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Croatia’s economy: Like Northern Ireland’s but even less competitive

Performance in global football is not that strongly associated with either the size of a country’s population or economy [Note 1]. Croatia is a very small country but punches (or kicks) above its weight. A positive lesson for Northern Ireland is that small size need be no barrier to global excellence. At the same time, Croatia has been an even more uncompetitive economy than Northern Ireland- see Table:

Comparisons NI, UK and Croatia

 

Croatia

UK

NI

Population, m 2017

4.2

53.0 (England)

1.9

World Competitiveness ranking out of 145, 2012-13

82nd

8th

42nd

GDP per head 2016 (as % of the level in NI)*

72

131.8

100

Productivity, GDP per hour worked 2016 (as % of level in NI)*

44

120.0

100

R&D spend as % of GDP 2014

0.9 (2015)

1.7

1.5

Note:*Measured in purchasing power parity (PPP) terms.

Source: National economic statistics, NISRA, Eurostat, World Economic Forum, Cambridge Econometrics/SQW/Economic Advisory Group.

It is true that Croatia, as a former Communist planned economy (then part of Yugoslavia) started from a very low base. It has made some progress. Output per head of the population in Northern Ireland is about 80% of the EU (27 member) average. The level in Croatia improved during 2000-8 from about 45% of that average to about 65% but then slumped to about 55% where it remained for most of the 2010s.

The economic growth which has been achieved in Croatia has been more from increasing the amounts of capital and labour in use rather than through raising productivity. There may have been problems around efficiency in state-run enterprises and governance remains an issue [Note 2].

Notes:

  1. Of the final eight, two (Russia and Brazil) have very large populations but four (Belgium, Croatia, Sweden and Uruguay) are very small in population terms. Four of the countries have relatively large GDP sizes- Brazil, France, Russia and UK- but the remaining four are all small sized economies.
  2. World Bank 2018, The Republic of Croatia: Systematic Country Diagnostic.