Manufacturing products in Croatia: technology, supply and demand

The purpose of this paper was to explore distinguishing features of Croatian manufacturing industry. The share of low technology industries is rising, and overall technology structure exhibits negative trends. Such changes point to the loss of competitive edge and diminishing ability to produce high value added products. The main hypothesis is that the technological gap between domestic supply and demand is widening, especially in the area of sophisticated consumer goods and investment goods. In addition to that, the structure of personal consumption and investment is limiting antirecessionary nature of fiscal policy because of technological gap widening. There is a clear need for technological upgrading in order to reduce the gap. Otherwise, the GDP growth in near future will exacerbate prevailing imbalances in international trade. Croatia is, on average, more exposed to international competition on domestic market in comparison to NMS. Total share of imports in domestic demand for manufacturing products in Croatia has been 58,6%. There is additional room for domestic producers to takeover additional share of domestic market in the area of low-technology products. HHI index of market concentration, as well as a share of large companies in total turnover, point to the low level of market competition among domestic producers. Reprinted by permission of the Croatian Economics Association