Croatia’s Woes Leave it Second Only to Bulgaria in Underdevelopment

The problem of emigration in Croatia has been further underlined by weak economic indicators, after Bulgaria, Croatia is the most underdeveloped country in the EU, explains economist Zdeslav Šantić.

As Tomislav Pili/Poslovni Dnevnik writes on the 14th of April, 2019, bringing Croatian average salaries closer to the average salaries of Western Europe, and strengthening institutions, are major factors which could significantly reduce the outflow of people from Croatia to work overseas, according to a study by the Brussels think tank, Centre for Economic and Political Studies (CEPS), which was published last week.

In a piece of research entitled “Mobile Workers of the European Union: A Challenge for Public Finance?” authors Cinzia Alcidi and Daniel Gros discuss current trends in labour mobility within the European Union, and the challenges faced by the countries from which such a workforce leaves.

The research suggests that in the last ten years, the mobility of workers has increased considerably in the EU. While in 2007 only 2.5 percent of workers had left their home countries, in 2017, the share of the mobile working population of the European Union grew to 3.8 percent. Increasing the mobility of European workers is the result of two factors, states CEPS. The first is the enlargement of the EU to the east having occurred in two waves, and mobility has increased much more, especially after the accession of Romania and Bulgaria to the EU back in 2007. Apart from the east-west direction, recent years have seen more labour force mobility from the southern EU member states to the north, due to debt crisis and unemployment growth.

The latest data referenced by CEPS shows that Romania, Lithuania and Croatia have the highest share of workforce abroad, far above the European average. Nearly 20 percent of Romanian citizens earn their money in other EU member states, in Lithuania it is 14.8 percent, and in Croatia, 13.9 percent. For Croatian economists, such data doesn’t really come as a surprise.

“Increasing emigration over the last few years was expected, and the experience of other new EU member states has shown that after EU accession and the labour market opening, emigration strongly increased, and in Croatia, the problem of emigration is further underlined by weak [domestic] economic indicators.

Croatia had one of the longest recessions in Europe, lasting six years in total. At the same time, even after recovery began, the growth dynamics remained insufficient in bringing Croatia closer to the EU’s economic growth. Today, Croatia, after Bulgaria, is the least developed country,” says OTP banka’s economist Zdeslav Šantić.

“The accelerated outflow of the working-age population is particularly evident with the opening up of [Croatia’s access to] the single European market since 2013, which was further strengthened by the deep recession in Croatia. However, with the exit from the migrant crisis, emigration from Croatia, especially among the working-age population, has not diminished but accelerated. Migration motives can be different – from differences in incomes, to employment opportunities, to structural factors,” emphasised Zrinka Živković Matijević, an analyst from RBA.

“The very last factors – a weak institutional environment and (unfavourable) expectations of future economic prosperity (quality of education, satisfaction and trust in politics, future opportunities for generations to come) – are the most common motives for migration of citizens of a particular state who have a higher level of education. In that context, it isn’t surprising that the countries which the most emigration are those with the lowest social progress index.

Regarding the convergence of wages, the fact is that at the very beginning of the transition process, Croatia had a high exchange rate, ie, a higher level of wage adjustment with the EU compared to other new members, following only Slovenia, the RBA analyst said.

“Meanwhile, the pace of wage growth and the standard of measured purchasing power parity in other countries has increased considerably since 2004, while GDP measured by the purchasing power parity in relation to the EU 28 average remains at approximately the same level (around 60 percent of the EU average), stagnant or comparatively behind,” explained Živković Matijević.

Unfortunately, in Croatia, the problem of emigration is not a consequence of current economic trends, Šantić added, saying that the high perception of corruption and nepotism, inefficient state institutions, the huge importance the state carries in overall economic trends and the lack of transparency in the public sector further encourage young people to leave.

“When talking about the emigration of young people, it’s worth mentioning that there’s a lack of a housing care strategy. There’s no regulated rental market yet, but young people have only the option of buying property through multi-year borrowing, and government measures are aimed solely at boosting property purchases,”

An interesting detail in the CEPS survey is the share of faculty-educated mobile workers. Although the usual theory often claims that those who find it the “easiest to leave” are the highly educated, research shows that this is not the case, especially in the case of new EU members such as Croatia.

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Click here for the original article by Tomislav Pili for Poslovni Dnevnik

Source:Total Croatia News