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 Croatian economy grew by 2.8 per cent in 2017, a slight slowdown from 3.2 per cent the previous year. The deceleration was primarily due to a pick-up in imports. Growth was supported by another good tourist season, strong household consumption and investment. Fiscal consolidation continued with the general government balance turning to a surplus of 0.8 per cent of GDP. Although public debt started to decrease in 2016, it is still high at 78 per cent of GDP.
 
Growth is expected to decelerate further in 2018 and 2019 as supportive cyclical factors (primarily a boost from tax cuts) are running out. However, the slowdown is expected to be rather marginal (to 2.7 and 2.5 per cent, respectively) as early indicators point to possibly another record tourist season in 2018 and the country is expected to put EU funds to better use.
 
Higher productivity and long-term economic growth will require tackling corporate over-indebtedness and improving corporate governance. Also, the potential spill-over of Agrokor’s financial problems to its subsidiaries and suppliers still poses a downside risk in the short term.