COMMISSION STAFF WORKING DOCUMENT 2023 Country Report – Croatia Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Croatia and delivering a Council opinion on the 2023 Stability Programme of Croatia
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Croatia, economic policy, economic recovery, economic reform, energy policy, fiscal policy, renewable energy, stability pact, stability programme, sustainable mobility

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.5.2023  SWD(2023) 611 final  COMMISSION STAFF WORKING DOCUMENT 2023 Country Report – Croatia Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Croatia and delivering a Council opinion on the 2023 Stability Programme of Croatia {COM(2023) 611 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

and resilience plan (RRP). 

The  strong  performance  of  Croatia’s 
external sector continues. Exports of goods 
were quick to recover from the pandemic and 
continue to grow above global demand, having 
increased  by  49%  in  real  terms  in  2022, 
compared to 2019. 

Labour  market  trends  remain  resilient 
overall.  The  employment 
(20-64) 
reached an all-time high of 69.7% in 2022, an 
in 
increase  of  11.6  percentage  points 
comparison with 2012. 

rate 

improved 

finances 
as 

have 
economic 

improved 
Public 
activity 
substantially 
increased.  In  2022,  the  general  government 
balance 
to  +0.4%  of  GDP, 
from  -2.5%  of  GDP  in  2021.  The  adjustment 
was  driven  by  better  revenues  supported  by 
still  strong  nominal  growth,  while  the  phasing 
out  of  the  COVID  support  measures  helped 
tame  spending.  In  the  coming  years,  the 
general  government  deficit  is  forecasted  to 
remain contained.   

Growth, employment and public 
finances show resilience 

After fully recovering from the pandemic-
induced economic downturn, the Croatian 
economy  continued  to grow  strongly  in  a 
complex geopolitical context. Croatia’s GDP 
grew  very  strongly  in  the  first  half  of  2022, 
before  headwinds  started  to  materialise.  In 
particular  the  Russian  invasion  of  Ukraine 
disrupted  financial,  energy  and  commodity 
markets,  pushing  HICP  inflation  rates  to  their 
highest  level  in  recent  decades  (10.7%  in 
2022).  This  put  pressure  on  household 
consumption, while rising input prices dragged 
down  industrial  production.  As  a  result,  GDP 
contracted in the third quarter of 2022 (-0.5% 
quarter-on-quarter),  but  rebounded  again  in 
the last quarter, resulting in Croatia’s real GDP 
growing  by  6.2%  in  2022  (4th  highest  in  the 
EU),  in  line  with  the  Commission’s  Winter 
interim  Forecast.  In  the  last  quarter  of  2022, 
Croatia’s real GDP was 10.3% higher than pre-
pandemic,  showing  increasing  resilience  to 
economic  shocks  thanks  also  to  the  reforms 
and  investment  deployed  under  the  recovery 

Box 1: 

Energy policy response in Croatia  

Croatia  adopted  various  support  measures  to  cushion  the  impact  of  energy  price  inflation  on 
households and businesses. For 2023, the gross budget cost of these measures is projected, in 
the  Commission  2023  spring  forecast,  to  amount  to  1.5%  of  GDP.  Most  measures  do  not 
preserve  the  price  signal  as  an  incentive  for  consumers  to  use  less  energy  and  they  are  not 
targeted to the most disadvantaged groups. The measures will be phased-out by April 2024.  

In March 2023, the authorities extended the energy measures package including a reduced VAT 
rate on gas and various other energy products, reduced excise duties on fuel and social transfers 
to  disadvantaged  groups  (increased  social  benefits  for  the  unemployed  and  disadvantaged 
energy  buyers  and  a  lump-sum  energy  supplement  for  pensioners).  The  authorities  also 
prolonged  the  price  caps  on  electricity,  gas  and  fuels  and  froze  the  price  for  heating  from 
thermal  power  stations,  as  well  as  limiting  the  charges  incorporated  into  electricity  prices  and 
subsidies for farmers and fishermen. 

The difference between the market price and the capped prices for electricity and gas is financed 
by  HEP  (the  state-owned  energy  company),  for  which  the  government  approved  a  capital 
transfer  of  up  to  EUR  0.9  billion  to  finance  the  price  caps.  The  two-tiered  pricing  system  for 
electricity is subsidised at different levels of consumption for households and companies for the 
period 1 April - 30 September 2023, while the gas price is subsidised until end of March 2024.  

Croatia should still report information to the Commission on the application of Council Regulation 
(EU) 2022/1854. 

