Why has Croatia’s shipbuilding industry depended on state subsidies?

Croatia’s shipbuilding industry has historically relied on state subsidies due to structural challenges rooted in the country's industrial development. Following 1945, Croatia underwent rapid industrialization under socialist policies, which often prioritized the creation of large-scale enterprises—sometimes referred to as "political factories"—to boost political prestige rather than to ensure rational resource allocation or long-term economic efficiency.1

While these investments initially helped absorb a rapidly urbanizing workforce and contributed significantly to the nation's GDP, many of these sectors struggled to maintain competitiveness following the transition from a socialist economy. Today, the shipbuilding sector remains heavily dependent on government financial support to remain operational, leading to ongoing questions regarding its long-term economic viability.1