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Croatia’s Economy

Croatia, a former Yugoslav republic, is set to become the 28th member state of the European Union (EU) July next year. This is a great achievement for the country albeit coming at a time when the EU is experiencing record political and economic turmoil within the EU block. Croatia applied its EU membership eight years ago and was allowed to sign an EU accession treat this year as EU leaders were scrambling to reach agreement on having closer fiscal ties among its member states. Croatia is a beautiful country with a population of about 4.4 million people with a thriving tourism economy and its people see the membership as a positive step that will strengthen their economic and political future, according to a report by Hutchison, 2011. According to the chief economist of Societe Generale Splitska Banka, Mr. Zdeslav Santic, the EU accession of Croatia is the only real scenario that can help the country realize both economical, political and social stability. However, the country is well aware that the EU alone cannot solve their problems that ought to be tackled from their home country. This study will carry research on how the economy of Croatia will benefit by joining the EU. 

The objective of this paper is to identify and present the expected benefits to Croatia’s accession to the EU in selected political, economical, and social areas. The aim of the paper will be to showcase that the integration of Croatia to the EU will bring benefits to its citizens as the analysis will center on expected costs and the benefits that will accrue because of the integration.

Since 1991 when Croatia gained independence from Yugoslavia, the country has been going through a slow but steady period of transition and democratization to a free economy. However, the journey started in October, 2001, when the Stabilization and Association Agreement (SAA) was signed. SAA is a legal agreement that stipulates that Croatia is an associate member of the EU (European Commision, 2006).

This paper is based on a simple and clear argument that intends to shed more light (especially to Croatians and all interested parties) to see into the benefits that will accrue from the EU integration. The paper will present its arguments that can be used for a positive contribution towards strengthening the enthusiasm for the EU project while trying to help combat euro-skepticism. This is because according to the Euro-barometer, only 42% of Croatians are positive of EU (European Commission, 2006). Thus the general aim is to raise a general public awareness of the importance of the EU membership to Croatia.

Literature Review

Since its independence in 1991, Croatia has been undergoing a transition and democratization period. After the signing of SAA, the country has been on a path to joining the EU. According to the European Commission (2006), Croatia has a functioning marketing economy and with its process of marketing integration, the country will be in a position to compete with market forces in the EU. Information by the Croatian national Bankd (2007) indicates that the country’s exchange rate and inflation are relatively low and stable, about 3.3% in 2005. The Central Bureau of Statistics (2012) indicates that the economy of Croatia has been growing steadily since 2001. For example since 2004, the GDP increased by 3.8%, 2005 by 4.3% and 2006 by 4.5% driven by stronger exports and domestic demand. The Croatian Chamber of Commerce and Industry agrees and even places the country’s per-capita income ahead of some euro-members, turkey and Macedonia. However, the greatest challenge that Croatia faces has been maintaining a microeconomic stability, good preparation of effective usage of the EU funds and a successful application of structural reforms (Croatian Nations Bank). In general, Atilgan (2006) agrees that the EU is worthy for all its members.


This involves the collection and analysis of relevant materials that were used for this study. This paper made use of both quantitative and qualitative data collection methods. However, it was more rooted to a qualitative position thus emphasizing the importance of researching within a historical, cultural and social context. Both primary and secondary sources were also used. The primary sources used included historical documents and people’s sentiments on Croatia’s accession to the EU. Secondary sources included newspapers, books, journal articles and relevant website information. The tools used to analyze data included mathematical tables, graphs, and other mathematical models.

Findings and Discussion of Findings

Economic Development

As seen earlier, the purpose of this research is to articulate the benefits that will accrue to Croatia as it is about to join the EU. The accession will bring benefits in various forms to Croatian citizens either in the short-term on long-term.

By becoming a member of the EU, Croatia will increase its access to the EU market that has a population of more than 490 million people. This will also open doors to companies in Croatia which will take advantage and be competitive enough to market their goods in the EU. However, those that will not be competitive enough may as well close business (European Commission, 2006). According to a book published by the Institute for International Relations (IMO), the book discusses that by becoming a member of the EU, Croatia’s benefits will result into a lasting value. It support further the idea that European markets will be open to the local companies for a mutual movement of goods, services, labour as well as capital which can be seen to have already visible changes after signing of the SAA. The book however cautions that the success of Croatia will depend on how the country will be prepared to minimize on risks but capitalize to make on most of the opportunities (the new IMO book).  As can be seen by the graphs below, the GDP of Croatia has been on the rise since the signing of the SAA in 2001.

Fisheries is another area where Croatia will benefit the most. Currently, the fisheries industry contributes only 0.3% to the GDP but this industry is oriented to exports. With a catch of approximately 20,000 tones a year, the EU will be the country’s greatest trading partner and now with free access to the EU market, this will be an incentive for development of this industry (Privredni Vjesnik).

Political Development

By joining the EU membership, Croatia is almost guaranteed of political stability and a well functioning government. This will as a result act as a guardian of democracy, human rights, rule of law and lead to respect of minority rights. Overall this will result to more democratization of Croatia and by reaching the current European standards; it means that Croatia will achieve a de-politisation society (Ministry of Foreign Affairs And Integration). Croatia will be the first Western Balkan country in the EU; this means that it will gain the role of a show-case nation to the others. Croatia like most transitional countries suffers from judicial shortcomings especially on human rights and the judiciary. This has been discussed during the accession and the country has promised to uphold the rule of law. This will enable the judiciary guarantee justice for all the people (Slobodna Dalmacija).  IMO states that Croatia will as a result of the integration have a judiciary which is harmonized with the EU’s high standards especially on professionalism.

Conclusions and Recommendations

As a member of the EU, Croatia will reap many benefits some of which will be manifested in the long-term. The country will be able to finance on 4% of its GDP from finances from the EU. Although the country will have to contribute to the EU budget that about 1.24% of its GNP, the country is set to gain from huge amounts of benefits from its trading partners and consumers. However, not all the benefits can be calculated in monetary terms, as some of them will be in the reform sector. This as a result leads to economical, social, and political growth of the country. After the accession period is over, Croatia will become a full fledged member of the EU and hence have its positions strengthened. This will also result to the stabilization of the Western Balkan region through democratization. The country will be made more efficient and less expensive through agriculture, transportation and even on environmental protection related to the accession reforms. Croatian consumers, already enjoying the accession linked reforms, will create an atmosphere sustainable for development. Croatians consumers will also benefit by enjoying goods and services at lower prices but a higher supply of the goods and services leading to an increase in consumer protection.

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