2 

 
 
 
Further European integration offers 
new opportunities 

Graph 1.1: External and domestic demand, 
contributions to GDP growth 

The  recent  accession  of  Croatia  to  the 
euro  and  Schengen  areas  is  a  positive 
development for trade and investment. In 
January  2023,  Croatia  became  the  20th 
member of the euro area and the 27th member 
of  the  Schengen  area.  Lower  currency-related 
risk, reduced costs and removal of travel, trade 
frictions  will  contribute 
and 
positively 
economic 
to 
performance.  

investment 

country’s 

the 

in  2023. 

components 

labour  market  supports 
As  a  tight 
incomes and investment picks up, growth 
should  be  broad-based  across  domestic 
The 
demand 
Commission’s Spring forecast expects real GDP 
growth  of  1.6%  in  2023,  with  household 
consumption  recovering  as  the  year  advances 
and  inflation  moderates.  At  the  same  time, 
investment  is  expected  to  remain  dynamic 
thanks to increased confidence and absorption 
of  EU  funds,  with  the  latter  also  boosting 
public  consumption.  The  external  sector  is 
expected 
negative 
contribution,  although  the  reversal  of  the 
terms of trade shock is set to lead to a trade 
substantial 
balance 
decrease  in  energy  prices  will  start  to  reduce 
inflation 
throughout  2023,  allowing  a 
progressive  deceleration  towards  the  2% 
target  despite  services  inflation  being  more 
persistent than anticipated. 

improvement. 

small 

have 

The 

to 

a 

Source: AMECO. 

share 

in  very 

Croatian  exporters  continued  to  gain 
market 
competitive 
international  markets.  This  demonstrates 
increased resilience and growing integration in 
Europe’s  value  chains.  These  positive  trends 
are conducive to establishing and maintaining 
a  solid  export  base,  which  is  important  to 
ensure the country’s smooth functioning in the 
monetary  union.  To  this  end,  policies  and 
investment  aimed  at  maintaining  cost  and 
non-cost  competitiveness  of  firms  will  be  of 
particular importance. 

is 

growth 

affected 

Potential 
by 
population  decline  and  low  productivity 
growth, although key reforms will have a 
positive  impact.  Croatia’s  2021  population 
census 
revealed  a  greater-than-expected 
population drop, as the number of inhabitants 
fell  below  four million  for  the  first  time  since 
at least 1960. The loss of population has been 
particularly  concentrated  in  the  east  of  the 
country.  Net  migration  has  been  a  key  factor 
behind  the  population  decline  in  the  last 
decade, but this trend appears to be subsiding, 
thanks  to  both  increasing  immigration  and 
slowing emigration.  

Croatia’s  sluggish  productivity  growth  is 
linked to the country’s below-EU average 
the  area  of  health, 
capacities 
education  and  work  according  to  the 
Commission’s  resilience  dashboards  (see 

in 

3 

-15-10-5051015200708091011121314151617181920212223'24'Growth (%)Net exportsInventories investmentInvestment (GFCF)ConsumptionReal GDP growth 
   
Annex  5).  Meanwhile,  the  interplay  of  key 
reforms and investment under the RRP should 
raise  productivity  and  investment  in  human, 
physical  and  knowledge  capital,  adding  to 
potential growth.  

Challenges in integrating 
disadvantaged groups in the 
labour market remain 

labour  market 

indicators 
Although 
is  needed  to 
improved,  more  effort 
(see 
integrate  disadvantaged  groups 
Annex  14).  As  a  result  of  the  improvement 
over  the  last  ten  years,  the  gap  vis-à-vis  the 
EU average employment rate halved to (a still 
high)  5  percentage  points.  However,  the 
unemployment  rates  for  low  and  medium-
skilled  persons  have  not  yet  reversed  to  pre-
pandemic 
levels,  and  neither  has  youth 
employment.  

At  28.7 percentage  points  in  2021,  the 
disability  employment  gap  was  still 
among  the  highest  in  the  EU.  There  has 
been  a  slight  improvement  in  the  gender 
employment  gap,  which  decreased 
to 
9.5 percentage points in 2022. Meanwhile, the 
number  of  workers  who  were  able  to  switch 
to  permanent  contracts 
temporary 
from 
increased, 
temporary 
and 
employment fell. 

involuntary 

in 

of 

focusing 

importance 

the  year,  with 

The 
on 
disadvantaged  groups  is  intensified  by 
decreasing  real  incomes.  Nominal  wages 
grew  by  7.9%  in  2022.  However,  on  the  back 
of  high  inflation,  real  wages  decreased  by 
2.7% 
lower-income 
households  being  more  affected  by  inflation, 
as  they  spend  a  higher  share  of  their  budget 
on  energy  and  food.  However,  the  impact  of 
high  inflation  was  almost  fully  contained  by 
the increase, in January 2022, of the statutory 
minimum  wage  by  10.8%.  Going  forward,  the 
growth  in  real  wages  should  resume  as 
inflation rates drop.  

