On the first day of 2023, Croatia officially joined the Eurozone and the Schengen Agreement which became the 20th country in the Eurozone and the 28th member of the Schengen Area on the first day of 2023. This is also another expansion of the Eurozone since the inclusion of Lithuania in 2015.
Croatian citizens will be able to pay in both euros and Croatian kuna for two weeks, after which the Croatian kuna will be completely retired from history.
The kuna and the euro will be exchanged at an exchange rate of 7.5345 kuna to 1 euro. Croatian officials require businesses to mark all goods in euros and kuna throughout 2023 in order to prevent price increases.
Croatia will abolish border checks with the majority of EU countries after joining the Schengen agreement, but also strengthen border controls with non-Schengen neighbors Serbia, Montenegro and Bosnia and Herzegovina.
Croatian Prime Minister Andrej Plenkovic said that Croatia would benefit from the removal of border controls. Currently 80% of Croatia’s goods and 75% of tourists come from Schengen countries. Croatia, with a population of just 3.9 million, attracted more than 16 million foreign tourists in the first 11 months of 2022. According to the European Commission’s tourism report, tourism industry accounted for 25% of Croatia’s annual GDP before the outbreak.
European Commission President von der Leyen then said, “Croatia’s accession will strengthen the country’s economy and the euro itself, which is a symbol of European strength and solidarity.” However, there are still voices in Croatia that are skeptical of the euro.
A poll published by Croatian research agency Improve in mid-2022 showed that only 42 percent of Croatians support the introduction of the euro, while 41 percent of respondents oppose the new currency. Seventy-five percent of those surveyed believe the biggest risk of introducing the euro is price inflation due to price disruption.
This is the reason why Croatian officials are asking merchants to mark all goods in both euros and kuna throughout 2023. The Croatian Central Bank denied that the euro would bring inflation. As in other EU countries, inflation in Croatia is mainly driven by rising fuel and food prices. Eurostat data show Croatian inflation at 12.6%, 12.7% and 13% from September to November. It’s higher than the overall Eurozone and EU levels.