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The Republic of Croatia enjoys international fame for its long Adriatic coastline dotted with hundreds of beautiful islands. They are the basis for the country being one of the top 20 tourist destinations in the world. Around 10 million visitors go to Croatia every year.

However, its main economic strength is also a weakness: there is over-reliance on tourism. This sector contributes about 20% to the Gross Domestic Product (GDP), making the country vulnerable to changes in travel habits.

Following the global financial crisis of 2008, Croatia lost almost one-sixth of its economic base. Today, it is still in the process of recovery.

It has a population of only 4.3 million – and the number has been shrinking in recent years. Unemployment, recorded at about 18%, is painfully high, while youth unemployment at 45% is a particular problem. Public debt, at 85% of GDP, is another area of serious concern.

Once a part of Yugoslavia, Croatia joined the European Union (EU) only in 2013. Certain structural reforms are still pending to the labour market and public enterprises, among other sectors. In order to comply fully with EU standards, the reforms will have to be carried out.

According to Eurostat, Croatia’s GDP per head at purchasing power parity in 2014 was EUR 16,100 – third-lowest in the EU, after Romania and Bulgaria. However, it was more or less on par with that of Hungary and Poland, which had both joined the EU a decade before Croatia.

In 2015, Croatia returned to growth for the first time since 2008. Although its overall economy remains relatively weak, the food processing industry is dominant.

Vegetable oil imports

Croatia’s lower production of oil from three major oil crops – soybean, sunflower and rapeseed – has reflected its general economic malaise. Low volumes have been recorded since 2009, up to 2014 (Figure 1).

Figure 1: Croatia – vegetable oil production (thousand tonnes)

Fig-1-Croatia

Sources: Oil World Annual 2014 & 2015

Over the same period, imports of the three commodities multiplied (Figure 2). Olive oil imports also went up, although at a lower level. Palm oil stood its ground, holding third spot among imported vegetable oils in 2014.

Figure 2: Croatia – major vegetable oil imports (thousand tonnes)

Fig-2-Croatia

Sources: Oil World Annual 2014 & 2015

Based on MPOB statistics, direct export of Malaysian palm oil products to Croatia increased by over 36% between 2013 and 2014. Palm oil exports grew by 66%, oleochemicals by 72% and palm kernel oil by some 15%. Finished products, however, showed a 67% drop.

Figure 3: Croatia – import of Malaysian palm-based products (thousand tonnes)

Fig-3-Croatia

Source: MPOB

Strong entrepreneurial spirit

Croatia offers important assets to the business and industrial communities, starting with its political stability.

Its main port, Rijeka, is a major gateway for Eastern European countries to the international markets and vice versa. In particular, the landlocked countries of Austria and Hungary operate free ports in Rijeka. This way they – together with several companies located in southern Germany – take advantage of the relatively short routes to the Middle East and the Far East.

Another attraction for those interested in doing business is Croatia’s ambition to become a leading regional player in food production and distribution. The growth of two major local companies illustrate this point.

The Agrokor Group is a leading food producer and retailer in the south-eastern European region. According to its website, Agrokor was the leader in 2014 in five regional markets – Slovenia, Croatia, Montenegro, Serbia, and Bosnia and Herzegovina. Its annual income that year was cited as EUR 6.5 billion, generated by around 55,000 employees.

Agrokor Group holds the majority stake in leading regional brands, such as ice cream producer Ledo. Other recognisable names in its stable are from the edible oils segment, mainly olive oil, as well as Croatia´s largest supermarket chain, Konzum, with over 700 stores.

The second case in point, Atlantic Grupa, is a multi-national company that has been in operation since 1991. Its website states that it is a leading food company in the region. It produces snacks and chocolate spreads, among other items. The company is also active in marketing cosmetics and over-the-counter pharmaceuticals. It is supported by its own distribution network, which currently services companies like Unilever.

In the days of the socialist Yugoslav federation, Croatia was the second most prosperous member. It is clear that the entrepreneurial fervour has not been lost over the years. On balance, Croatia offers some of the more attractive business prospects among post-communist states in Central and Eastern Europe.

MPOC Brussels

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