Croatia overview

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In Croatia we focus on:

  • Supporting efforts to accelerate the reform process: The Bank’s engagement in Croatia in the new strategy period which started in 2017-stands to gain significantly from acceleration in the pace of the reform process. Accordingly, the EBRD will aim to enhance the impact of its investments as well as leveraging available EU funds for Croatia. The Bank will also closely co-ordinate with other IFIs, including the EIB and World Bank Group.
     
  • Support private sector competitiveness through fostering innovation, operational and resource efficiency, as well as improvement of the business climate and economic inclusion. After a prolonged recession Croatia has now returned to growth. The next challenge is to tackle structural vulnerabilities and institutional deficiencies hampering competitiveness of the corporate sector, in particular micro, small and medium enterprises (MSMEs). The Bank continues to support larger domestic corporates and small and medium enterprises seeking to adopt modern operational and management practices, and foreign direct investments (FDIs) that produce technology transfers and serve to integrate local economy into global value chains.
     
  • Deepening financial markets to broaden access to finance with focus on capital markets developments. As small businesses’ access to finance remains constrained, the EBRD continues to provide long term funding directly to local companies and through partner financial institutions and, whenever possible, blend the financing with capacity building. The Bank will continue providing SME advisory through the Advice for Small Businesses programme. In line with the objectives of the European Commission's Capital Markets Union initiative, the Bank will put emphasis on the development of local capital markets.
     
  • Promote commercialisation of public companies, including the improvement of corporate governance, and support the privatisation of some state-owned companies. The Bank is working with the state and local authorities to accelerate the reform of public companies through promotion of commercialisation and increased private sector participation.
     
  • Croatia corporate productivity
  • Croatia SOE performance

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

Croatia's policy response to the coronavirus crisis

The EBRD is monitoring Croatia's policy response to the coronavirus pandemic. Our biweekly publication identifies the major channels of disruption as well as selected impact and response indicators.

Learn more

EBRD forecast for Croatia’s real GDP growth in 2020 -7.0%

EBRD forecast for Croatia's real GDP growth in 2021 6.0%

The economy of Croatia recorded a growth rate of 2.9 per cent in 2019, as domestic consumption and investment increased, fuelled by higher earnings and employment rate, an increasing pace of lending, growing disbursement of EU funds and rising economic sentiment. However, for 2020, a sharp recession of up to 7.0 per cent is expected because of the coronavirus pandemic. In mid-March, the government introduced a number of lockdown measures, with tough restrictions on travel and economic activity. A key channel for disruption is tourism, which is a mainstay of the Croatian economy (tourist spending accounts for about 20 per cent of GDP).
 
There was a drop of 75-80 per cent in tourist arrivals in March year-on-year, with a similar drop expected in the second quarter and a decrease of about 30 per cent in third quarter, mitigated by the fact that Croatia is easily reachable by land from the tourists’ main countries of residence such as Germany, Austria, Slovenia, Hungary and the Czech Republic. As revenues from tourism drop, spillover effects of the crisis are likely to be multiplied, including through a labour market shock (25 per cent of employed in Croatia are on temporary contracts, and most of them are related to the tourism sector).
 
The domestic lockdown, introduced in mid-March, is heavily reducing demand for both services and durable goods (these categories together account for about 40 per cent of consumption spending). Still, decreases in sales of investment goods may be less severe, as some spending on repairs would need to take place following the March earthquake in Zagreb. Goods exports will also decrease, particularly given the high exposure to the severely hit Italian economy (15 per cent of the total). Despite the country’s high public debt (71 per cent of GDP) and limited fiscal space, the government responded with strong stimulus measures, of around 7 per cent of GDP so far. These are expected to limit the immediate negative consequences to the economy but are also bound to worsen fiscal indicators. On the monetary side, Croatia is proceeding with the Action Plan on Euro adoption, aiming to enter the ERM2 as early as in the second half of 2020. As gradual lifting of restrictions started from end of April, and more broadly from early May, we expect to see some normalisation of economic activity in 2020, although to levels still below the economy’s potential. For 2021, we expect a rapid recovery, with a growth rate of 6.0 per cent.
 
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