potential  growth  and  tackle  poverty.  As 
regards  the  implementation  of  the  European 
Pillar  of  Social  Rights  (see  Annex  14),  skills 
mismatches, 
among 
disadvantaged  groups,  and  the  low  level  of 
adult 
considerable 
challenges.  

constitute 

particular 

learning, 

in 

The trends concerning the employment of 
disadvantaged  groups  highlight 
the 
importance  of  prioritising  upskilling  and 
focusing on including these groups in the 
labour  market.  Good  examples  of  this 
include  the  new  active  labour  market  policies 
and  the  voucher  system  developed  under  the 
recovery and resilience plan (see Section 3).  

and 

needs 

Croatian  labour  market  policies  have  so 
far lacked effectiveness in responding to 
labour 
labour  market 
shortages.  They  have  been 
insufficiently 
coordinated  with  social  and  skills  policies  and 
suffered 
to 
disadvantaged  groups.  A  range  of  measures 
under  the  RRP  and  the  European  Social  Fund 
Plus aim to tackle some of these issues.  

limited  outreach 

from  a 

The rise in house prices is a 
growing concern 

Croatia  faces  challenges  linked  to  an 
increase  in  household  debt  and  house 
prices,  unmatched  by  commensurate 
policy  measures.  Household  debt  increased 
from  34%  of GDP in  2021  to  42%  of GDP  in 
2022. The growth in house prices picked up in 
2022,  reaching  36.2%  compared  to  pre-
pandemic  levels  (see  additional  info  in  Annex 
18). At the same time, real incomes decreased, 
further eroding affordability.  

The  policy  response  has  yet  to  catch  up 
with  the  gravity  of  the  issue,  as  the 
current  subsidy  scheme  aimed  at  first-
time buyers has been found to contribute 
to the price increases. Similarly, the lack of 
a  recurrent  property  tax (1)  and  the  low  tax 

Strengthening 
remains  the  top  priority  to 

employment 

creation 
increase 

(1)  More info in Annex 19: Taxation 

4 

 
                                                 
good  health  and  well-being  (SDG  3).  Annex  1 
contains more detailed information.  

rates  on  income  from  short-term  rent (2) 
increase  the  returns  on  dwellings  as  an 
investment  class,  thus  contributing  to  the 
growing  prices  and  reducing  the  supply  of 
residential  properties  available  to  households. 
The  issue  is  particularly  pronounced  in  the 
coastal  areas,  and  disproportionately  affects 
lower-income  households  and  young  families. 
A  comprehensive  policy  response  could  help 
alleviate the pressure on housing prices. 

Graph 1.2: Evolution of house price index and 
loans for house purchases from monetary 
financial institutions (MFI) 

Source: Eurostat, ECB, European Commission 

Croatia is improving in the SDG 
indicators 

Croatia  is  making  timely  progress  on 
improving  almost  all  of 
the  UN 
Sustainable  Development  Goals  (SDGs). 
Improvements  were  made  on  all  the  SDG 
indicators  linked  to  fairness,  productivity  and 
macroeconomic  stability  and  almost  all 
environmental 
indicators 
responsible 
sustainability, 
from 
consumption  and  production 
(SDG  12). 
Although  improving,  there  are  9  SDGs  still 
below  the  EU  average,  where  further  effort 
and ambition is needed, most notably industry, 
innovation  and  infrastructure  (SDG  9)  and 

linked 

apart 

to 

(2)  Box 4.1.1 Country Report Croatia 2019. 

5 

-20-15-10-5051015202530-20-15-10-5051015202504Q405Q406Q407Q408Q409Q410Q411Q412Q413Q414Q415Q416Q417Q418Q419Q420Q421Q422Q4% deviation from averageRate of change y-o-y (%)MFI loans for house purchase (y-o-y growth rate)House Price Index (y-o-y growth rate)Price to income vs long term average, rhs 
   
                                                 
 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 

Croatia’s  resilience  and  recovery  plan 
(RRP) aims to address the key challenges 
related to the accelerating the digital and 
green transitions, strengthened economic 
and social resilience, and a more efficient 
public  administration.  It  consists  of  76 
reforms  and  146  investment  strands  that  are 
supported  by  EUR  5.51  billion  in  grants, 
representing  9.5%  of  2021  GDP.  All  planned 
measures  were  implemented,  following  which 
the  Commission  paid  EUR  1.4  billion, 
representing 22% of the RRP amount due.  

