Project Report on Economics - Croatian Economy

ECONOMICS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Impact of trading bloc on Croatia...........................................................................................1
Effects of Globalization on Croatia's trade relations..............................................................4
The exchange rate and the country’s currency in relation to trade.......................................10
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

ILLUSTRATION INDEX
Illustration 1: Economies of Scale...................................................................................................3
Illustration 2: Croatia Exports and Imports.....................................................................................6
Illustration 3: Growth rate of GDP..................................................................................................6
Illustration 4: Ricardian Model........................................................................................................7
Illustration 5: Heckscher–Ohlin model............................................................................................8
Illustration 6: GDP Data................................................................................................................10
Illustration 7: Equilibrium foreign exchange rate for Croatia.......................................................12

INTRODUCTION
The economy is a term which indicates production and consumption of goods and
services by different organizations. The economic balance is crucial for uplifting of society and
its overall growth. A country generates wealth from production, distribution and consumption of
various services and several products developed by business and industries.
Croatian economy is one of the strongest economy amongst all in European Union. It has
a strong GDP based economy. The country went into an open market economy after collapsing
of the socialist system which incorporated an era of industrialization. Thus, the present report
incorporates transformation of Croatian economy and impact of Yugoslavia. The regional trading
bloc helped Croatia macroeconomic stabilisation. The various effects of globalization and
exchange rate impact on overall economic development. Croatia has faced a huge load from war
damages costing the economy around $ 37.1 billion (GDP in Croatia, 2018). The shift from
socialist economy to open market has introduced new currency known as Croatian Kuna.
Impact of trading bloc on Croatia
Trading bloc refers to intergovernmental agreements signed by states which reduces trade
barriers, improve market efficiency, enhances economies of scale and increases foreign direct
investment (Asongu and De Moor, 2017). The Croatia is former member of European Union,
World Trade Organization and European Free Trade Agreement after transitioned from
Yugoslavia socialist economy. Croatia implemented an ambitious transformation programme
based on gradual opening of trade and investment (Dreher, Sturm and Ursprung, 2008).
Croatia joined European Union since 2013. Croatia is member of WTO from the year
2000 though the country joined EFTA on 12 April 2014 (Pill and et al., 2012). The European
Union has helped rebuild Croatian economy by facilitating infrastructure, and financing from
World Bank to improve health sector and provide assistance to financial enterprises and
agricultural sectors thereby providing $ 1 billion (Fleer, Hedegaard, and Tudge, 2012). The
nation’s economy started to experience economic growth in 2015 as access to EU markets helped
connect prosperous parts of the economy to global value chains (Radoševi, 2014). With reduced
trade barriers and tariff the country GDP rose to more than $ 50 billion by exporting refined
petroleum, electricity, packaged medicament and swam wood which accounts to 21 million in
total (GDP in Croatia, 2018).
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