In the first ten months of this year, 39% more residence and work permits were issued than last year (147,301), including two-thirds for work in construction and tourism.
It is estimated that between 80,000 and 100,000 foreigners are working in Croatia, which is 5-6% of this year's workforce.
Given the solid economic growth and constant labour market tensions, it is estimated that between 170,000 and 175,000 work permits will have been issued this year and more than 200,000 in 2024, HUP says, adding that the number of foreign workers could reach between 400,000 and 500,000 by 2030, on the assumption that GDP will grow about 2.5% over the next seven years.
HUP cites Croatian National Bank analyses based on demographic projections according to which the working age population, those aged 24-65, could shrink by 400,000 in the next 20 years.
HUP analyses show that the hiring of foreigners can be facilitated by expanding the shortage occupation list and extending residence and work permits from one to two or three years and from six to nine months for seasonal workers.
HUP also advocates simplifying work permit issuance procedures.
HUP says foreign workers' income will increase 15-18% this year.
A high labour demand, considerable aid for reskilling and upskilling under the National Recovery and Resilience Plan encourages employee migration to growing economic sectors, and the pressure on pay growth, along with decreasing inflation, supports a recovery of real wages and purchasing power, HUP notes.
It expects an average employment growth of 2.5% this year and a slowing down to 1.5% in 2024, which, thanks to solid economic activity, is markedly above the average employment growth in the EU of 1% this year and 0.4% in 2024.
This year HUP expects gross wages to increase 15-18%, a 7.5% inflation rate, an increasingly important role of real wages in the public sector, and a 2.7% employment growth thanks to stronger immigration and stronger economic activity.
Given the estimated 8.5% nominal gross pay growth in 2024 and the possibility of an average growth of non-taxable income above 20%, the growth of total income could exceed 12%.
Despite an inflation rate above the euro area average, in 2024 Croatia will achieve a strong real growth of gross wages for the second consecutive year and a real growth of total income for the third year in a row.
However, HUP notes, due to a labour shortage, tightened competition on the EU single market, and lower inflation, the real pay growth in 2024 reflects to a large extent a 32% increase of the salary budget and a record-high minimum wage increase, by 20% in comparison with other EU member states.
It is no surprise that the real pay growth, along with an accelerated convergence of low services' prices, about 30% below the EU average, will keep inflation above the euro area average in the years ahead, which increases the risk of a spiral of wages and retail prices, HUP says.
That's why, it adds, productivity growth is the main prerequisite for a sustainable growth of wages and their convergence to the EU average.