The European Commission published on 17 November 2025 the latest macroeconomic forecasts confirming that the Croatian economy continues to grow at a multiple times faster pace than the average of the European Union and the euro area.

The Croatian economy continues in a good direction, despite the global slowdown, but rising prices remain a significant threat to households and businesses.

The Croatian economy continues to grow at a multiple times faster pace than the average of the European Union and the euro area, the latest macroeconomic forecasts from Brussels confirm, but a moderate slowdown in the pace of gross domestic product growth, GDP, is projected in the coming years. Although 2024 ended with exceptionally strong growth of 3.8 percent, this strong momentum, driven primarily by domestic demand, will gradually diminish but remain stable.

Analysts predict that GDP will grow by 3.2 percent in 2025, followed by a further easing of growth to 2.9 percent in 2026 and 2.5 percent in 2027. Nevertheless, unlike many more developed European member states, this rate keeps Croatia at the very top of the fastest-growing economies in the Union.

Household consumption and European money are the main drivers

The main reason for such robust economic activity lies in exceptionally strong domestic demand, supported by record-low unemployment and continuous growth in citizens' real disposable income. Put simply, people have more money and are willing to spend it.

An increase in real wages and strong employment are key factors that will support personal consumption. At the same time, investments are expected to rise significantly, primarily due to increased absorption of funds from European Union funds, especially from the Recovery and Resilience Facility, RRF. Even general government spending, that is, its investments, is expected to contribute to GDP growth, especially due to the announced wage increases for employees in the public sector.

Although exports of goods are maintaining momentum despite trade protectionism negatively affecting demand from some key partners, exports of services, primarily tourism, could slow slightly due to rising prices of tourism services, while imports will continue to outpace exports, partly due to a greater number of international trips by Croatian residents.

Labor market and price growth

Croatia is facing record-low unemployment, which will remain at historically low levels. The unemployment rate, which clearly reflects a tight labor market, is projected at 4.7 percent in 2025, then 4.5 percent in 2026 and 4.6 percent in 2027. Although employment growth is slowing, the labor shortage remains a pronounced problem, despite increased immigration of workers from countries outside the European Union.

On the other hand, inflation, that is, price growth, remains high, but its significant easing is expected after 2025. In 2025, overall inflation should rise to 4.3 percent, driven by accelerating growth in food and energy prices, while inflation in the services sector is slowly weakening. From 2026 onward, due to easing wage and demand pressures, inflation will slow more significantly, reaching 2.8 percent in 2026 and 2.2 percent in 2027.

It is important to note that energy price growth will likely intensify again after April 2026, when government support measures for households could expire, and with the introduction of new carbon emissions-related charges in 2027.

High budget deficit despite stable debt

When it comes to public finances, an increase in the general government budget deficit is projected. The deficit is expected to rise to 2.8 percent of GDP in 2025 (compared with 1.9 percent in 2024), and it will remain at similar levels in the following years as well (2.9 percent in 2026 and 2.8 percent in 2027).

This increase in the deficit is the result of strong growth in social benefits, especially increased pension costs, as well as higher wage expenditures. Revenues will grow thanks to strong nominal GDP, employment and wage growth, but also fiscal measures such as the end of the exemption from health insurance contributions for younger workers, the non-indexation of personal income tax brackets, and the abolition of the temporary reduction in the value added tax rate, VAT, for energy products.

Although the deficit is high, the public debt-to-GDP ratio should remain almost unchanged, hovering around 56 percent by the end of 2027, thanks to strong nominal growth of GDP itself.