Paul Johannes Spittau, Head of Group Carrier Relations & Insurance Mediation at GrECo International, converses with Andrej Krvavica, General Manager at GrECo Croatia, about the current economic landscape of Croatia. They delve into the present developments and challenges faced by businesses, the necessary strategic shifts for stability, and the implications for the insurance industry.
Addressing Current Challenges
Spittau: What developments and challenges are your clients in Croatia currently navigating?
Krvavica: One of the primary issues is the lack of an adequate workforce and rising labour costs. Companies are responding by planning salary increases to maintain competitiveness and attract talent. Regulatory and compliance issues also pose a challenge, with differing EU regulations affecting exporters. Additionally, Croatia lags behind the EU average in digital adoption, which impacts competitiveness and efficiency. High energy costs continue to burden businesses, affecting operational expenses and profitability. Geopolitical risks, such as the ongoing conflict in Ukraine, are also affecting economic stability and investment decisions.
Spittau: And what changes do you see as necessary in the coming years to ensure Croatia retains stability?
Krvavica: Looking ahead, there is a crucial need for Croatia to diversify its economy beyond the tourism sector to mitigate vulnerability to external shocks. This diversification involves fostering growth in sectors such as IT and clean energy. The banking sector must also address challenges related to digitalization, necessitating continuous investment in technology to enhance customer experience and competitiveness. Sustainability and green investments come with both opportunities and challenges, particularly regarding adherence to environmental regulations. The adoption of the Euro has introduced new business opportunities but requires alignment with EU standards, posing difficulties for certain sectors. Additionally, improving the efficiency and predictability of the judicial system is essential for enhancing the business environment and attracting investment.
Spittau: What regulatory challenges are companies facing?
Krvavica: There’s a whole host of regulatory changes creating headaches for Croatian at the moment. Overregulation, with an excessive number of rules and regulatory processes, is complicating compliance and increasing operational complexity for businesses. Additionally, many businesses are experiencing difficulties in maintaining competitiveness and efficiency because of slower digital adoption relative to the EU average. Plus, high energy costs remain a significant challenge.
But that’s not all. Legislative changes for the foreign workforce may impact labour market dynamics and require businesses to adapt to new workforce regulations. The Consumer Credit Directive 2, which will be transposed into Croatian law by November 2025, aims to enhance consumer protection in the financial sector. And lastly, mandatory electronic invoicing will require businesses to adapt their billing systems to comply with new regulations.
Impacts on the Corporate Risk Landscape
Spittau: How are current conditions shaping corporate risks and the insurance industry?
Krvavica: Croatia’s political, economic, and ecological conditions are definitely shaping corporate risks. If we take a whistlestop look at the key drivers, we see that GDP growth is expected to moderate, bolstered by EU funds and the adoption of the Euro. Private consumption remains robust, driven by a strong labour market, though rising energy prices may affect real income growth, and our fiscal policy aims to stimulate growth and strengthen social and demographic policies. Our major challenges include an ageing population and the emigration of skilled young people.
For the insurance industry, these conditions imply a need to adapt to a dynamic and uncertain environment. Insurers must develop products that address the risks associated with economic volatility, demographic changes, and energy price fluctuations. Sustainability and green investments will also require insurers to offer products that support environmental initiatives and mitigate climate-related risks.
Investments and New Risks
Spittau: Which economic sectors or industries are anticipated to receive increased investments in the coming years, and how will this trend affect the risk industry?
Krvavica: The Croatian Government’s National Investment Promotion Plan aims to attract investments that create quality jobs, contribute to the green transition, encourage research and development, increase productivity, and bring new technologies. Additionally, Croatia plans to invest 6 billion EUR over a decade to modernise half its railway network, which will stimulate the economy by improving accessibility and promoting sustainable transportation. There will also be further growth in greenfield investments, especially in manufacturing, construction, transport, energy, and business services.
For the risk industry, these investment trends imply a growing demand for insurance products that cover a wide range of sectors. Insurers will need to develop tailored products that address the specific risks associated with these individual industries, such as property, liability, and cyber insurance.
Paul Johannes Spittau
Head of Group Carrier Relations & Insurance Mediation
T +43 664 537 17 42
Andrej Krvavica
General Manager
GrECo Croatia