The implementation of Croatia’s recovery 
and  resilience  plan  is  well  underway. 
Croatia  submitted  two  payment  requests, 
corresponding to 59 milestones and targets in 
the  plan  and 
in  an  overall 
resulting 
disbursement  of  EUR  1.4  billion.  At  this  stage 
of  implementation  of  the  plan,  the  measures 
consist  to  a  large  extent  of  adopting  national 
strategic  framework  documents  (revised  or 
new  legislation,  strategies,  programmes).  A 
significant  share  of  the  RRP  funds  is  already 
available under calls for projects and targeted 
funding  programmes.  Croatia 
to 
submit  an  amendment  of  its  plan  by  August 
2023,  which  would  comprise  new  investment 
under  REPowerEU  and  a  request  for  an  RRF 
loan.  

intends 

Accelerating the green and digital 
transitions 

The  first  measures  were  completed  in 
managing  water,  public  sewage  and 
waste. A multi-annual  water and wastewater 
construction  programme  was  adopted,  listing 
and  prioritising  the  investments  necessary  to 
Its 
quality 
meet 
the 
started 
implementation 
(re)construction  of  a  part  of  the  public 
sewerage  and  water  supply  network.  The  new 

standards. 
with 

the 

EU 

Waste  Management  Act  identified  measures 
that  should  increase  the  re-use  and  recycling 
of municipal waste and accelerate the circular 
economy. 

Measures  were  developed  to  improve 
energy efficiency in different sectors. The 
new  Energy  Efficiency  Programme  sets  out 
investment priorities for energy efficiency and 
district  heating  systems  by  2030,  but  also  up 
to  2050.  Grant  support  was  awarded  to  75 
energy-intensive  small,  medium  and  large 
firms  that  had  committed  to  improve  their 
efficiency  and  use  of  renewable  energy 
sources  in  the  industrial  production  process. 
New programmes were adopted for the energy 
renovation of multi-dwelling buildings, cultural 
heritage,  public    sector  buildings  and  energy 
poverty  reduction  in  areas  of  special  state 
concern.  A  “one-stop”  office  provides  advice 
and  services  on  energy  renovation  and  post-
earthquake  reconstruction.  New  programmes 
were  adopted  for  urban  green  infrastructure 
and  circular  management  of  space  and 
buildings. 

An  in-depth  analysis  was  performed  on 
the barriers restraining the higher uptake 
of  renewable  energy  sources.  The  analysis 
also  included  recommendations  on  how  to 
alleviate  the  respective  bottlenecks.  The  first 
national  Hydrogen  Strategy  was  adopted  to 
the  production  and  use  of 
incentivise 
renewable  and  green  hydrogen  in  producing 
electricity,  in  industry  in  general  and  as  an 
alternative  fuel.  The  amendments  to  the  Act 
on Biofuels for Transport created  a legislative 
framework  for  deploying  alternative  fuels,  as 
well as producing and using advanced biofuels 
and hydrogen in transport.  

The  first  steps  have  been  taken  in  the 
road, 
inland 
railway,  maritime  and 
waterways  sectors.  A  strategic  government 
document  identifies  the  key  priorities  for 
reforming  and  modernising  the  railway  sector 

6 

 
 
and  establishes  implementation  plans  for  the 
government  and  railway  companies.  The  new 
Regular  and  Seasonal  Coastal  Transport  Act 
simplifies  administrative  procedures  and 
creates  better  conditions  for  a  more  efficient 
operation of public coastal maritime transport. 
The  new  Inland  Navigation  and  Ports  Act  will 
help  identify  specific  safety  risks  in  inland 
waterways. 

The  development  of  5G  and  broadband 
access  is  under  way.  Particularly  in  non-
urban  areas,  accelerated  simplification  and 
legal  and 
is  expected  of  the 
adaptation 
for 
administrative 
planning, 
conditions 
licensing  and  completing 
the  necessary 
investment. 

Strengthening economic 
competitiveness and resilience 

The  first  steps  have  been  completed  to 
digitalise  public  services  for  businesses 
and  reducing  the  administrative  and 
fiscal  burden  on  them.  A  new  digital 
platform  is  used  by  companies  to  pay  the 
most  frequent  and  cost-intensive  compulsory 
business fees online. Fifty concrete steps were 
implemented  to  reduce  non-tax  and  para-
fiscal  (non-tax)  business  charges  and  reduce 
fees for professional examinations. 

