Key developments and challenges

Croatia’s progress towards EU accession has advanced significantly in the past year and was given a further boost by the positive outcome of the Slovenian referendum on the arbitration agreement regarding the unsolved border settlement. It is crucial that momentum is maintained towards completion of negotiations of the acquis communautaire in the coming months.

Many large commercial companies continue to be supported by the state, notably in the shipyard industry where attempts to sell off assets have failed. A renewed effort is needed to address these problems effectively.

The economy has contracted for the past two years and remains vulnerable to weakness in the global economy. The government’s commitment to fiscal stability is commendable but few steps have been taken to reduce expenditure, and implementation of the government’s ambitious reform programme is crucial for achieving sustainable growth in the medium term.