Croatia: Solid prospects amid global uncertainties

Croatia enters 2026 in fairly solid economic shape, even though the pace of growth is beginning to cool after a strong performance in 2024 and early 2025. The economy grew by around 3% in 2025, but the momentum softened somewhat toward the end of the year. This was expected, as domestic demand—while still the primary engine of growth—no longer carries the exceptional strength it showed previously.

Inflation has been gradually cooling, which is another positive sign for the coming year. After spending much of 2025 in higher territory, the inflation rate dipped below 4% in late 2025, largely because food and service prices—previously the biggest contributors—began to level off. Energy prices are still shaping the month-to-month movements, especially as some temporary anti-inflation measures have been rolled back.

On the fiscal front, the picture remains stable, though somewhat less comfortable than in previous years. The 2024 deficit was revised down to 1.9% of GDP, which was a welcome correction, and public debt stood at 57.4% of GDP. But from 2025 onward, the government is steering a fiscal path that keeps the deficit hovering near 3% of GDP for several years. This reflects both political reality and the absence of market pressure to tighten policy.

Financial market conditions have remained impressively calm. Government bond yields, particularly the 10-year benchmark, have traded in a narrow range around 3.0% to 3.1%. Investor interest has stayed strong, helped by Croatia’s relatively good fundamentals and the lack of excessive new bond issuance. Spreads against German Bunds have even slipped below 30 basis points, suggesting that investors view Croatia more positively than its official credit rating might imply.

Download The Full Croatia Outlook