The End of HRK Currency: Implications for Croatia’s Economy and Tourism

Croatia changed from the HRK currency to the euro. This change has made life different for travelers and businesses. The euro makes paying for things easier. People do not have to worry about changing money. There are quick benefits for everyone. Croatia’s economy is doing better now. Using the euro helps the country grow and stay strong. More tourists are coming, and they are spending more money. In 2023, tourism made $15.6 billion. Stopping the HRK currency helps tourism even more. It is now easier and clearer to buy things. The euro also makes Croatia more popular around the world.

Highlights

• Croatia started using the euro instead of the HRK on January 1, 2023. This made it easier for people to travel and pay for things. Both visitors and locals found it simpler.

• The euro helped Croatian businesses trade better with other European countries. It also brought in more money from other countries.

• The euro made prices clearer. People could compare costs more easily in Europe.

• Croatia’s economy became stronger and grew faster after using the euro. There were some price increases because of inflation.

• More tourists came after the change. But higher prices and service problems mean Croatia must keep getting better to compete.

HRK Currency to Euro

Transition Process

Croatia wanted to use the euro instead of the HRK currency. The country planned this change for many years.

1. In April 2015, the president talked about using the euro.

2. By November 2017, the prime minister said Croatia should join the euro area by 2025.

3. On July 5, 2019, Croatia sent a letter to the European Union to begin the process.

4. In July 2020, Croatia joined the Exchange Rate Mechanism II. This is an important step before using the euro.

5. The government picked January 1, 2023, as the date to start using the euro.

6. In 2021 and 2022, Croatia made new laws, made euro coins, and told people about the change.

7. The European Union said yes to Croatia joining the eurozone in July 2022.

8. On January 1, 2023, the euro became the official money. People could not use the HRK currency to pay anymore.

Croatia started using the euro when it joined the Schengen Area. This made it easier for people to travel between European Union countries. The change was a big moment for Croatia to be part of the European Union and the eurozone.

National Implementation

The Croatian National Bank helped make the switch to the euro go well. The bank lowered the amount of money banks had to keep, so it matched eurozone rules. It also removed some rules about foreign money, which helped banks get ready. The National Bank worked with banks to make sure people could get euro coins and bills. It also changed all money and payments from the HRK currency to the euro.

The National Bank wanted to keep the economy safe during the change. It told people about the good things that come with the euro, like less risk for public money. The bank planned carefully, so Croatia joined the euro area without big problems. Now, Croatia is the 20th country in the eurozone and is fully part of the European Union’s economy.

For Travelers

Currency Exchange

Travelers find it much easier to handle money in Croatia now. Since January 2023, the euro is the official currency. Visitors do not need to change their money to kuna anymore. They can use the euro for everything they buy.

• Bank cards like Revolut or Wise give good exchange rates and low fees.

• ATMs are easy to find in cities and tourist spots. Most ATMs give euros, but some in quiet places may still give kuna.

• Travelers should pick to pay in euros at ATMs to avoid extra fees.

• Exchange offices, called Mjenjačnica, are still open but often have worse rates, especially in busy tourist spots.

• Before the euro, one euro was about 7.4 HRK.

• It is smart to carry some cash, especially in small towns where cards may not work.

Travelers do not need to worry about losing money on exchanges or carrying lots of cash. The euro makes travel in Croatia easier and safer.

Payment Convenience

Using the euro has made paying much easier for visitors. Most hotels, restaurants, and shops in tourist places take big credit and debit cards like Visa and Mastercard. Many places also take contactless payments, Google Pay, and Apple Pay. You can buy things under €40 without a PIN, so small buys are fast.

ATMs for international cards are even in the countryside. Travelers can get euros when they need them. Even though cards work in more places, it is still good to have cash for small things or tips.

The euro puts Croatia in line with other European Union countries. It is now easier for visitors to handle their money. This change helps tourism by making money matters simpler.

Price Transparency

Switching to the euro makes prices clearer for everyone. Visitors can now compare prices in different European countries easily. This helps them spend smarter and plan their money better.

Croatian tourists traveling in the eurozone also benefit. They can use the same money in many countries. This makes trips easier and less confusing. The euro removes worries about exchange rates and extra costs.