Access to finance for businesses has been 
improved  by  setting  up  new  RRP  funds 
providing  loans,  loan  guarantees  and 
interest  rate  subsidies.  Selected  projects 
recovery  and 
are  aimed  at  supporting 
resilience  as  well  as  digital  and  green 
transitions for businesses of all sizes. 

have 

contributed 

preservation 

in  the  agriculture  and  food 
Efforts 
to 
sectors 
environmental 
and 
improving  life  in  rural  areas.    Specifically, 
the new Act on Agricultural Land Consolidation 
sets  out  measures  to  ensure  more  efficient 
use  of  agricultural  land  and  increase  the 
productivity  and  sustainability  of  agricultural 
production.  A  new  operational  programme 
increases  the  role  and  management  capacity 

of  producer  organisations  in  the  fruit  and 
vegetable production  and  marketing  chain.  An 
online platform on the circular economy in the 
agri-food 
raises  awareness  and 
educates  people  about  the  prevention  and 
reduction of food waste and food donation.  

sector 

The  reform  to  make  the  tourism  sector 
more  resilient  and  sustainable  was 
initiated  with  the  completion  of  an  in-
depth  analysis  of  the  sector.  This  analysis 
helped    defining  the  key  priorities  for  the 
Sustainable Tourism Development Strategy for 
2030.  

Finally, the legislative texts on  copyright 
and  electronic  media  were  amended.  This 
will  facilitate  the  online  licensing  of  creative, 
cultural  and media content, with the objective 
of fostering the digital transition and resilience 
of enterprises in the active and cultural sector.  

Reinforcing education and social 
resilience 

to 

for 

adopted 

labour  and  adult 
On 
the  side  of 
labour  market 
education,  new  active 
(self) 
policies  were 
in  sectors  and  activities 
employment 
linked 
the  green  and  digital 
transitions.  A  new  voucher  system  offers 
education,  training  and  upskilling  to  promote 
green  and  digital  skills.  The  revised  Minimum 
Wage  Act  raises  the  minimum  increase  in 
wages  for  overtime,  night  work  and  work  on 
Sundays  and  public  holidays,  and  reinforces 
controls  and  penalties  for  non-compliant 
employers.  The  new  Adult  Education  Act 
improves  the  quality  and  relevance  of  adult 
education  and  facilitates  the  recognition  of 
acquired knowledge and skills.  

The  reform  of  the  education  system 
kicked off with a comprehensive analysis 
of secondary education needs.  The goal of 
future 
the  analysis  was 
to  guide 
implementation  of  measures 
that  are 
designed  to:  increase  the  share  of  students 
in  general  secondary  education, 
enrolled 
in  surplus 
reduce  the  share  of  students 

the 

7 

 
programmes and align vocational programmes 
with labour market needs.  

The  social  protection  reform  progressed 
with  the  adoption  of  the  Social  Welfare 
Act.  The  Act  increases  the  adequacy  of  the 
main  social  benefits,  merges  multiple  social 
benefits  into  one  single  benefit,  introduces  a 
new social mentoring service and improves the 
transparency and efficiency of the system. The 
training  of  253  new  social  mentoring 
professionals  was  completed.  The  2021-27 
National  Plan  against  Poverty  and  Social 
Exclusion  identifies  priorities  and  needs  for 
tackling poverty  and social  exclusion, with the 
objective  of  reducing  the  at-risk-of-poverty 
rate  to  less than  15%.  The  2021-27  National 
Plan  for  the  Development  of  Social  Services 
identifies  needs  and  sets  out  priorities  for 
developing home-based, community and other 
social services.  

The first steps were taken in the reforms 
aimed at improving the efficiency, quality 
and  accessibility  of  the  health  system. 
The  2021-27  National  Health  Development 
Plan was adopted. It maps long-term needs in 
the  health  and  social  sectors  as  well  as  the 
distribution  of  health  professionals,  and 
contains  measures  aimed  at  improving  the 
quality,  monitoring  and  efficiency  of  the 
system. 

Improving the efficiency and 
transparency of public 
administration 

Steps were taken to strengthen oversight 
of  fiscal  processes.  To  strengthen  fiscal 
planning and reporting, a new Budget Act sets 
out  the  processes  and  key  documents  for: 
preparing,  adopting  and  executing  the  budget 
of  the  state  and  the  local  government  units, 
local  and 
the  borrowing  framework  for 
regional government units and as the forecast 
and  control  process  for  future  spending, 
including multi-annual commitments. 

