Foreign Direct Investment
After experiencing a period of growth in 2005-2008, foreign direct investment inflows to Croatia collapsed as an effect of the global economic crisis (the tourism sector was particularly affected). Since then, FDI flows have been struggling to return to their pre-crisis levels. According to UNCTAD's World Investment Report 2023, total FDI inflows reached USD 3.67 billion in 2022, down 17% year-on-year. In the same year, the total stock of FDI stood at USD 38.3 billion, around 53.9% of the country’s GDP. The main investing countries are the Netherlands (16%), Austria (14%), Germany (11%), Luxembourg (10%), Italy (9%), and Hungary (7%). The sectors receiving the most FDIs are financial services (25%), manufacturing (17%), real estate (16%), wholesale and retail trade (14%), ICT (7%), and tourism (4% - source: Ministry of Economy). According to preliminary figures from the National Bank, the cumulative net inflow of FDI in the four quarters to end-September 2023 amounted to EUR 2.72 billion, equal to 3.7% of Croatia's GDP.
Croatia suffered from a poor image linked to corruption and an inefficient judicial system. Despite the Croatian government's efforts to improve the business climate through judicial reform, a historical pain point for investors, the economy still faces challenges. These include underperforming state-owned enterprises, a lack of regulatory transparency, and delays in approving permits, particularly in the energy sector, which hinder further development. The country has high-quality infrastructure and high touristic potential, a well-educated workforce, and a strategic position. Croatia does not have a foreign investment screening mechanism and does not discriminate between national and foreign investors, except in certain sectors in which foreign ownership is restricted (e.g., inland waterways transport, maritime transport, rail transport, air-to-ground handling, freight-forwarding, publishing, ski instruction, and primary mandated healthcare). The recently amended Investment Promotion Act (IPA) offers incentives to investment projects in manufacturing and processing activities, development and innovation activities, business support activities, and high added-value services, in the form of tax refunds or cash grants. On 1 January 2023, the country adopted the euro and became the 20th member of the euro area. Croatia ranks 44th among the 132 economies on the Global Innovation Index 2023 and 39th out of 184 countries on the latest Index of Economic Freedom.
Foreign Direct Investment | 2020 | 2021 | 2022 |
FDI Inward Flow (million USD) | 146 | 4,427 | 3,675 |
FDI Stock (million USD) | 38,496 | 39,200 | 38,314 |
Number of Greenfield Investments* | 40 | 29 | 34 |
Value of Greenfield Investments (million USD) | 669 | 1,037 | 2,002 |
Source: UNCTAD - Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Croatia | Eastern Europe & Central Asia | United States | Germany |
Index of Transaction Transparency* | 5.0 | 7.5 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 6.0 | 5.0 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 6.0 | 6.8 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.