The 2007 Index of Economic Freedom survey, conducted by The Heritage Foundation and The Wall Street Journal, was presented in Zagreb on Tuesday by the Adriatic Institute for Public Order.
The Croatian economy was assessed as being 55 per cent free, which puts it in the "mostly unfree" category, and its overall rating was below the regional average, said Natasa Srdoc and Joel Anand Say, co-founders of the Adriatic Institute.
They said that this was partly due to a change in methodology, recalling that last year Croatia was ranked 55th on a list of 161 countries and was categorised as "mostly free".
This year's index uses a new methodology and a new rating system, which includes a scale of 0 to 100, with a higher rating representing greater freedom.
The list is topped, just like last year, by Hong Kong, which is followed by Singapore, Australia, the United States, and New Zealand.
Of the 41 European countries, the freest are Great Britain, Ireland and Luxembourg, while Croatia ranks 37th, followed by Bosnia-Herzegovina, Russia, Ukraine, and Belarus.
Economic freedom is defined as absence of government coercion or constraint on the production, distribution or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself.
The index measures economic freedom across ten specific factors.
Croatia achieved good marks in fiscal freedom (79.9 per cent), monetary freedom (79.3 per cent) and trade freedom (73.6 per cent), but scored below-average ratings in property rights (30 per cent), freedom from corruption (34 per cent), and freedom from government (36.5 per cent). It also performed poorly with regard to investment freedom (50 per cent), labour freedom (52 per cent) business freedom (53.8 per cent) and financial freedom (60 per cent).
Robert Maricak, the CEO of the Croatian company General Graphic, drew attention to numerous obstacles being faced by domestic companies, such as lack of developed market infrastructure, high taxes, and absence of government support for technological development, innovations and exports.
The Index of Economic Freedom shows that Croatia can increase its prosperity if it frees its economy, because the government has too great a presence in the economy compared to other countries, the presenters of the survey said.