Kolinda Grabar-Kitarovic has been inaugurated as Croatia's first female president after a surprise election victory in the European Union's newest member state.

The nationalist won the largely ceremonial presidency by edging liberal incumbent Ivo Josipovic in a runoff vote in December amid deep discontent over economic woes in Croatia.

Sunday's inauguration ceremony of Grabar-Kitarovic, a former foreign minister, ambassador to Washington and an ex-assistant to the NATO secretary general, was attended by thousands of cheering supporters at a square in the old part of the capital, Zagreb. Dozens of regional leaders and foreign officials attended the event.

The victory for Grabar-Kitarovic — giving her a five-year term — boosts the chances of her center-right Croatian Democratic Union to win back power in parliamentary elections scheduled later this year.