FOREIGN DIRECT INVESTMENT AS A KEY ELEMENT OF ECONOMIC GROWTH

Foreign direct investment (FDI) is crucial for faster development of the countries that are still developing their economies and trying to reach the developed countries. This flow of new capital strengthens the structural basis of an economy because of long term investments. This implies the investor brings new knowledge in managing the company and investment means a great improvement in abilities of local workforce. Furthermore, there are also great advantages in obtaining new technologies, production processes and opening new markets. Since FDI is divided into greenfield (investing in new capacities) and brownfield (investing in existing capacities) investments, the importance of the first one is much greater since brings greater 'blood flow' to the economy. Many countries give investors a lot of benefits trying to lure them in an investment that will greatly benefit the countries' economy starting from new employment. Smaller costs of production, political stability, market growth, good infrastructure, educated workforce are the conditions that increase FDI. The FDI in Croatia as in other countries slowed down and created great problems in boosting the economy. In the paper figures will compare investment and growth in different countries trying to find the reasons why there is difference between them. We will look for the determinants that are slowing the flow of FDI. With the recession, stagnation of GDP and a big unemployment figure FDI would greatly help in restoring economic growth. According to the findings and obtained results, this paper will propose measures that can help the growth of FDI in Croatia and similar counries.