For Businesses

Trade and Investment

The euro has changed how Croatian companies work. Now, they do not worry about changing money. This makes trading with euro area countries much easier. Companies use the same money for payments and contracts. Trade has grown, and more people from other countries invest in Croatia. In the last three years, Croatia’s real GDP grew faster than the euro area by three points. Investors think Croatia is a safer place for their money. The country’s good politics and strong ties with the European Union help people trust it. Property prices, especially on the Adriatic Coast, have gone up. More buyers from other countries are buying homes. About 20% of homes are now bought by people from abroad. The euro also brings more investment in tourism, IT, and energy.

Operational Costs

Businesses in Croatia now spend less to run their companies. They do not pay extra fees to change money. Paying suppliers and partners in the euro area is faster and cheaper. Many companies already used the euro for deposits and loans. The switch made daily work easier. Tourism businesses changed prices to match what visitors from richer EU countries can pay. Some things, like pastries and coffee, cost a little more now. These price changes are small and often happen because of inflation. The euro helps businesses plan and manage their money better.

Financial Stability

The euro has made Croatian companies more stable with money. Bond yields dropped a lot, so investors trust Croatia more. Credit rating agencies gave Croatia better scores. This makes it cheaper for businesses to borrow money. Before the euro, about half of all bank deposits and loans were already in euros. The switch made currency risk smaller. The euro lets Croatia use the European Stability Mechanism. This is a safety net for hard times. The Finance Minister said the euro will help the economy stay strong and bring more investment. Good trade with the euro area and smart government plans help keep things stable.

Impact on Croatian Economy

Inflation and Prices

The euro changed many things in Croatia’s economy. People started to notice prices more. When Croatia joined the eurozone, some worried about prices going up. Many thought switching to the euro would make things cost more. Studies from the Croatian National Bank and the European Central Bank found the euro only made prices go up a little, about 0.4 percentage points. Most of the inflation came from other things, like problems with supplies and changes in the world market.

Before the euro, Croatia’s inflation rate was 5.4% in May 2022. This was just above the level needed to join the eurozone. In 2022, prices went up fast. Some things cost 15% to 20% more. But these big jumps were not because of the euro. After the switch, food prices rose 18% in July 2023. This was much higher than the European Union average. The government checked stores and found about 25% had unfair price hikes. More than 240 businesses got fines for raising prices without a good reason. Some stores rounded up prices or raised them by up to 50%. This made life harder for many people.

Even with these problems, the euro made prices easier to understand. People could compare costs with other European Union countries. This helped travelers and locals make smarter choices. While some prices did go up, most of the problem came from outside the country, not just the euro.

Economic Stability

Using the euro made Croatia’s economy more stable. Joining the eurozone took away exchange rate worries. The country did not have to think about changes between the kuna and the euro anymore. This made the financial system safer and easier to predict.

Croatia’s credit ratings got better after using the euro. Investors felt their money was safer in Croatia. The economy grew by 6.2% in 2022. This was because people spent more and tourism was busy. The government kept a small budget surplus. Public debt dropped to about 69% of GDP, which was lower than before the pandemic.

Banks in Croatia stayed strong. They made money, had enough capital, and could lend money. Joining the eurozone also made it easier for Croatia to get money from capital markets. The International Monetary Fund said the euro helped Croatia by lowering currency risks and keeping the country’s finances healthy.

Growth Prospects

Croatia’s future growth looks good. The International Monetary Fund thinks real GDP will grow by 3.4% in 2024 and 2.9% in 2025. This means Croatia’s economy will keep growing, even if the fast recovery after the pandemic slows down. Growth will still be higher than in many other eurozone countries.

People spending money and investments from the National Recovery and Resilience Plan will help the economy. The government wants to control spending and focus on reforms. These actions will help keep the budget stable and support growth for a long time.

Inflation should go down slowly but may stay higher than the eurozone average until late 2025. Services inflation might stay high because wages are rising and tourism is strong. The government needs to watch out for risks like not enough workers, changes in prices for goods, and possible recessions in nearby places.

Croatia’s economy keeps getting stronger because it is part of the eurozone and the European Union. The euro has brought more stability, clearer prices, and better chances for growth in the future.

