for as much as 40% of GDP. Some large, state-owned industries, such as the country's shipyards, continue to rely on government subsidies, crowding out investment in education and technology needed to ensure the economy's long-term competitiveness.
Of particular concern is the backlogged judiciary system, combined with inefficient public administration, especially issues of land ownership and corruption. Another main problem includes the large and growing national debt which has reached over 34 billion euro or 89.1 per cent of the nations gross domestic product. Because of these problems, studies show that the population of Croatia generally has negative expectations of the country's economic future.
Croatia has so far weathered the global financial crisis reasonably well, but faces significant challenges in 2009 largely due to an expected downturn in Croatia's top export commodity, tourism. Croatia's external imbalances and high foreign debt present risks as well, as continued access to foreign credit in 2009 may be severely limited.
The country has been preparing for membership in the European Union, its most important trading partner. In February 2005, the Stabilisation and Association Agreement with the EU officially came into force.