Measures 
the  prevention  of  corruption,  money 

contribute 

which 

laundering, and the financing of terrorism 
have  been  implemented.  The  2021-2030 
new Anti-corruption Strategy sets out targeted 
measures to increase the transparency of work 
done  by  public  authorities,  strengthen  the 
integrity  and  management  of  conflicts  of 
interest  and  improve  the  capacity  to  detect, 
prevent  and  reduce  corruption  in  the  public 
procurement  system.  Under  the  new  Act  on 
Interest,  asset 
Prevention  of  Conflict  of 
declarations  and 
for  potential 
remedies 
conflicts  of  interest  are  made  mandatory  in 
local  and  regional  government  units  and 
companies  owned  by  them.  Steps  are  being 
taken to strengthen the capacities of the anti-
money 
supervisory 
authorities  and  increase  cooperation  among 
them;  continuous  professional 
is 
provided  to  management  and  AML  officers  in 
public and credit institutions.  

laundering 

training 

(AML) 

The  first  steps  have  been  taken  to 
improve  the  efficiency  of  the  justice 
system  and  increase  citizens’  trust  in  it. 
New  electronic 
tools  and  administrative 
capacities  have  been  developed  in  the  State 
Judicial  Council  and  the  State  Attorney's 
Council  to  improve  the  quality  of  the  work  of 
both Councils. Amendments to the Bankruptcy 
Act  and  the  Consumer  Insolvency  Act  are 
expected  to  ensure  greater  efficiency  of 
insolvency  proceedings,  improve  the  system 
for  organising  and  appointing 
insolvency 
practitioners  and  improve  supervision  of  the 
performance  of  this  service.  Amendments  to 
the  Criminal  Procedure  Act  allow  the  use  of 
information and communications technology in 
criminal  proceedings  – 
remote 
hearings,  online  testimonies  by  victims  of 
crime and the preparation of hearings. 

including 

The  legislative  framework  was  amended 
to  encourage  the  voluntary  merger  of 
local government units via incentives. The 
functional  and  physical  mergers  of 
the 
smallest 
local  government  units  should 
improve administrative capacity, to the benefit 
of 
those 
communities. 

provision 

service 

public 

in 

The  government  revised  and  reduced  the 
list  of  state-owned  enterprises.  The 
companies for which the existence of a public 

to                                                                                                                                                                                                                 

8 

 
is  not  demonstrated  will  be 
interest 
transferred  to  the  Restructuring  and  Sales 
Centre, with a view of monetising their assets 
in the following years. 

the 

Finally,  the  first  steps  were  taken  to 
strengthen 
capacity  of  public 
institutions  and  Croatian  beneficiaries to 
prepare and implement EU projects. Going 
forward,  these  measures  prepare  the  ground 
for  a  better  absorption  of  funding  and  higher 
quality projects. 

9 

 
 
Box 2: 

Key deliverables expected under the Recovery and Resilience Plan in 2023-24 

  Simplifying and removing regulatory requirements for the provision of services by regulated 

professions  

  Adopting  the  legislation  to  improve  the  uptake  of  renewable  energy  sources,  including  the 

introduction of a premium-based system to support renewable energy sources 

  Connecting an additional 1500 MW of renewables capacity to the grid  

  Amending  the  State  Assets  Act  to  separate  completely  the  management  of  the  gas 

transmission system operator from state-owned production and supply activities.  

  Consolidating  and  reducing  the  number  of  public  water  service  providers,  to  improve  their 

efficiency and governance  

  Reducing the share of municipal waste sent for disposal 

  Establishing a functional system for the exercise of the rights of persons with disabilities in 

the field of transport 

  Establishing a traceability information system in the food supply chain  

  Adopting a Tourism Act, establishing a framework for monitoring and developing the tourism 

sector   

  Adopting acts on salaries in the state administration and public services and regulations for 

professional mobility 

  Recruiting  all  newly  recruited,  permanent  civil  servants  in  government  bodies  exclusively 
through a new centralised, digitised and standardised selection and recruitment system  

  Adopting  a  new 

legal  framework  on  state-owned  enterprises, 

incorporating 

the 

recommendations of the OECD  

  Adopting amendments to the legislative framework in the area of justice, with the new Non-

contentious Procedure Act  

  Establishing a new public procurement platform and mobile application 

  Adopting  new  framework  benchmarks  for  the  work  of  judges  and  introducing  an  active 

judicial case management tool 

  Adopting the Model for the Financing of Early Childhood Education and Care 

  Amending the law regulating primary and secondary education to introduce the conditions for 

a full-day teaching  

  Adopting amendments to the Pension Insurance Act 

 

Implementing IT system calculation of prices for social services and service providers in the 
network 

  Enforcing a joint procurement procedure for health institutions  

  Completing the functional integration of hospitals  

  Adopting green urban renewal strategies. 

10 

 
 
FURTHER PRIORITIES AHEAD 

green 

transition, 

Beyond those  tackled  in  its  recovery  and 
(RRP),  Croatia  faces 
resilience  plan 
additional  challenges  related  to  the 
decarbonisation  of  energy  and  transport, 
the 
economic 
productivity  and  the  risk  of  poverty  and 
social 
these 
challenges will also help Croatia make further 
progress  in  meeting  those  SDGs  where  it 
currently  shows 
improvement. 
room 
Namely  those  related  to  ‘Quality  education’ 
(SDG 4), ‘Affordable and clean energy’ (SDG 7), 
infrastructure’ 
‘Industry, 
(SDG 9) and ‘Climate action’ (SDG 13). 