Tourism in Croatia

Visitor Numbers

Croatia had more visitors after it started using the euro. In 2023, 20.6 million people visited. This was more than the 18.9 million who came in 2022. The increase happened after Croatia joined the Schengen Area and switched to the euro. But in 2024, the number dropped a little to 20.2 million. Travel is now more expensive because of higher prices and inflation. Croatia is now one of the pricier places in Europe. Travelers think more about cost and value before booking trips. Croatia is still a favorite spot, but people worry about too many tourists and the environment.

Spending Patterns

Tourists in Croatia are spending their money differently now. In early 2024, more tourists came and stayed overnight, up by over 15%. Most new visitors were from Eastern Europe. Fewer people came from Western Europe, with a drop of up to 10%. Even with more tourists, many new hotels and apartments are empty. Tourists spend less on eating out and fun activities. Many cook their own food instead of going to restaurants. Restaurant sales went down by about 20%. Some islands saw even bigger drops, up to 50%. Prices for hotels and services are higher because of inflation and the euro. Tourists now watch their budgets more closely.

• More visitors from Eastern Europe, fewer from Western Europe

• More places to stay, but fewer people pay for extra services

• Tourists spend less on eating out and tours

Competitiveness

Croatia is still a top place to visit in the eurozone, but there are problems. The country is behind other EU countries in things like roads, culture, and technology. These issues can make trips less fun for visitors. During the pandemic, Croatia got more tourists back faster than Spain, Portugal, or Cyprus. But to stay popular, Croatia needs to improve its services and buildings. The euro made travel easier, but higher prices and service problems could hurt Croatia’s future as a tourist spot.

Government and Business Response

Price Controls

The Croatian government made rules to help people during the euro switch. Leaders wanted to stop unfair price jumps and keep things open.

• Stores had to show prices in both kuna and euros until 2023 ended. This rule helped people see if prices changed quickly.

• The government created a group of inspectors. Many inspectors checked shops and restaurants all over Croatia.

• Inspectors could give fines if stores did not show both prices or tried to hide real costs.

• Groups like the Croatian Association for Consumer Protection watched for price tricks and told on bad stores.

• Banks let people change kuna coins and bills to euros for free. This made it easier for shoppers and store owners.

Public Information

Many people in Croatia were scared about higher prices and losing control of their money. Surveys showed almost half of people worried about bad effects from the euro. More than 80% feared prices would go up. The government and central bank tried to calm these worries. They gave clear facts about how the euro would change prices and the economy. Experts from the Croatian National Bank and European Central Bank said the euro only made prices go up a little. They also said Croatia’s credit rating got better after joining the eurozone.

Adaptation Strategies

Businesses in Croatia used different ways to handle the new money.

• Companies like Končar Group found it easier to work with eurozone partners.

• The long-time link between the kuna and euro made the change smoother.

• Many businesses worked on getting better at their jobs and using new tech.

• The euro helped important areas like tourism and factories grow.

• The central bank leader said the euro made the economy stronger and brought more foreign investors.

• Big changes in the economy kept going, helped by a better business climate.

Croatia started using the euro and saw both good and hard things happen.

• Travelers can now cross borders easily and pay for things without trouble. Businesses are trading more and getting more money from other countries.

• Experts say the economy is stronger, but there are still problems like higher prices and not enough workers.

• The future looks good for Croatia, with more tourists coming and more trade with other countries.
  
  Croatia needs to keep making its government and roads better to stay successful.

FAQ

What happened to the Croatian kuna (HRK)?

People do not use the Croatian kuna to pay anymore. Croatia started using the euro as its main money on January 1, 2023. Now, everyone pays with euros for everything.

Can travelers still exchange kuna for euros?

Travelers can swap leftover kuna for euros at banks in Croatia until the end of 2023. After that, only the Croatian National Bank will change kuna coins and bills. There are different deadlines for each type.

Did prices increase after Croatia switched to the euro?

Prices went up a little after Croatia started using the euro. Most of the price jumps were because of world inflation, not just the new money. The government watched prices and gave fines to businesses that raised prices unfairly.

Is Croatia more expensive for tourists now?

Croatia costs more now, especially in places with lots of tourists. Higher prices are from both inflation and the euro. Tourists can check prices in other eurozone countries to get the best deals.

Do businesses in Croatia accept other currencies?

Businesses in Croatia only take euros for payments. Some tourist shops might let you use big credit cards. Using euros helps make payments easy and stops extra fees.