The dire projections of a washout summer season in Croatia – leading to a huge slump in GDP for 2020 given the importance of tourism to the economy – have not been realised. 

Zagreb has opened up its borders to tourists, first from EU countries with low coronavirus (COVID-19) infection rates, later to the whole of the EU and third countries, using an online entry form to facilitate the process. As a result, millions of tourists have flocked to the Adriatic country, so far without resulting in a hike in infections. 

More than 1mn tourist arrivals and 7.2mn overnight stays were reported in Croatia in the first nine days of August alone, according to preliminary data from the eVisitor system quoted by the Croatian National Tourist Board. The figures are around 70% of the 2019 level, which bodes well for Croatia’s overall economy to put in a better than expected performance this year. 

"After an excellent July in which we achieved about 60% of last year's result, in August we are recording even better tourist trends and we are currently at about 70% of last year's result,” said the director of the tourist board, Kristjan Stanicic, on the release of the figures. 

A look at figures for earlier in the year shows that tourism was virtually non-existent during the lockdown month of April, then started a gradual revival after restrictions were eased towards the end of May. 

^{Tourist arrivals in Croatia, 2017-2020. Source: Croatian Bureau of Statistics.} 

The strong figures for July and early August from eVisitor (the state statistics office has so far only released data for June) were influenced by large numbers of holidaymakers from Central European countries, for whom Croatia is easily accessible by road. There are also signs that West Europeans who normally choose exotic long-haul destinations are opting for holidays in countries such as Croatia that are seen as a safer option. 

East Capital analysts made the point in a recent comment published by bne IntelliNews: “Many countries in Southeastern Europe are highly dependent on tourism sectors, and while the initial shock was negative, long-haul tourism is expected to be affected the most by travel restrictions and health regulations, while short-haul should benefit. The higher chance of Europeans travelling to Greece, Croatia, Turkey and Bulgaria instead of vacationing in far-away countries benefits the Balkans in terms of redistribution of tourists flows,” wrote Tim Umberger, partner and deputy head of Eastern Europe at East Capital, and Ilya Kiselev, analyst at East Capital. 

As a result, the eVisitor data shows that the number of arrivals from several major source markets has actually risen compared to last year. The highest number of tourist arrivals in August 1-9 came from Germany, around 225,000 people, which is an increase of 6% compared to the same period of 2019. There was also a year-on-year increase in the number of arrivals from Slovenia (up 10%) and Poland (up 16%) as well as from the domestic market. 

"The markets that reacted best are territorially closer markets for which Croatian destinations are easily accessible by road, such as Germany, Slovenia, Austria, Poland, the Czech Republic, Slovakia and Hungary. We have directed our promotional and information campaigns towards these markets all the time, communicating that Croatia is a safe and well-prepared tourist destination. Also, with the increase in the number of airlines, tourist traffic in the southern parts of Dalmatia has intensified,” Stanicic commented. 

Despite the large numbers of people arriving in the country, Croatia has not so far seen a major rise in new COVID-19 cases. Most days Croatia reports a few dozen new infections, though there have been some recent outbreaks linked to nightclubs, prompting calls for new measures such as a move to outdoor-only events. 

The rebound in tourism is very good news for Croatia, where the sector accounts for a substantial slice of the economy. The World Bank puts the direct contribution of travel and tourism to GDP at 11% in Croatia, just under the 11.67% in Montenegro and above most other European countries. Taking into account both direct and indirect effects, tourism accounts for around a quarter of GDP, according to the World Travel and Tourism Council. A slump in tourism during the summer months would have had a negative impact on employment and on industries that supply the tourist sector such as food producers. 

Back in April, Croatia’s then tourism minister Gari Cappelli warned that the country was preparing for a fall in tourist overnight stays that could range from a best-case scenario of 60% – should things start getting back to normal in May – to a worst-case scenario of 90% this year. The minister told the state news agency at the time that the most likely scenario was for a 75% fall in overnight stays, “assuming we catch some tourism traffic in August, September, October and the end of the year”. 

