Croatia's President Ivo Josipovic and his conservative rival have headed for a January runoff following a tight first round vote in a country battling a severe economic crisis.

Centre-left incumbent Josipovic and his main challenger Kolinda Grabar-Kitarovic will face off on January 11 after both failed to win more than 50 percent outright in Sunday's first round of voting for the largely ceremonial post.

With 98 percent of Sunday's ballot papers counted, Josipovic was on top with 38.5 percent, followed closely by Grabar-Kitarovic on 37 percent.

Josipovic - the third president of the former Yugoslav republic since independence in 1991 - is a member of Croatia's Social Democrats (SDP), the main partner in the ruling coalition.

A former law professor who won office on an anti-corruption ticket, Josipovic famously played Beethoven's "Ode to Joy" when Croatia joined the European Union in 2013 hoping membership would revive its flagging economy.

'Shares the blame'

But the tourism-reliant economy of the small Adriatic nation of 4.2 million remains one of the EU's weakest after six years of recession.

Unemployment is close to 20 percent, half of the country's youth are jobless and public debt is close to 80 percent of gross domestic product (GDP).

Though the president has limited powers - running the country is primarily left to the government - Sunday's election is seen as a key test for Croatia's political parties ahead of parliamentary contests in late 2015.

A victory for Grabar-Kitarovic would further boost the position of the HDZ, currently the most popular party.

The 46-year-old, who represents moderates within HDZ, is a former foreign and European affairs minister and an ex-NATO assistant secretary general.

During the campaign she slammed Josipovic's lack of initiative on tackling economic hardship.

Source: Agencies