Poor Economic Climate Slowing Down Opening of Croatian Companies

Lauren Simmonds

As Adriano Milovan/Novac writes on the 12th of January, 2020, the poor entrepreneurial/economic climate, money worries and mass emigration are increasingly reflected in the dynamics of opening new Croatian companies and businesses.

According to Fina’s data, about a thousand fewer Croatian companies and trades were founded through Hitro.hr last year than were founded back in 2018, which is a startling decrease of almost 15 percent.

During 2019, a total of 5914 Croatian companies were established through Hitro.hr, according to Fina’s data. Just one year earlier, 6822 Croatian companies and other types of businesses were established through the same service, while back in 2017, the number of established Croatian business entities through that service stood at a much higher 7081. A decrease was also present in 2018 compared to 2017, but it accelerated significantly last year.

Crafts (obrti) recorded a particularly large decline: while 245 were established through Hitro.hr in 2017 and 128 in 2018, only 48 were established through the service last year.

The number of established simple limited liability companies is also down from 2018. In 2018, 4347 were established through Hitro.hr, while 3498 were founded last year, equalling almost a fifth less. On the other hand, in 2019, the number of limited liability companies increased slightly. Back in 2018, 2347 were established through the Hitro.hr service, and 2368 were established last year, which is equal to about one percent more.

Last year, economists were pointing their fingers at a poor and discouraging entrepreneurial climate in Croatia, but also to mass emigration and the demographic crisis, which led to the absence of entrepreneurs in some Croatian municipalities. In addition, they warn that Croatia is too large a public sector, which displaces private initiative. In these circumstances, nothing, not even the ability to quickly start a business through Hitro.hr, can help that much.

”It’s a combination of a number of factors which have been present in Croatia for more than two decades now, which have further enhanced emigration. The Croatian economy is simply not an incentive for startups,” says Damir Novotny, a well known economic analyst.

Novotny points out that in Croatia there are limited possibilities for financing new entrepreneurial ideas through venture capital funds, which in the west play a large role in the first entrepreneurial steps of people with ideas, but who lack the money to navigate entrepreneurial waters. In addition, Novotny adds, the incentives for self-employment provided by the state to the unemployed are relatively small here. In other words, the development of entrepreneurship in Croatia is a major obstacle to an underdeveloped infrastructure, with a particular focus on finance, although some progress has recently been made in this area.

However, Novotny sees perhaps a greater obstacle to a stronger development of entrepreneurship in Croatia in the staggering amount of bureaucracy. Administrative barriers in Croatia remain large and cumbersome, he warns, and regulations are complicated and often changing.

”The entrepreneurial climate in our country is still bad. When abroad, when it comes to administration, you’ve got the “see you once a year” rule, in our country, it’s common for inspections to come knocking on the doors of Croatian companies as soon as they start business, and there are visits that entrepreneurs have to make to various government institutions,” Novotny notes.

He believes that young people should be directed more towards entrepreneurial waters, so that their goal is not to look for jobs in the public sector after graduation, but to decide to start their own businesses. Although changes have taken place in recent years, they are still, according to economists, insufficient.

Until these changes occur, Croatia will continue to be perceived by the world as a country where it is difficult and expensive for business owners to play, with the state playing a major role in economic life.

Make sure to follow our dedicated business page for much more on Croatian companies, entrepreneurs, products and services.


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