Following an expansion by 3.8% in 2024, Croatia’s GDP growth is expected to remain solid, thanks to robust household consumption supported by rising real disposable incomes, but to slow down gradually, from 3.2% in 2025, to 2.9% in 2026 and 2.5% in 2027. Employment is forecast to expand further, with the unemployment rate remaining below 5%. Inflation is expected to remain elevated in 2025 and 2026, declining to 2.2% by 2027. The general government deficit is expected to increase to 2.8% in 2025 and to remain at similar levels throughout the forecast horizon, with the debt-to-GDP ratio hovering around 56% through 2027.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 3.2 | 2.9 | 2.5 |
| Inflation (%, yoy) | 4.3 | 2.8 | 2.2 |
| Unemployment (%) | 4.7 | 4.5 | 4.6 |
| General government balance (% of GDP) | -2.8 | -2.9 | -2.8 |
| Gross public debt (% of GDP) | 56.2 | 56.1 | 55.9 |
| Current account balance (% of GDP) | -2.9 | -3.2 | -3.2 |
Economic growth to decelerate but remain solid
After growing by 3.8% in 2024, Croatia’s real GDP growth is forecast to gradually slow down but remain robust throughout the forecast period, supported by strong domestic demand.
In 2025, GDP is projected to grow by 3.2%, as private consumption is underpinned by increases in real wages and employment. Investment is set to rise, bolstered by increased absorption of EU funds, particularly from the RRF. Government consumption is expected to contribute to GDP growth, as salaries of public sector employees increase. Goods exports are forecast to maintain momentum despite trade protectionism negatively impacting demand from some key trading partners. By contrast, real exports of services are expected to slightly decline, due to increasing prices of tourism services. Imports are set to outpace exports, driven by a significant rise in international travel by Croatian residents, resulting in a negative yet smaller contribution of net exports to growth compared to the previous year.
Economic growth is forecast to ease to 2.9% in 2026 and 2.5% in 2027, driven by a slowdown in consumption as improvements in real disposable income moderate. Investment is set to continue growing, albeit at a slower pace after the expiration of the RRF, as the absorption of other EU funds picks up and private investment continues to increase. The negative contribution of net exports on growth is expected to decrease, as competitiveness considerations limit price increases in tourism services and exports of services strengthen.
Risks to this outlook are tilted to the downside. Higher-than-expected wage increases could add to price pressures and reduce exporters’ cost competitiveness. Additionally, potential supply bottlenecks, notably in construction, may delay the absorption of EU funds.
Record low unemployment but easing wage pressures
Employment growth is projected to abate over the forecast horizon, with expected annual increases of 2.1% in 2025, 1.5% in 2026, and 0.9% in 2027. Labour shortages remain significant despite increased numbers of non-EU workers immigrating to Croatia. The unemployment rate is set to reach new lows of 4.7% in 2025, 4.5% in 2026 and 4.6% in 2027, mirroring the tight labour market. As labour demand gradually stabilises and employment growth slows, nominal and real wage increases are projected to ease.
Headline inflation to moderate after 2025
Headline inflation is projected to increase to 4.3% in 2025, from 4% in 2024 as food and energy inflation accelerate, while services inflation gradually eases. With the wage and demand pressures moderating, inflation is set to decelerate more significantly after 2025, reaching 2.8% in 2026 and 2.2% in 2027. The decline is expected to be primarily driven by decelerating services and food inflation. Conversely, energy inflation is forecast to pick up as government energy support measures expire in April 2026 and, unless delayed, ETS2 becomes operational in 2027. Inflation excluding energy and food is set to decline from 4.8% in 2024 to below 2% by the end of the forecast period.
Government deficits remain high, debt remains broadly constant
In 2025, the general government deficit is expected to increase to 2.8% of GDP, from 1.9% in 2024, driven by strong growth in social benefits, particularly pension expenditure, and a strong carry-over from the increase in the 2024 wage bill. Indirect tax revenue is set to expand following solid nominal GDP growth, while direct taxes will benefit from employment and wage developments.
In 2026, the deficit is forecast to increase further to 2.9% of GDP. Revenue growth is supported by GDP and employment growth, along with fiscal measures, such as the non-indexation of personal income tax brackets and deductions, phasing out of health contributions exemptions for young workers and the elimination of the temporary VAT rate reduction for natural gas, heat, pellet, wood chippings and firewood. In terms of expenditure, the introduction of an annual supplement for pensioners will further raise pension expenditure and public investments remain at record high levels. The deficit is forecast to slightly narrow to 2.8% of GDP in 2027, as investments lose steam, and other expenditure (mainly spending on wages and social assistance) are outpaced by nominal GDP growth.
In a context of high government deficits, the debt-to-GDP ratio is expected to slightly decrease to 56.2% in 2025 and 55.9% by end of 2027, driven by strong nominal GDP growth and stock-flow adjustments.