The potential reason for the slower growth of financial wealth among Croatian citizens lies in the fact that the share of cash and deposits is much higher in Croatia than in Eastern Europe or globally, while bonds, investment funds, and stocks, which could generate higher long-term returns for investors than cash, are much less present, BCG partner and director Krisztian Horvath has said.
Those asset classes, with their combined share of 22%, are only slightly higher than half of the Eastern European average. At the same time, the share of long-term wealth instruments such as life insurance and pension savings constitutes a significantly larger portion (40%) of financial wealth than in Eastern Europe (31%), according to BCG.
The financial wealth of Croatian citizens has grown slower than the Eastern European average
The financial wealth of Croatian citizens, defined as total wealth excluding real estate and debt, has grown at a rate of 6% annually over the past 20 years, while the average for Eastern Europe was 10%.
This significant difference of four percentage points could partially explain the unique phenomenon that the real assets of Croatian households are twice the value of their financial assets, Horvath said.
Real assets include real estate, durable consumer goods, physical gold, and other precious metals at current prices, and for comparison with Croatia, Horvath said, the difference between financial and real assets in Eastern Europe is on average 1.3 times greater in favour of real assets.
The BCG also noted that from 2018 through 2023, the financial wealth of Croatian citizens grew at an annual rate of 7.2%, reaching nearly US$ 100 billion, thus Croatia holds 2.1% of the financial wealth of the Eastern European region.
Croatia has one of the more equitable wealth distributions
As an interesting fact, the BCG points out that Croatia simultaneously has one of the more equitable wealth distributions, with citizens possessing less than $250,000 owning 72% of total wealth, significantly more than in Eastern Europe (42%) or globally (30%).
Although that figure is slowly decreasing, from 75% in 2019, the concentration of wealth in Croatia is lower than elsewhere, said Horvath.
This is particularly notable in the segment of super-rich citizens who own more than $100 million, with this group holding only 3% of total wealth, much less than the global average of 14%.