Despite economic forecast-related fears, there is plenty to be optimistic about in Croatia, with the country joining the eurozone and Schengen area next year, according to Divjak, Topic, Bahtijarevic & Krka Senior Partner Damir Topic.
"It is a surprisingly busy period for the legal industry in Croatia," Topic says. "We experienced a bit of a slowdown in May, which was clearly related to the war in Ukraine. However, the situation changed rather suddenly to an extent that at the moment, we expect that we will not have a decent break in summer. The overall sentiment in Europe was that the business sector was pushing the break to understand what happens first. Still, now we feel that the situation is calming down." Among the busiest sectors, Topic says, "driven by concerns regarding the energy supply after the cut of gas supply from Russia, there is a special interest in energy, in particular, in transactions related to hydro, solar, and wind plants."
"As of January 1, 2023, Croatia will become a member of the eurozone," Topic notes, adding: "Our currency – the Croatian Kuna will be replaced by the euro. This will have an interesting effect, as introducing the euro normally leads to inflation, which is already record-high in Croatia." On top of that, as of January, next year, Croatia will also be a part of Schengen, resulting in easier travel and exchange of goods and services. "This will have a huge impact on businesses and our lives," he explains. "Rating agencies have already lifted the credit rating of the state by two notches, meaning that we are now a decent area for investment. We feel that there are plenty of reasons to be optimistic and happy."
Despite that, Topic points out, "everyone seems to be quite scared about the winter, considering energy prices forecasts. Yet, we are a relatively small country with a rather low demand for gas, and that, together with the access to the LNG terminal on island Krk which allows us to transport gas from anywhere in the world, is a good ground to feel optimistic about the future." Overall, Topic adds that he doesn't expect that crisis in Croatia will be as bad as before. "In the past, Croatia was one of the last EU countries to formally end the crisis, but this time, we expect to be the frontrunners to come out of it."
One noteworthy recent trend, Topic notes, is the moves and spin-offs in Croatian law firms. "This is a common trend among all major Croatian firms, like in other CEE jurisdictions, but contrary to the western world where law firms are rather merging," he says. "It could be explained by factors such as generational change or the absence of proper internal structures, but still, we all tend to struggle to maintain lawyers and face constant spin-offs."
Other than that, Topic highlights that the Croatian parliament will be very busy after the summer break. "There are thousands of laws and bylaws, referencing Croatian Kuna as a currency, which will cease to exist in five months," he points out. "For that reason, the legislative body is busy amending these laws to reflect the values in euros. This alone creates plenty of work for the parliament to prepare for January 1, 2023."