Tourism Is Most Important Sector, But How Much Are We Making?

By 23 April 2018

How well is the Croatian economy actually doing owing to tourism? Despite the constant talks and praise, it would seem that nobody actually knows.

As Poslovni Dnevnik/Marija Crnjak writes on the 23rd of April, 2018, although the Tourism Institute found discovered in the Satellite Tourism Account (TSA), that the direct share of tourism in relation to Croatia's GDP was around 10.4 percent four years ago, the latest estimates show that the total tourism share in Croatia is between 14 and 16 percent of GDP, meaning that the real impact and significance tourism actually has on the Croatian economy is, rather bizarrely, given the banging of the drum, relatively unknown.

The calculations of the Croatian National Bank (HNB) on tourism revenues are also apparently incorrect, since it uses a survey method that follows the spending and habits of foreign guests in Croatia exclusively, and does not actually include the spending or the habits of domestic tourists, who undoubtedly also make up a large part of overall tourism within the country.

The Central Bureau of Statistics also doesn't actually take revenues from the nautical sector into its various calculations either, and nobody can track so-called side segments, such as family accommodation, which isn't in the VAT system itself. Similarly, there is almost no way to follow one-day excursions without the inclusion of at least one overnight stay.

This was the conclusion arrived to at the round table on the topic of the impact of tourism on Croatia's economy, which was organised by the Institute for Tourism and took place on Friday.

As is already widely known, the aforementioned institute, in cooperation with the Ministry of Tourism and the Central Bureau of Statistics, is working on a satellite balance project aimed at identifying the direct, indirect and induced economic effects of tourism, but when the project will reach completion remains unknown as yet.

"Tourism is difficult to measure because it's a segment which involves many intertwined business sectors, including agriculture, the food industry, trade, and services. Although it's the strongest support of the Croatian economy, the state hasn't invested enough in a national satellite billing project to obtain all of the current data,'' stated Oliver Kesar, a professor from the Faculty of Economics in Zagreb.

For the time being, however, it is well-known that the share of tourism in the total economy is still very heavily influenced by the country's high seasonality, the large import component and the large share of accommodation facilities which can't be found in the VAT system.

"Precisely because of seasonality, the Croatian economy doesn't support the tourist demand, it doesn't have the capacity to meet a highly concentrated season with low out-of-season demand. As a result, the sector is forced to import seasonal workers, which is why we've got a relatively low employment rate in tourism, relative to tourism income, and also in relation to our competitors,'' explained Marina Tkalec from the Institute of Economics.

Marina Tkalec believes that the real tax burden on tourism should be investigated within the context of a large number of lump sums outside of the VAT system, which the state stimulates much more than the corporate segment.

Namely, the estimate is that between 30-40 million overnight stays pass without one kuna of VAT, and just last year alone, a massive total of 87 million overnights were realised in Croatia.