Addressing 

exclusion. 

innovation 

and 

for 

Decarbonising energy and 
transport & stepping-up the green 
transition  

is  continuing 

Croatia 
its  efforts  to 
decarbonise the economy. The country is on 
a good trajectory to reach its current and new 
2030  climate  policy  target  for  the  effort-
sharing  sectors (3).  Data 
for  2021  on 
greenhouse  gas  emissions  in  these  sectors  is 
expected  to  show  that  the  country  generated 
less than its annual emission allocations (4). In 
its  long-term  strategy  for  decarbonisation, 
Croatia  has  set  itself  the  goal  of  reducing 
greenhouse  gas  emissions  to  between  57% 
and  73%  by  2050  (excluding  land  use  and 
forestry).  The  five-year  action  plan  for  the 
implementation  of  this  strategy  is  currently 
being  revised  to  consider  the  more  ambitious 
2030  targets.  Reducing  Croatia’s  reliance  on 
fossil  fuels  is  an  essential  part  of  ensuring 

(3)  Sectors outside the current EU Emissions Trading 

System: mainly buildings (heating and cooling), road 
transport, agriculture, waste and small industrial firms 

(4)  Croatia's annual emission allocations for 2021 were 
around 17.5 Mt CO2eq, and its approximated 2021 
emissions were at 16.2 Mt 

11 

security of supply. The latest figures regarding 
Croatia’s  net  carbon  removals  through  the 
land  use  sector  are  slightly  above  the  2030 
targets;  however,  due  to  the  important  risks 
identified 
the  actual 
implementation  of  the  Forest  and  the  Soil 
Strategies and the adoption of the Action Plan 
for  planting  1  million  trees  annually  by  2030 
remain important.  

(see  Annex  6), 

Increasing  the  circularity  of  Croatia’s 
economy  remains  a  priority.  The  use  of 
circular  material  is  far  below  the  EU  average 
(see Annex 9). The strengthening of the policy 
framework  and  reduction  of  the  investment 
gap  would  help  in  the  uptake  of  the  circular 
economy  by  all  economic  sectors,  in  line  with 
the  Circular  Economy  Action  Plan.  This  can  be 
facilitated by developing and providing access 
to 
instruments  and 
funding  for  eco-innovation,  and  by  putting 
further  emphasis  on  the  circular  economy 
within 
the  upcoming  2023-2028  Waste 
Management Plan. 

innovative 

financial 

Croatia has improved waste management 
practices,  but  significant  challenges 
remain.  Efforts  are  needed  to  meet  the  EU 
recycling  targets,  as  well  as  to  accelerate  the 
circular  economy  transition.  The  share  of 
municipal  waste  being 
landfilled  remains 
almost  double  the  EU  average,  as  Croatia 
underperforms  in  the  sorting,  collection,  and 
recycling of waste (see Annex 6). In addition to 
developing  waste  infrastructure,  better  cost 
internalisation  of  landfilling  residual  and  bio-
waste could reduce the risk of failing to meet 
the  Waste  Framework  Directive’s  2025 
recycling target of 55%. Overall environmental 
governance  could  be  improved  by  increasing 
transparency 
citizen 
engagement, compliance and enforcement, as 
well 
and 
coordination. 

administrative 

reinforcing 

capacity 

and 

as 

 
 
                                                 
and 

recent 

planned 
Significant 
investment  will  help  improve  the  poor 
state  of  water 
infrastructure,  but 
sustained  efforts  are  needed.  The  vast 
majority  of  wastewater  in  Croatia  is  not 
properly  treated  (see  Annex  6).  Increasing  the 
availability  of  adequate  sanitation  services 
and  reducing  risks  to  the  environment  and 
public  health  will  depend  on  a  substantial 
increase in annual expenditures for sanitation.  

to 

the  Commission’s 

Croatia is among the Member States with 
higher  vulnerability  to  climate  risks. 
According 
resilience 
dashboards,  Croatia 
shows  medium/low 
capacities  in  the  area  of  “climate  change 
mitigation  and  adaptation  (Annex  5).  More 
frequent  heatwaves,  droughts, floods,  and 
forest  fires  affect  several  sectors,  including 
energy,  with  rising  risks  of  lower  hydropower 
production  and  increased  energy  demand  for 
cooling,  while  nearly  six  in  ten  companies  in 
Croatia  report  that  climate  change  negatively 
affected  their  business (5).  The  cumulative 
share  of  the  damage  from  extreme  weather 
and climate events in relation to GDP is one of 
the  highest  in  the  EU  (see  Annex  6).  Croatia 
appears to be particularly vulnerable to floods. 
Between  1980  and  2020,  only  around  3%  of 
disaster  losses  were  insured;  the  insurance 
coverage  remains  low  compared  to  projected 
risk; this could result in losses to be covered by 
the  public  sector, thereby  potentially  posing  a 
risk to public  finances.  The  implementation  of 
climate  adaptation  policies  and  measures, 
(including the ones set out in the RRP) as well 
as the development of necessary capacities at 
all levels, are vital for tackling these risks and 
improving long-term resilience. 

