After growing by 3.9% in 2024, economic activity in Croatia is projected to expand by 3.2% in 2025 and 2.9% in 2026, driven by robust household consumption. The labour market is set to remain tight, with the unemployment rate below 5%. Inflation is forecast to decelerate and reach 2% in 2026. After widening significantly in 2024, the general government deficit is expected to increase further and reach 2.7% in 2025. In a context of solid nominal GDP growth, the debt-to-GDP ratio is expected to decline to 56.3% in 2025.
| Indicators | 2024 | 2025 | 2026 |
|---|---|---|---|
| GDP growth (%, yoy) | 3,9 | 3,2 | 2,9 |
| Inflation (%, yoy) | 4,0 | 3,4 | 2,0 |
| Unemployment (%) | 5,0 | 4,6 | 4,5 |
| General government balance (% of GDP) | -2,4 | -2,7 | -2,6 |
| Gross public debt (% of GDP) | 57,6 | 56,3 | 56,4 |
| Current account balance (% of GDP) | -0,7 | -1,1 | -1,1 |
Solid economic growth to continue
After growing by 3.9% in 2024, Croatia’s economy is set to decelerate gradually over the forecast period. Croatia’s exposure to the US-tariff shock is low compared to other Member States and a robust domestic demand is expected to provide for solid GDP growth despite heightened trade-related uncertainty.
In 2025, GDP is forecast to expand by 3.2%. Growth is expected to be mainly driven by private consumption, underpinned by real wage and employment growth. Investment growth is projected to continue, although at a slower pace, sustained by sizeable absorption of EU funds, notably from the RRF. Government consumption is set to rise with further increases in compensation of public sector employees. Exports of goods are forecast to continue growing at solid rates, despite rising trade protectionism that adversely affects global economic activity and demand from some of Croatia’s main trading partners. Conversely, exports of services are expected to increase mildly in real terms, as continued price increases of touristic services weigh on competitivess. With imports outpacing exports, the contribution of net exports to growth is set to remain negative.
In 2026, economic growth is forecast to soften but still reach 2.9%. Consumption growth is set to decelerate as wage growth moderates. Investment is projected to continue growing, although more slowly, further supported by increased absorption of EU funds. The external sector’s contribution to growth is set to become less negative, as exports of services gain momentum with expected moderation in price growth of touristic services, coupled with more solid external demand growth.
Risks to this outlook include a higher-than-expected impact of uncertainty on private investment and consumption. Stronger than anticipated wage increases could add to price pressures and hurt exporters’ cost competitiveness. Potential supply bottlenecks in construction could delay the absorption of EU funds.
Tight labour market but moderating wage growth
As labour shortages remain elevated, inflows of workers from non-EU countries continue. The unemployment rate is projected to reach new lows of 4.6% in 2025 and 4.5% in 2026 as employment continues to grow, but it is set to decelerate over the forecast horizon. As a result, wage growth is expected to slow down, both in nominal and real terms.
Headline inflation to reach 2% in 2026
In 2025, headline inflation is projected to decline to 3.4% from 4% in 2024, as energy inflation picks up and food and services inflation slowly decreases. With continued moderation of wage and demand pressures, inflation is expected to decelerate more strongly and reach 2% in 2026. The decline is projected to be driven mainly by services and food inflation. The expected fall in international energy commodity prices is forecast to lead only to a small decline in energy inflation as government’s energy price measures expire in October 2025. Inflation excluding energy and food is set to decrease from 4.8% in 2024 to 3.4% in 2025 and 2.4% in 2026.
Public deficit increases in 2025 while debt continues to adjust
In 2024, the general government deficit increased to 2.4% of GDP, from 0.8% in 2023, driven by higher expenditure on public wages and social benefits - in particular pensions. At the same time revenue increased due to strong nominal GDP growth and favourable labour market developments.
In 2025, the deficit is forecast to increase to 2.7% of GDP. Nominal GDP growth, wage and employment growth are set to continue supporting revenue, with overall additional revenue expected from the fiscal measures (extra revenue from health social contributions and the reform of property and rental income taxation, and reduced revenue from changes to the personal income tax rates, brackets and deductions). Capital expenditure is projected to rise as a result of EU RRF funds while change in the indexation formula is likely to further increase pensions expenditure.
The deficit is forecasted to edge down to 2.6% of GDP in 2026. Revenue growth is supported by GDP and employment growth, and also fiscal measures (non-indexation of PIT brackets and deductions, phasing out health contributions exemptions for young workers and elimination of the temporary VAT rate reduction for natural gas, heat, pellet, wood chippings and firewood). Although investment is set to remain at a record-high nominal level—supported by the implementation of the RRP—its growth is subdued compared to the previous year. At the same time, the introduction of an annual supplement for pensioners is expected to further raise pension expenditures.
The debt-to-GDP ratio reached 57.6% in 2024 and is forecast to decrease further to 56.3% in 2025, in a context of sustained nominal GDP growth. In 2026, debt is expected to increase only marginally to 56.4% of GDP due to debt-increasing stock-flow adjustments.