Tuesday, 15 September 2026
Croatia’s economy continued to expand faster than the wider European Union during the first half of 2026, although growth slowed noticeably compared with the previous year. Employment remained relatively strong and consumer spending continued to increase, while construction and parts of industry showed further expansion. Persistent inflation, however, remained an important constraint on households and businesses. Real GDP increased by 2.2% year-on-year during the first quarter before growth moderated to 1.7% in the second quarter. On a seasonally adjusted basis, economic output increased by 0.4% between the first and second quarters. The figures confirm that Croatia remained on a growth path during H1, but the pace was below the 3.4% expansion recorded across 2025.
Domestic spending continued to play an important role in the economy. Inflation-adjusted retail turnover increased by 1.9% during the first six months compared with the corresponding period of 2025. June marked the 39th consecutive month of annual growth in real retail activity, although the increase had slowed to 0.4% year-on-year. Compared with May, real retail turnover rose by 1.5%. Construction activity also continued to increase, with the volume of construction work 2.6% higher year-on-year during the first quarter and 3.1% higher during the second. Civil engineering recorded annual growth of 4.3% in Q2, while activity involving buildings increased by 2.4%.
Industrial activity presented a more uneven picture. Output improved strongly towards the end of the first half, with industrial production in June increasing by 4.3% compared with a year earlier and by 5.3% from May after seasonal and calendar adjustments. Manufacturing production was 4.0% higher year-on-year in June, while intermediate-goods output increased by 14.8%. Other industrial categories performed less strongly, with capital-goods production declining by 7.3% and durable consumer-goods production falling by 13.8%.
Employment within industry also remained under pressure. The number of people working in the industrial sector in June was 5.3% below its level a year earlier. At the same time, industrial labour productivity during the first six months increased by 6.0%, indicating a significant difference between the direction of industrial employment and output.
The broader labour market remained considerably stronger. Approximately 1.72 million people were employed during the second quarter, around 21,000 more than during the corresponding period of 2025. The employment rate among people aged between 15 and 64 increased to 69.2%, compared with 68.8% a year earlier. Around 84,000 people were unemployed during Q2, approximately 2,000 fewer than a year earlier, while the internationally comparable unemployment rate fell to 4.7% from 4.9% in the corresponding quarter of 2025. The rate had stood at 5.6% during the first quarter of 2026.
Inflation remained one of the principal weaknesses in Croatia’s economic picture. Consumer prices were 4.5% higher in June than a year earlier, while inflation measured using the EU-comparable index stood at 4.2%. Energy costs were 13.2% higher year-on-year, while service prices increased by 8.1%. Costs associated with housing, water, electricity, gas and other household fuels increased by 12.0%, while transport prices were 8.6% higher. Price growth for food and non-alcoholic beverages was considerably lower, standing at 0.8% year-on-year in June.
Tourism entered the main summer period from a relatively strong position. During the first five months of 2026, Croatia recorded approximately 4.3 million tourist arrivals and 12.5 million overnight stays in commercial accommodation. Arrivals increased by 6.2% compared with the same period of 2025, while overnight stays rose by 8.6%. Foreign visitors generated approximately 10.2 million overnight stays between January and May, representing annual growth of 9.3%. These figures cover the period before the main summer season and therefore provide an early indication rather than a complete first-half tourism result.
Croatia’s public finances remain comparatively stronger than those of several highly indebted European economies. European Commission projections put the 2026 budget deficit at approximately 2.9% of GDP, while government debt is expected to decline to around 55.9% of GDP. The Commission expects Croatia’s economy to grow by approximately 2.7% across 2026, compared with 3.4% in 2025, before growth moderates further to around 2.5% during 2027. Inflation is forecast to average approximately 4.6% during 2026 before declining towards 2.7% next year.
For Croatia’s commercial property sector, the economic backdrop remains relatively supportive. Economic growth, low unemployment, construction activity and continuing investment provide a foundation for occupier and development markets, while tourism remains particularly important for hotels, coastal property and associated investment. At the same time, higher construction, energy and service costs can affect development economics and operating expenses, while slower GDP growth may encourage businesses and investors to become more selective.
Croatia therefore entered the second half of 2026 with economic growth intact but clearly moderating. Consumer spending, employment and construction remain relatively resilient, while industrial performance varies considerably between individual segments. The central challenge for the remainder of the year is inflation. If price growth begins to moderate while employment remains strong, Croatia should remain on a comparatively solid growth path. If inflation remains elevated for longer, pressure on household purchasing power and business costs could increasingly restrict the pace of expansion.
Source: CIJ.World Research & Analysis Team
