ECONOMIC CRISIS IN CROATIA

Croatia is becoming the 28th member of the European Union on July 1st, 2013. Croatia has gone a long way from a socialist republic to an independent country recognized as one of the economic tigers of the Western Balkans in the first decade of the 21st century. Croatia has been hit by the global crisis, which turned out to be a huge external shock for the region of the Western Balkans. Although it does not enter the economy through the direct channels, as local banks have not been engaged in toxic assets trade, but indirect channels, like the decrease of FDI, which deepens foreign trade deficits, slow credit growth or decrease of remittance which lead to economic disturbances during the last phase of the European integration process. Small economies, like Croatia, are exposed much more to the effects of any disturbances on the international scene. They are dependent on foreign trade and the inflow of FDI, while their demand and inflation rate are affected by the pace of changes in big economies. The article addresses the problem of economic development in the country which needs to deal with a problem of the economic crisis infection and the EU integration process. The article studies the economic situation in Croatia which is the consequence of a recovery plan undertaken by the Croatian government.