ZAGREB, 15 April (Hina) – The Croatian Employers’ Association (HUP) said on Wednesday it expects Croatia’s economy to grow by 2.5% in 2026, with average inflation seen at around 5%.
“We expect Croatia to maintain relatively strong growth of 2.5% over the next two years. This marks a slowdown compared with previous years, but it remains significantly above the EU average,” said HUP chief economist Hrvoje Stojić.
HUP forecasts inflation will accelerate from 4.4% last year to around 5% in 2026, driven mainly by higher energy prices, continued convergence of services prices with the EUВ average, and renewed cost pressures in food production.
He noted that rising food prices pose a significant inflation risk, as food and non-alcoholic beverages account for 21.8% of the consumer basket in Croatia.
“ In such an environment, it is essential to avoid fuelling inflation through overly broad and poorly targeted fiscal measures. Pressures to increase the public-sector wage bill must be firmly resisted, while social measures should be better targeted so that additional fiscal stimulus does not add fuel to inflation,” Stojić said.
HUP said economic growth continues to be supported by strong corporate investment lending, record use of EU funds, exports of capital goods and Croatia’s relatively secure position as a tourist destination. However, it warned that a prolonged energy crisis, tighter financing conditions, weaker fiscal support and heightened geopolitical uncertainty could further slow economic activity in 2026 and 2027.
“The Croatian economy has continued to grow despite unprecedented crises, demonstrating resilience and adaptability in challenging global conditions. To sustain growth and ultimately reach EU living standards, we must strengthen competitiveness,” said HUP director general Irena Weber.
She said the focus should be on boosting private investment, creating instruments to encourage investment, and reducing tax, administrative and regulatory burdens. Amendments to public procurement and investment promotion laws are needed to support stronger private-sector capital investment, she added.
Weber reiterated that Croatian companies still pay electricity prices around 18% higher than their EU competitors. While the government has protected households and small and medium-sized enterprises, large firms have been paying market prices for four to five years, undermining competitiveness.
She also stressed the need to strengthen digital and AI infrastructure to improve efficiency and reduce employment in the public sector, pointing to what she described as an “explosion” in the public wage bill. “We see in this year’s budget that wages, pensions and transfers to households will exceed 50% of the state budget, which is unsustainable in the long term.”
She highlighted the importance of boosting the competitiveness and productivity of domestic agriculture, arguing that, amid geopolitical instability, food production and greater self-sufficiency are matters of national security.
Among measures proposed by HUP to raise productivity are reducing business costs and encouraging investment. Key priorities include lowering the tax burden on labour, especially for middle and higher incomes, broadening the tax base, and strengthening youth employment and skills development aligned with labour market needs.
The association also called for cuts to parafiscal charges, deregulation and restructuring of public administration and state-owned enterprises, as well as targeted energy subsidies and lower energy costs to enhance industrial competitiveness and support modernisation.
Productivity growth should be further supported through stronger investment, more efficient use of EU funds and better integration of mid-sized companies into EU funding programmes and global value chains, HUP said.
