Croatia, a parliamentary republic in Central Europe that sits along the Adriatic Sea, is bordered by Slovenia to the north, Hungary and Serbia to the east, and Bosnia and Herzegovina to the south. Croatia is divided into 20 counties and the city of Zagreb, which is also the capital of Croatia. The official language of Croatia is Croatian, and the currency is the kuna (HRK).
Croatia was part of the Austro-Hungarian Empire until the end of World War I. In 1918, the Croats, Serbs, and Slovenes formed a kingdom known after 1929 as Yugoslavia. Following World War II, Yugoslavia became a federal social independent state. Croatia declared its independence from Yugoslavia in 1991.
On 1 July 2013, Croatia became the 28th European Union (EU) member state.
The favourable developments in Croatia’s economic activity that marked the first six months of 2016 continued in the second half of the year. The annual real gross domestic product (GDP) growth rate accelerated to 3.1% on average, from 2.7% in the first half of 2016. The export of goods and services accelerated due to favourable developments in tourism, so the contribution of net foreign demand was positive in the second half of 2016.
The labour market continued to recover. The unemployment rate decreased to 12.4% in the second half of 2016. The annual growth of the average gross wage was 1.6%, while growth in real earnings (i.e. the growth in purchasing power) was even greater.
Inflation grew substantially in the second half of 2016, which was mostly the result of the strengthening of imported inflationary pressures (i.e. the rise in the prices of oil and other raw materials in the world market, increase in inflation in the euro area, and strengthening of domestic demand). The annual consumer price inflation rate increased from -1.6% in June to 0.2% in December 2016.
The price competitiveness of Croatian exports, measured by the developments in the real effective exchange rates, was relatively stable in the second half of 2016. In 2016, the euro/kuna exchange rate fell from 7.635 to 7.558 (-1.01%). The US dollar strengthened in relation to the kuna from 6.992 to 7.169 (2.53%) in the same period.
The client base of PwC Croatia includes some of the largest Croatian and multinational companies in Croatia. We have approximately 160 professionals in Croatia who are focused on providing innovative advice and solutions. Our teams of local and expatriate professionals have the skills and the experience in all areas of taxation, corporate and personal, direct and indirect, to help clients grow and develop.