Understanding the Croatian Export Boom

Kristian Orsini and Arian Perić

No 65, European Economy - Economic Briefs from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: Notwithstanding a quite diversified export base, a fair degree of sophistication of its products and a well-established presence in a large number of markets, Croatia’s export performance has trailed that of other Central and Eastern European countries – most of which joined the EU already in 2004. Following its EU accession in 2013, however, Croatia’s export performance has improved markedly. The aim of this paper is to review the performance of Croatia’s exports of goods over the past two decades and assess to what extent EU accession facilitated the surge in exports. The strong export growth is partly explained by the recovery in global demand, as well as policies geared to restore external competitiveness and wage restraint. More importantly, our analysis provides evidence that EU accession opened new opportunities for Croatian firms, which are making inroads into EU value chains and gaining market shares. Interestingly, deeper trade links with the EU do not seem to have come at the cost of Croatia's historical trade ties with CEFTA countries – and particularly the ex-Yugoslav economies. Sluggish demand growth, nevertheless, implies that these markets now absorb a much lower share of Croatia’s total exports. Policy action should aim to ensure that real wage improvements go hand in hand with productivity gains, while incentivise investing in product upgrades, particularly in sectors where Croatia already enjoys a strategic advantage. At EU level, relaunching accession talks with candidate members participating in CEFTA would boost Croatia's strategic role in the regional trade flows.

Keywords: Croatia; EU accession; Trade developments; value chains; export elasticities; CEE; CEFTA; Understanding the Croatian export boom; Kristian Orsini; Arian Perić. (search for similar items in EconPapers)
JEL-codes: F14 F15 F43 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2021-03
New Economics Papers: this item is included in nep-int and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecobri:065

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