Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
Croatia is a market of about 4 million people with a GDP per capita at around 65% of the EU average. Since EU accession, hundreds of thousands of skilled, young, highly educated workers have left for better-paid jobs in more developed EU countries. This has caused the need for imported labor in many industries, especially tourism.
Despite significant progress in economic and administrative reforms since its independence in 1991, Croatia is still a developing economy and problems remain. These include a judiciary plagued by case backlogs and a lack of expertise in commercial affairs, an overly complex and sometimes non-transparent bureaucracy, relatively high operating costs, and both real and perceived corruption. Employment taxes are high and there are often difficulties establishing property ownership due to a lack of good real estate title records. Companies that face court disputes in Croatia often wait many years to reach a final resolution. They also complain about a lack of enforcement and questionable court rulings.
The current Croatian government, which was reelected in July 2020, is committed to continue implementing its comprehensive program of planned reforms to address the complaints and suggestions from the business community. The government improved its fiscal position and is paving the way for Croatia to enter the eurozone. Croatia met the EU Maastricht requirements in 2018 and was admitted to the European Exchange Rate Mechanism II on July 10, 2020. According to this agreement, Croatia must enhance the competitiveness and resilience of its economy for at least two years before it can join the euro. The Croatian government provided more than $1.5 billion in job retention and economic stabilization measures to minimize negative economic effects of the COVID-19 pandemic. The government hopes to join the Schengen Area in 2022 and the eurozone as early as January 1, 2023. Croatia’s inclusion in the Schengen Area would eliminate border controls with Slovenia, Austria, and Hungary, facilitating increased tourism and business opportunities.
Overall, the business and investment climate in Croatia is still considered difficult, requiring caution and patience for success by foreign companies. U.S. firms entering this market must contend with a mature market and face competition from well established, mainly European, companies.