Croatia and it’s transition

Nimish, Zahid, Rushil, and Prudhvi

Introduction- Rushil
● The definition of a command economy is an economy in which production, investment, prices and incomes
are determined centrally by the government. Here economies are run by the government or state and the
allocation of resources are conducted by them. Planned economies are done with the incentive of ensuring the
welfare of its people are taken care of.

● The definition of a mixed economy is an economy that combines both private ownership and the government.
This type of economy is highly present in the world. The main intention of a mixed economy is to utilize the
private sector and public sector to improve quality and quantity of products.
About Croatia:

20 years ago, CEECs and SEECs were particularly marked for the shift to mixed economies. Croatia was unique in
its shift compared to the rest of its counterparts because the government used marketing instruments and
interdependency amongst sectors. These conditions allowed Croatia to be the favourites in the transition.
Success- Zahid
● After the immediate difficulties of the war had been overcome, Croatia moved into a phase of increasing
Gross Domestic Product (GDP). The highest growth rate of 5.2% was recorded in 2002, and in 2003 GDP
reached its level before the war (USD 24.8 billion, 1990).
● From 2000, preferential trade agreements were signed with almost all CEEC members and according to
Skuflic (2005), 95% of Croatia’s trade in 2005 was covered with bilateral trade agreements.
● In 1994 the rate of inflation fell to 107% and in the following five years it was brought down to an average of
4.46% per annum. The Croatian economy started to grow and the average annual rate of growth of GDP and
GDP per capita reached 4.5% and 5.38% respectively.
The graph shows the progress of institutional reforms in the post-transition period.
Success
● Law on Transformation of Socially Owned Assets was passed in 1991, which facilitated the replacement of
social ownership by private ownership. By 1998, 96% of total capital earmarked for privatisation was
privatized by sales and distribution. (Druzic, 2006). Between 1998 and 2000 half of the remaining shares
were then distributed through voucher privatization to selected social categories.

● Between 2000 and 2010, all main macroeconomic aggregates recorded positive trends. Growth of GDP and
GDP per capita was somewhat lower than in other CEECs but Croatia reached its pre-transition level of
output in 2003 (EBRD, 2007). The growth of output was accompanied by growth in employment (0.48%)
which was higher than in other CEECs (0.38%) and by a growth of labour productivity (2.15%). Also,
through the entire period, inflation remained at around 3%, below the rate of inflation in other CEECs (4.8%)
(EBRD, 2011).
Failures- Prudhvi
● Economic development in Croatia was damaged by the war, estimated in 1999 to amount to USD 37.1
billion, which made privatisation more difficult. In addition, the transformation process by which the former
public ownership became state owned and then privately owned, was undertaken in agreement between the
political and business elite, frequently without the actual purchase of enterprises or investment in them. The
transition therefore had many negative social and economic effects: the impoverishment of the population, a
rise in corruption and economic crime, and the devastation of industry.
● The average salary in Croatia is approximately 836 euros. This is among the lowest in Europe.In 2017, the
European Trade Union Confederation stated that, in 10 Eastern European countries, the wages were almost
half those of Western European countries. Although wages in all Eastern European countries decreased,
Croatia experienced the most dramatic fall – from 43% to 37% of the average Western European wage
(during the period from 2008 to 2016).
Failures
Croatia’s unemployment rate ( 2000 - 2018)
Failures
● Croatia recorded a government debt equivalent to 74.1% of the country's Gross Domestic Product in 2018.
● There is a high risk of encountering corruption in the Croatian judiciary. Businesses express low levels of
confidence in the judiciary’s independence and very low levels of trust in the efficiency of the legal
framework in relation to settling disputes and challenging regulations.
● Croatia is seeing huge emigration of the working population (about 300,000 people). Since the beginning of
the 2007/08 crisis, every 11th working position has been lost.
● Population is declining as a result of both population emigration and a decreasing birth rate.
● The largest number of Croatians leave for “better economic conditions abroad” and due to a lack of
employment at home.
Challenges and obstacles faced- Nimish
● Croatian shipyards Uljanik and 3. Maj are facing layoffs as a result of huge debts and the government to not
protecting shipbuilding as one of its last export industries. More than 4,500 workers have been on strike since
end of October 2018, because of unpaid wages. It is the second strike at Uljanik and 3. Maj since August 2018.
● Poor working conditions are due to several “reforms” of labour laws, but the most radical is the one from 2014
(proposed by the now opposition party SDP), which increased and legitimised precarious jobs.
● The ruling party and its opposition claim that there is “no conflict between labour and capital” (the SDP
recently published its new programme stating this).
● All governments promote the “race to the bottom” strategy (by promoting the need for increasing
“competitiveness” through a decrease in salaries and labour rights), although the results of such manoeuvres
did not prove to be successful in similar cases (the most radical example being Macedonia).
Challenges and obstacles faced
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