The state electoral commission said that after about 97% of the vote counted, Kolinda Grabar-Kitarovic won 50.54 of the vote yesterday, while President Ivo Josipovic had 49.46%.
The result meant that Grabar-Kitarovic won by a slight margin of about 21,000 votes.
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The conservative triumph could shift Croatia back to right-wing nationalism, jeopardising relations with its neighbours, including bitter Balkan wartime rival Serbia.
The vote was always expected to be close. In the first round two weeks ago, Josipovic won 38.5% of the vote, just edging Grabar-Kitarovic with 37.2%. The runoff was called because neither candidate captured more than 50% needed to win outright.
The presidency in Croatia is a largely ceremonial position, but the vote was considered an important test for the main political parties before the parliamentary elections expected in the second half of the year. The victory for Grabar-Kitarovic giving her a five-year term greatly boosts the chances of her center-right Croatian Democratic Union to win back power.
Grabar-Kitarovic, a former foreign minister, ambassador to Washington and an ex-assistant to the NATO secretary general, said earlier yesterday she felt "very confident" of a victory because "people will vote for a change."
She has said that Josipovic, a law professor and composer of classical music, did nothing to stop Croatia's economic downturn, including a 20-per cent unemployment rate one of the highest in the EU.
Josipovic has said the president's duties don't include the government's economic policies and has proposed constitutional changes that would decentralise the country and give more power to Croatia's regional authorities.
Grabar-Kitarovic also criticised Josipovic for allegedly being too soft toward Serbs, who in the 1990s fought a war against Croatia's independence from the former Yugoslavia. She said Serbia's EU membership bid must be conditioned by Croatia.
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