Croatia overview

Seascape

In Croatia we focus on:

Mitigating the impact of the crisis and restoring sustainable growth. Croatia was one of the region's countries worst hit by the global crisis of 2008-09 and has struggled towards recovery ever since. In the context of the new joint IFI action plan for growth in central and south-eastern Europe, the EBRD is tailoring its financing to meet potential demand for long-term investment as well as working capital financing, operational and financial restructuring. Support to the corporate sector is aimed at foreign investors and local companies. Our investments will be strengthened by policy dialogue to promote economic restructuring, diversification and improved business climate conditions and corporate governance.

Leveraging the benefits of EU accession to advance transition. As a EU member, Croatia has access to substantial amounts of structural funds, but experience shows that new members often have difficulty absorbing these funds effectively. In addition, private sector companies may find it difficult to meet the challenge of enhanced competition. We are working closely with the authorities and the EU in selected areas where structural funds can be blended with those of the EBRD to accelerate transition, including in the municipal sector. The EBRD is also providing financing, mainly though financial intermediaries, to facilitate investments by corporates to enhance their competitiveness.

Restructuring and commercialising public sector enterprises. One of the reasons for Croatia’s continued stagnation is the delay in restructuring large infrastructure utilities. The government has started addressing this problem and EU accession makes reforming public sector entities an even more urgent task, as the country’s absorption capacity is conditioned on capacity enhancement, financial and operational improvement at public utilities. The EBRD is working with the authorities to accelerate the reform of publicly-owned companies in the infrastructure sector.

The EBRD’s latest strategy for Croatia was adopted on 7 June 2017

EBRD forecast for Croatia’s real GDP growth in 2017 2.9%

EBRD forecast for Croatia's real GDP growth in 2018 2.6%

After a strong growth momentum in 2016 (3.0 per cent), the Croatian economy is expected to grow at similar pace in 2017 (2.9 per cent) and slow down slightly in 2018, to 2.6 per cent. Growth in 2017 will be driven by domestic demand. The consumption recovery is supported by tax cuts, falling unemployment and record-breaking tourism revenues, while investments are underpinned by favourable financial conditions and lower corporate tax. Both exports and imports are expected to speed up moderately, resulting in a negligible impact of net exports to GDP developments in 2017.
 
GDP growth may slow somewhat next year as a consequence of the possible slow-down in consumption growth due to the fading out of the effects of the tax reform and lower probability of another record tourist year. The risks of the projection are slightly tilted to the downside because of the potential for spill-overs from Agrokor's financial troubles on its subsidiaries and suppliers.
 
The medium-term growth prospects remain weak due to long-standing structural weaknesses, including high corporate over-indebtedness, still weak business environment reforms, and slow EU fund absorption – all of which need to be addressed consistently.