Before the dissolution of Yugoslavia in 1991 Croatia was the federation’s second most prosperous and industrialized republic after Slovenia, with a per capita output around one-third above the Yugoslav average. Although Croatia was part of a Communist, one-party system from the mid-1940s until 1990, Yugoslav socialism was decentralized. Enterprises, although under state control, were generally free to make their own pricing and investment decisions, and were allowed to compete with one another. Before the war in 1991 nearly two-thirds of the republic’s land was cultivated, and sugar beets, wheat, oats, rye, barley and corn were the principal agricultural products.

valuable deposits of oil and natural gas, sufficient to meet Croatia's needs and offer surplus for export, are found in the Pannonian valleys of eastern Slavonia. There are also bauxite deposits in Istria and Dalmatia, coal in northwestern Croatia, Istria, and Dalmatia, and smaller deposits of zinc, iron, lead, mercury, manganese, and salt throughout the nation. Other natural resources are the numerous rivers with hydroelectric potential and the large forests that form the basis of the wood and pulp industry. Croatia's beautiful coastline and its numerous islands supply excellent natural harbours for the shipbuilding and fishing industries; they also form the basis of the nation's single most valuable source of foreign exchange—tourism.

Stepped-up Western aid and investment, particularly in the tourist and oil industries, would help bolster the economy. The economy emerged from its mild recession in 2000 with tourism the main factor. Massive unemployment remains a key negative element. The government's failure to press the economic reforms needed to spur growth is largely the result of coalition politics and public resistance, particularly from the trade unions, to measures that would cut jobs, wages, or social benefits.