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Croatia joins the European Union and "turn the page"

The economy of the Balkan country has not yet overcome the shock of the 1991-1995 Yugoslav wars that hit the industrial system in particular. Among the leading activities is the service sector, and tourism which accounts for 16% of the GDP. After the drop experienced in recent years in exports of Italian agricultural machinery the sector is now recovering

by Giovanni M. Losavio
January 2014 | Back

July 1, 2013 Croatia became the 28th nation to join the European Union, marking the completion of a dramatic process which brought the nation close to Europe, a process begun in the early 90ies when Zagreb broke from the Socialist Federal Republic of Yugoslavia. The independence of Croatia, more than that of Slovenia, triggered the fierce ethnic conflicts that swept the Balkan peninsula between 1991 and 1995. The Dayton Agreement (USA) finally put an end to one of the darkest periods of contemporary European history. Moreover the history of the Balkan countries has always been characterized by conflict, more or less latent. Croatia was once the southern border of the Austria-Hungarian Empire, it was dominated for a century by the Republic of Venice and then by Napoleon, it later became the dividing line between the areas of influence of three empires: to the north the Austria-Hungarian Empire, Russia to the east (through the mediation of Serbia) and, most importantly, the Ottoman empire to the south, where Zagabria acted as a sort of natural barrier for its containment (a military border). This function seems to have been imposed by the very morphology of the Croatian land, a barrier shaped like an upside-down U that surrounds Bosnia and Herzegovina and was the furthest point of the empire of Constantinople in Europe until 1878. Also in more recent years Croatia continued to be border territory. This was the case in the period that followed WWII when Croatia, part of the Socialist Federal Republic of Yugoslavia, was the most western nation of the Soviet bloc, and then became – following the conflict between the Yugoslav President Tito and the Soviet Union – a buffer state between the east and the west. This geopolitical scenario lasted for some decades and drastically changed May 4, 1980 with the death of Tito (who was, incidentally, Croatian) and with the consequent revival of independence movements that contributed to the dissolution of the Federation, at the time in the grip of a dramatic economic crisis and of the hegemony of the Greater Serbia.


A de-industrialized economic system.

The economic system in Croatia inherited many traits from the Austria-Hungarian Empire, and for a long time was one of the most dynamic in the former Yugoslavia. The war that lasted from 1991 to 1995 altered its features, weakening in particular the industrial sector which seems to have not yet overcome the consequences of such a long-lasting conflict. A recent report on the economy in the country issued by ICE (Italian Foreign Trade Agency for the the promotion and internationalization of Italian companies) reveals that “the last twenty years have been characterized by a marked process of de-industrialization. The contribution of the industrial sector to the GDP has gone from about one third (30%), recorded in the early 1990s, to about 17% recorded in these last years.” This situation is made worse by the international economic crisis: in 2009 industrial production shrank by 9.2% and the effects were felt in the following years. During the first months of 2013 there has on the contrary been a slight change of trend. In the near future the industrial sector, like the rest of the economy in Croatia – GDP was negative throughout the 2009-2012 period with the exception of the year 2011 in which it remained stable – is  expected to benefit from EU membership and from the EU funds from Brussels which, according to Ice amount to two million euro. From a structural point of view the industry in Croatia is led by the food sector, power, gas and water supply, metalworking and by the mechanical engineering industry. Also machinery production and shipbuilding play an important role, though the real leader of the national production system is the service sector that accounts for two thirds of the GDP. In Croatia  the tertiary sector is a synonym especially of tourism, which contributes 16% to the GDP and accounts for about 40% of the total export of goods and services (as reported by Ice in 2010). The nation can in fact count on a significant cultural and natural heritage that comprises 5,700 km of coast, 1,246 islands and numerous sites that are protected by Unesco.


The primary sector: the role of cereal production and viticulture.

Presently agriculture accounts for 5% of the GDP (it was 10% in 1990) and is very diverse depending on climatic, environmental and land conditions that allow the cultivation of a great variety of crops, that go from the plains of Slovenia and northern Croatia (with a continental climate) to the vast coastal area characterized by the Mediterranean climate, and finally the Dinaric Alps mountain area, with an Alpine climate, that stretches from north to south across the center-western part of the country. According to data provided by ICE, the strong point of agriculture in Croatia is cereal grain production (3.4 million tons a year) followed by forage (1 million tons), sugar beets and oil bearing plants. Also Mediterranean crops occupy an important position, in particular apples, prunes and mandarins, and olives – and the production of olive oil – present mostly in the coastal areas. Of great importance is also viticulture which can be found in areas that are not suitable for farming, and represents one of the many areas of specialization of the primary sector in Croatia (in the country there are 133 million of vines), together with livestock breeding. According to Ice in 2010 livestock amounted to 9.5 million birds, 444,000 head of cattle, 1.3 million pigs and about 700,000 sheep and goats.


Agricultural mechanization, a plunge in Italian export to Croatia.

Although in the year 2000 Italy was the main commercial partner of Croatia and the country's main supplier (especially for yarns, fuel, iron, steel and furniture), starting in 2008 Italian exports of agricultural machinery have been drastically reduced. In fact between 2008 and 2012 Italy's export of tractors alone went from 871 to 190 units, from a value of 21.1 millions to 4.1 million of euros. If we consider the exports for the whole agricultural machinery sector in the same period (tractors and equipment) the plunge is even more evident with a contraction from 48.1 million to 18.4 millions of euros. The period that goes from January to July 2013 shows a reversal of this trend, with an increase of the number of tractors exported to Croatia (172 against the 134 sold in the first seven months of 2012) and of the value of export referred to the whole sector of agricultural machinery (tractors and equipment) that has grown by 5.5%, for a value of 12.2 millions of euros.



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