CROATIA HISTORY, ECONOMY AND TRADE OVERVIEW - Buying property in Croatia for non-Croatian citizens

Economic Overview

Croatia and Slovenia were the most industrialised of the former Yugoslav Republics. Croatians enjoyed a relatively high standard of living, with a Gross National Product (GNP) per capita of US$3,729 in 1989. The principal industries were Petrochemicals, Chemicals, Tourism, Shipbuilding, Non-ferrous Metals, Food Processing and Agriculture.

The break up of Yugoslavia and the hostilities following Croatia's declaration of independence in 1991 severely damaged Croatia's economy. The government has estimated the direct cost of events since 1991 at US$27 billion. The loss of Croatia's former markets in Yugoslavia and the cost of the conflict brought about an estimated 40% fall in Croatia's real Gross Domestic Product (GDP) between 1989 and 1993. By October 1993 inflation reached 38% per month.

The Government of Croatia's economic stabilisation programme, introduced in 1993 and based on tight monetary and incomes policy, has been very successful in reducing inflation to 3-4% per annum since 1994 which earned plaudits from the International Monetary Fund (IMF) and World Bank. The currency (Kuna) has remained stable, foreign exchange reserves has increased from zero to over US$5.3 billion at the end of August 2002 and industrial production is slowly picking up. Levels of foreign indebtedness are low.

Continuing concerns are; the level of unemployment (officially around 22% but probably lower given the fairly substantial grey economy), the need for restructuring of major loss making state industries and a growing trade deficit. However, these are offset by a fast recovering tourist industry and remittances/investment from a large number of expatriates Croats.

Emergency reconstruction of basic infrastructure has largely been carried out, but substantial amounts of government investment are still required to develop the infrastructure and reconstruct housing in war affected areas. Investment in industrial infrastructure is also required. Foreign investment is gradually returning to Croatia as confidence in stable economy returns. The World Bank, IMF and European Bank for Reconstruction and Development EBRD) have been active investors.

Tourism, which performed poorly over the period 1991-1995 recovered well in 2001, earning around US$4.2 billion. The recovery in tourism, on which most of the Dalmatian economy depends, has been a great boost for the Croatian economy. However, a fair amount of investment is required in hotel infrastructure if Croatia is to ensure full recovery and secure a large share of the European Tourist market that it once held. Opportunities exist for hotel outfitters, refurbishers and suppliers who can find good local partners.

The GOC is committed to a policy of privatisation. Several small and medium sized enterprises have been privatised.

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History and Political situation

Croatia declared independence on 25 June 1991. It was recognised by the EU in January 1992 and joined the UN in May 1992. During the war which followed the proclamation of independence, there was much loss of life and material destruction and roughly a quarter of Croatian territory was occupied. Croatia has now regained all of its territory.

Despite some recent economic setbacks, Croatia remains a promising and fast developing market. It's reformist coalition government signals a welcome change. The government is keen to encourage foreign investment, to strengthen trade and commercial relations between UK and Croatia and is, drawing Croatia closer to the EU.

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Trade Statistics

Statistics on world trade are available to consult for free at the UK Trade & Investment Information Centre. The Information Centre also holds an extensive collection of publications and electronic resources covering topics such as market research, economic country data plus international telephone, business and trade directories.

The National Statistics Information and Library Service (NSILS) is a public library providing access to the statistical outputs of the Government Statistical Service (GSS). Tel: 0845 601 3034

UK Trade Information supplies free basic four digit UK trade figures on a monthly basis. The site is provided by HM Customs and Excise so, as you'd expect, the information is both accurate and up to date. In fact one of it's unique features is that the data is available within 48 hours of publication.

More detailed figures on United Kingdom overseas trade can be obtained from data retailers, for more information please contact:

HM Customs and Excise, Statistics and Analysis of Trade Office Tel: 01702 367485

Alternatively most public reference libraries normally hold United Kingdom trade statistics. UK Top Ten Exports & Imports of Goods From Croatia: Jan To Nov 2003- (Łk)

Major Exports: Miscellaneous Manufactured Articles 24,326 Medical Products 14,357 Machinery Specialised for Partcular Industries 10,817 Office Machines & ADP Machines 10,312 Road Vehicles 7,835 General Industrial Machinery & Machine Parts 6,471 Chemical Materials & Products 6,046 Electrical Machinery, Apparatus & Appliances 5,341 Power Generating Machinery & Equipment 5,256 Other Transport Equipment 4,633 Total 129,584

Major Imports: Furniture 9,422 Metalliferous Ores & Metal Scrap 8,490 Articles of Apparel & Clothing Accessories 5,079 Electrical Machinery, Apparatus & Appliances 4,100 Power Generating Machinery & Equipment 2,840 Miscellaneous manufactured Articles 2,293 Non-Ferrous Metals 2,169 Textile Yarn, Fabrics, Made-Up Articles 1,772 Office Machines & ADP Products 1,737 Furniture & Parts therof 1,341 Total 46,431

UK Exports (FOB) ŁM: UK Imports (CIF) ŁM: % Change 2000 1999 1998 Trade Balance % Change 2000 1999 1998 -11.22% 4.518 5.089 6.500 1.99 -29.53% 2.525 3.583 2.531

(statistics produced by East European Trade Council - EETC)

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Standard of living

Income tax clearance

Every resident is, in principle, liable to pay income tax. Non-residents pay income tax only on income earned in Croatia. Interest income, dividends and the proceeds from the sale of shares are not taxable. Every resident is entitled to a personal tax-free allowance of Kn 1250 per month and a personal tax-free allowance for supporting family members.

Income up to Kn 2500 is taxed at a rate of 15%; income of Kn 2500 - Kn 6250 is taxed at 20%. Income in excess of this amount is taxed at 35%.

Towns with more than 40,000 inhabitants may collect local taxes, which are levied according to the amount of income tax paid at rates set by the towns themselves.

BROKER, real estate agency team.