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 2018 2.7%

EBRD forecast for Croatia's real GDP growth in 2019 2.5%

The economic recovery has continued in 2018 but at a somewhat slower pace than in 2017. The Croatian economy expanded by 2.7 per cent year-on-year in the first half of 2018, on the back of stronger domestic demand, primarily that of households, while net exports contributed negatively due to a faster rise in imports than exports. Fiscal adjustment has continued but public debt remains high at 76 per cent of GDP (end-June 2018).

Growth is projected to slow to 2.7 per cent in 2018 and 2.5 per cent in 2019. Risks to the projection are relatively balanced, with upside ones being the stronger than expected tourism revenues (with 2018 set to be another record high year) and faster utilisation of EU funds, and the downside ones relating to skilled labour shortages and the country’s ailing food and retail giant, Agrokor.

Despite high unemployment, labour is scarce in sectors such as tourism and construction, which might act as a drag on growth. In July 2018, Agrokor creditors approved a debt settlement, but there are still uncertainties surrounding the restructuring of the company, and negative spillovers to the rest of the economy cannot be excluded.