Croatia's registered unemployment rate declined for the third consecutive month to 13.2% in April, the lowest level registered since September’s 13.1%, preliminary data from the statistics office showed on May 23. The unemployment rate in April was also significantly lower y/y than the 15.9% recorded in April 2016.
Unemployment rate in the Adriatic country fell to as low as 13.1% in August and September thanks to the favourable tourism season. During winter months, unemployment rose to a peak of 15.4% in January after which it continued to decline from February.
Despite this improvement, the Croatian unemployment rate remains one of the highest in the EU. The significant annual drop in the figures between 2015 and 2016 (17.9% in December 2015 to 14.8% in December 2016) was mainly due to a change in the methodology for collecting data from the labour market introduced in 2016 but there was also some improved growth in the job market.
The recent problems in retail giant Agrokor currently impose risks to Croatia's growth and employment outlook. Agrokor employs more than 40,000 personnel in Croatia.
In April, the IMF revised down its 2017 unemployment rate forecast for Croatia to 13.9% from a previous forecast of 15.9% in the October edition of its World Economic Outlook. The European Commission forecasts unemployment in Croatia will decline to 11.6% in 2017 from 13.3% in 2016. The EC projects unemployment will continue falling, although at a slower pace, as the labour force shrinks more moderately.
Better than expected growth prospects in 2017 were mainly driven by Croatia’s domestic demand – consumption supported by tax cuts, strong tourism revenues and falling unemployment, as well as investment, which is benefitting from favourable financial conditions, lower corporate tax and expected improvements in the absorption capacity of EU funds, the European Bank for Reconstruction and Development (EBRD) said earlier this month in the May edition of its Regional Economic Prospects report, in which it hiked its 2017 GDP growth forecast for Croatia to 2.9% from 2% in the previous November report.
Youth unemployment stands at alarming levels of around 50% in Croatia, as well as Bosnia & Herzegovina and Serbia, compared to about 15% in Western Europe, the EBRD warned in December.