Cappelli forecast the following month that Croatia would receive tourism revenues of around €4bn this year, around a third of last year’s level. 

Projections made by international financial institutions (IFIs) for Croatia’s economic performance this year were dire, with much of the damage expected to come from the pandemic’s impact on the tourism sector. 

They range from a GDP contraction of 7% forecast by the European Bank for Reconstruction and Development (EBRD) to as much as 10.8% forecast by the European Commission. 

The latter’s forecast, made on July 7, is worse than those for all other EU member states except tourism-dependent Italy (-11.2%) and Spain (-10.9%). 

The World Bank expects Croatia to have the worst affected economy in the emerging Europe region by the coronavirus (COVID-19) pandemic, with a contraction of 9.3% forecast for this year. 

That is more than a full three percentage points worse than the forecasts for the next most affected countries, Bulgaria (-6.2%) and Russia (-6.0%), shows the World Bank’s June 2020 Global Economic Prospects report released on June 8. 

The World Bank forecast at the time that even though travel restrictions were being lifted, many people would be reluctant to take foreign holidays this summer or may no longer have the disposable income to do so; as a result, “much of the summer holiday season [is] likely to be lost … Initial estimates place the global decline in international tourist arrivals between 60% and 80% in 2020”. 

“A key channel for disruption is tourism, which is a mainstay of the Croatian economy (tourist spending accounts for about 20% of GDP),” said EBRD in its latest Regional Economic Prospects report. 

“[A] similar drop [is] expected in the second quarter and a decrease of about 30% in third quarter, mitigated by the fact that Croatia is easily reachable by land from the tourists’ main countries of residence such as Germany, Austria, Slovenia, Hungary and the Czech Republic,” said the report. “As revenues from tourism drop, spillover effects of the crisis are likely to be multiplied, including through a labour market shock (25% of those employed in Croatia are on temporary contracts, and most of them are related to the tourism sector). 

Croatia is also anticipated to see a decline in goods exports, particularly given the country's high exposure to the Italian economy, the site of one of Europe’s worst coronavirus outbreaks. 

Statements from major companies show that while their business was almost non-existent during the lockdown months, they see a more positive tendency during the summer. 

Valamar Riviera reported that in the first half of 2020 its revenues amounted to HRK134mn, or 81% less than in the same period last year. "This is a result of closing properties from March to the end of May and significant disruptions in tourism flows caused by the global COVID-19 pandemic, which continued to affect business volumes in June,” the company said. 

However, the company used the lockdown period to launch action plans to stabilise its operations, and reopened for the summer season in June "with modified products and services that additionally increased guest safety and service quality”. 

Then in June and July, it gradually opened 21 hotels and resorts and all 15 of its campsites. As of end-July, there were over 30,000 guests staying in its properties which, it said, “is a considerable success given the challenges tourism still faces globally”.

“Croatia has a unique opportunity to establish itself as the most desirable destination in the Mediterranean and achieve strong growth in 2021 given its high safety level, geographical and political position in Europe,” Valamar Riviera’s statement added. 

Hotelier Jadran reported good July figures at 78% of the July 2019 level, and a “very good” occupancy rate. 

The company said in an August 7 statement published by the Zagreb Stock Exchange (ZSE) that the figures so far bode well for August too. In the first seven months of the year its total operating income reached 53% of last year’s level. As of early August, all its properties except for three smaller hotels were open and it had acquired three new hotels. 

“Despite the coronavirus pandemic and restrictive measures, we at Jadran had resumed intensive pre-season preparations believing that July, August and September will bring visitors and good financial results. Given the circumstances, we are glad to have been able to complete our investments and upgrades of rooms and amenities to a higher category, which enabled us to achieve over 75% of the last year’s numbers. Our occupancy rate is still good and I believe that this year’s season will exceed the summer 2020 tourism forecast made during the lockdown,” said the president of Jadran’s management board, Goran Fabris.