Clare Nuttall in Bucharest -

Croatia’s incumbent president Ivo Josipovic is fighting to hold on to his position after securing only a tiny margin over his conservative rival Kolinda Grabar-Kitarovic in the first round of voting. The second round on January 11 is likely to be extremely close.

Josipovic, backed by the ruling Social Democratic Party (SDP), was expected to be an easy winner in the first round of the election on December 28, with some polls indicating he could be re-elected for a second five-year term in the first round. However, he took just 38.46% of the vote to Grabar-Kitarovic’s 37.22%, giving him a margin of under 23,000 votes, according to the State Electoral Commission (DIP).

The unexpectedly low support for Josipovic partly reflects Croatia’s poor economic performance, as Josipovic's term has coincided with a severe and lengthy recession. But the overall turnout was extremely low at just 47.12% of the electorate, and the high level of support for independent candidates - notably third placed Ivan Sincic - illustrates disillusionment not just with the SDP but with the entire political establishment, including the opposition Croatian Democratic Union (HDZ) that is backing Grabar-Kitarovic.

Corruption was also highlighted in 2014 with the arrest of Zagreb mayor Milan Bandic and his associates on corruption charges in October. The arrests were part of an ongoing anti-graft campaign in Croatia, whose other high profile targets have included former prime minister Ivo Sanader, Marina Lovric-Merzel, the former prefect of Sisak-Moslavina county, and Zeljko Sabo, the former mayor of the eastern Croatian city of Vukovar.

Josipovic took office in February 2010 after winning the second round of the 2010 presidential elections with 60.26% of the vote, defeating Bandic, an independent candidate. His electoral programme for his second five-year term as president is based on constitutional changes. If adopted, the new constitution would introduce changes to the voting method for general elections and referendum organisation, as well as a new territorial organisation of the country.

These, however, have failed to strike much of a chord with a population that has endured six consecutive years of economic recession. While other economies in the region have revived since the crisis hit back in 2009, Croatia has remained in recession. The International Monetary Fund (IMF) forecasts a contraction of 0.8% in 2014. Going forward, Croatia’s central bank, the IMF and the European Commission all expect the country’s economy to return to modest growth in 2015, although some economists have already taken a more sceptical stance and are predicting a seventh straight year of economic decline.

“The economy continues to face long-standing problems of weak competitiveness, a large public sector and difficulties in the business environment,” according to the EBRD’s 2014 Transition Report. For the economy to grow in the medium term, Zagreb will need to carry out reforms to public administration and economic governance.

While the position of president is largely ceremonial, the elections are seen as an important litmus test for parliamentary elections due to take place in late 2015 or early 2016. Support for the ruling SDP has already declined and Josipovic’s poor performance indicates a serious erosion of its support base.

Grabar-Kitarovic’s electoral platform is mainly focused on economic growth as key to development. She has pledged to introduce lower taxes for businesses, supports social stability and has declared no tolerance of corruption. If successful, Grabar-Kitarovic, a former European integration minister and assistant secretary general for public diplomacy at Nato, would become Croatia’s first female president and the first conservative to hold the position for 15 years.

She is better positioned than Josipovic to hoover up votes from other first round candidates, since she is expected to attract votes from those who backed fellow rightwinger Kujundzic, the fourth-placed candidate with 6.3% of votes cast.

An unknown factor is whether any of the 16.42% of voters who backed Sincic in the first round will vote for either Josipovic or Grabar-Kitarovic in the second, or whether they will reject both the two established politicians.

Sincic was a rank outsider in the presidential race. The long-haired designer-stubbled 25-year-old is supported by an association fighting forced evictions. He focussed his campaign on attacks on the main political parties as well as the EU and Nato, and called for marijuana to be legalised.

Commenting after the first round, Sincic told his supporters to cast their second round votes according “to their conscience”, Hina news agency reported.