The paper deals with the topic of defining the welfare economy with special reference to the development of Croatia in the 21st century. It defines welfare economics, and the theoretical views of economists who have dealt with welfare theory through out the past, such as A. C. Pigou, Adam Smith and Wilfred Paret. Then there was the theory of supply and demand for public goods, and interest groups and their impact on the welfare economy. The paper explains welfare as a wealth necessary for successful economic growth, defines the factors of economic growth, economic inequality, and models of economic growth. The paper focused on the presentation of prosperity in Croatia and its development in the 21st century, explaining the economic development of Croatia, the relationship between prosperity and competitiveness, factors of economic growth in Croatia, economic inequality in Croatia according to Thomas Pikety, economic inequality in tourism - the activity on which the Croatian economy depends, the impact of the Covida 19 pandemic on the welfare economy in Croatia, and the importance of digital transformation for the economic growth of the economy in the modern environment.