THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Croatia

Ranked 43rd of 149

At a glance

Ranks

43 rd on the Legatum
Prosperity Index™

61st
89th
44th
37th
56th
31st
38th
113th
30th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Croatia performs best on Natural Environment and Safety & Security and scores lowest on the Social Capital sub-index.

Visit our Rankings table to see how Croatia compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

Croatia closed its prosperity gap over the past decade and continues to delivery more prosperity than expected given its wealth, but only slightly. While it outperforms Romania, a country with a comparable GDP who joined the EU six years earlier, Croatia needs to further diversify its economy and promote business opportunities if it wants to compete with its European peers.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

Croatia saw significant economic growth in the years before the 2008 economic crisis but then slumped into a six-year recession. Unsurprisingly, its worst performance comes in the Economic Quality sub-index, where Croatia has moved down 15 ranks to 61st. Privatisation and efforts to diversify the economy have been slow, not aided by inefficient public administration and judicial corruption. Satisfaction with living standards and current incomes has seen little improvement over the past decade. Notably, there has also been a 7.1% increase in unemployment levels since 2007: Croatia’s unemployment rate at 16.7% is the third highest in the EU, behind only Greece and Spain.

While its declining Economic Quality score is a cause for concern, there has been a modest improvement in the Business Environment sub-index. Good infrastructure is key for economic and business prosperity, particularly for a country such as Croatia which relies heavily on tourism. There have been positive changes in this area with increased investment in infrastructure to improve logistics, particularly since Croatia joined the EU in 2013. Notably, broadband subscriptions have nearly tripled over the past decade. Reforms have also made it easier to start and run a business in Croatia: redundancy costs have been significantly reduced and it has become far easier to resolve insolvency. The 2016 Prosperity Index reports that 45% of people think their area is a good place to start a business, compared to just 30% in 2007. However, confidence in business opportunities appears to be lower in Croatia than in many of its Balkan peers. Romania, by contrast, sees 68% of people feeling that their area is a good place to open a business.

Business Environment Scores in the Balkans.
Croatia lags behind its Balkan peers when it comes to Business Environment.

Croatia has made small, but good progress in the Social Capital sub-index over the past decade, moving up 10 ranks to 113th. Nevertheless, it performs well below average in comparison to its EU peers. Of note is a marked increase in charitable donations complemented by an uptake in volunteering and sending financial aid to other households. However, fewer people feel that they can rely on friends & family in times of need than in 2007 which, perhaps, is a result of Croatia’s six-year recession.

Croatia’s biggest improvement comes in the Natural Environment sub-index where it has moved up 51 ranks to 30th over the past decade. The treatment of wastewater had been an issue of concern in Croatia, particularly in the coastal regions that play such a vital role in Croatia’s tourism industry and economy in general. Until 2013, sewage poured through tubes directly into the sea, but new wastewater facilities, funded by the government and World Bank, have been built along Croatia’s coastline, dramatically reducing sea pollution levels. While only 4.9% of wastewater was being treated in 2007, this has increased to 50%. This is a positive development for Croatia’s delivery of prosperity: its coastline and national parks attract millions of tourists per year which, in turn, generate millions of euros in revenue for the country.

Percentage of wastewater that is treated in Croatia since 2007
Croatia’s efforts to combat pollution of its coastal waters have been significant over the past decade.

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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.