Marcus Svedberg at East Capital comments on Croatia’s EU membership

Marcus Svedberg , chief economist at East Capital, has noted Croatia’s inclusion as the latest member of the European Union.

On 1 July Croatia became the European Union’s 28th member state. The country of 4.4 million people is the second former Yugoslavian country to join the EU. Slovenia was the first to join in 2004.

While Croatia’s political establishment were in favour of joining the EU, many of its citizens were skeptical. They question whether membership will really lead to positive change and fear their country is being given away to foreign interests and will lose some of its identity.

Despite those reservations, 66% Croatians voted in favor of joining the EU in a referendum held in January 2012.

One of the benefits of EU membership is that Croatia will find it easier to attract foreign investment. It will also give the country access to various EU funds. It already trades heavily with existing member countries, with about 60 percent of its exports going to the EU.

Today, Croatia’s economy is struggling. It has lost competitiveness and is currently in the grip of its worst recession since the early 1990s. Growth has been weak or negative over the past four years and the state still plays an outsized role in the economy

At the same time debt and budget deficit levels breach EU limits. Since 2008, unemployment has more than doubled and currently stands around 20 percent. Like many other countries, Croatia also faces the problem of an ageing population.

In an effort to try to address its problems the Croatian government has embarked on a series of painful structural reforms, including cuts to the country’s public services.

One of few industries that is performing successfully is tourism. In 2012, revenues rose by 3.2 percent to €6.8bn, with 11.8 million tourists visiting the country – which boasts excellent beaches and a vibrant nightlife.


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