Croatia's Economic Growth Slows to 1.7% in Q2, but Outlook Remains Favorable

Croatia's economic growth experienced a notable slowdown in the second quarter of 2026, with Gross Domestic Product (GDP) increasing by 1.7% year-on-year. This marks the most modest growth rate since 2015, excluding the pandemic-induced downturns. Despite this deceleration, the economy showed a quarter-on-quarter acceleration of 0.4%, indicating underlying resilience.

Prime Minister Andrej Plenković expressed satisfaction, noting Croatia's consistent economic growth over the past five and a half years, placing it among four EU countries with an unbroken trend. He also highlighted that average wages and pensions are nearing government targets. The State Statistical Office's initial estimate revealed that stronger state consumption and robust goods exports in the second quarter contributed to the economic activity, although this was partially offset by slower growth in personal consumption and investments.

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Croatia, along with Belgium, Bulgaria, and Cyprus, is one of the four European Union countries with an unbroken trend of economic growth over the last five and a half years.

Household consumption, a key driver of the Croatian economy, grew by only 0.5%, the lowest in six years. Analysts suggest that rising prices and inflation may have deterred consumer spending, as evidenced by a significant slowdown in retail trade growth. Sectors like information and communications, along with agriculture, showed strong growth rates of 5-6%. However, industry and professional services experienced a slight decrease in added value, and the construction sector, a previous growth engine, saw its expansion slow to 3% from double-digit rates.

Despite the second-quarter slowdown, economists from RBA remain optimistic about the second half of the year. They predict that domestic demand will continue to support solid growth. Early indicators from the tourism sector suggest positive trends, and consumer confidence remains strong, bolstered by record low unemployment and steady real wage growth. These factors, combined with consistent foreign investment inflows, point towards a potentially brighter economic outlook for the remainder of 2026.

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Domestic demand will continue to be a pillar of still solid growth.