Renewable energy sources make up a big 
share  of  Croatia’s  energy  consumption, 
but  there  is  still  room  for  growth.  While 
the  share  of  wind  energy  has  increased 
steadily over the last ten years, solar power is 
lagging  behind (6).  The  bulk  of  the 
still 
renewable  energy  comes  from 
country’s 

(5)  European Investment Bank (2023), EIB Annual 

Investment Survey 2022. 

(6)  The share of wind energy reached 14% and the share 

of solar energy was 1%. 

12 

Still, 

hydropower  plants (7);  however,  the 
lower 
availability  of  hydropower  output  in  the  wake 
of  droughts,  expected 
to  become  more 
frequent,  is  a  trend  that  could  affect  the 
security  of  Croatia’s  power  supply.  In  2022, 
VAT  on  the  purchase  and  delivery  of  solar 
panels  was  abolished  and  taxes  were  cut  for 
producers-consumers (8). 
household 
investment  in  photovoltaics  is  hampered  by 
legal  uncertainty,  in  particular  as  regards  the 
implications of the producer-consumer feeding 
more  electricity  back  into  the  grid  than  they 
use. Croatia plans to phase out coal by 2033; 
important  in  that  context  that  the 
it  is 
country’s  potential 
for  wind,  solar  and 
geothermal are explored, in the context of the 
in 
expected 
hydropower and wood biomass. The electricity 
taxation regime still imposes a heavier burden 
in  comparison  to  gas  taxation  and  does  not 
incentivise  consumers  to  switch  to  electrified 
heating  with  the  use  of  heat  pumps  rather 
than gas boilers. 

the  outputs 

lowering  of 

renewable  energy  sources 

Permitting  procedures  for  renewable 
energy  in  Croatia  are  cumbersome  and 
longer than the EU average. An inadequate 
and  in  some  cases  incomplete  legislative 
framework  on  permitting  procedures  for 
deploying 
(in 
particular  as  regards  solar  and  wind  power) 
and  the  lack  of  staff  and  technical  capacities 
are  contributing  to  the  slow  uptake  of  large 
new  renewable  energy  installations  (over  500 
kw)  (see  Annexes  7  and  12).  As  a  result,  a 
number  of  projects  are  currently  stalled. 
Improvements  to  the  grid,  on  top  of  already 
envisaged  measures  under  the  RRP  are  also 
key; this notably concerns the rollout of smart 
metering  and  smart  grids  as  well  as  the 
increase in the storage capacity.  

With the construction of the LNG terminal 
on  the  island  of  Krk  and  its  technical 
upgrade in 2022, Croatia has managed to 
secure  all  its  gas  supplies.  The  country 
plans to further expand the capacity of the Krk 

(7)  Almost two-thirds of Croatia’s electricity has come from 
renewables, predominantly hydropower (between 40% 
and 60% depending on whether it is a dry or wet year). 

(8)  A tax exemption of up to EUR 1,320 personal income 
per year generated by the sale of excess electricity 
from solar panels fed to the grid 

 
                                                 
                                                 
terminal  to  6.1  bcm/year  in  order  to  fully 
utilise  its  capacity,  increase  the  security  of 
supply  of  neighbouring  countries  and  further 
develop the internal gas transmission pipelines 
towards  Slovenia,  Hungary  and  Bosnia-
Herzegovina.  This  reflects  Croatia’s  ambition 
to  become  a 
regional  gas  energy  hub 
contributing to the security of supply of South-
Eastern  Europe  region,  and  contributes  to  the 
objectives  of  the  REPowerEU.  In  parallel  to 
this,  continuous  efforts  are  needed 
to 
structurally reduce gas demand in the country; 
decreased, 
prices 
while 
uncertainty remains regarding next winter. 

energy 

have 

in 

its 

investment 

Croatia’s  national  indicative  contribution 
to  the  EU’s  2030  energy  efficiency 
targets is still low. Energy renovation rate in 
Croatia  was  low  but  Croatia  has  recently 
stepped-up 
energy 
renovation  of  private  and  public  buildings, 
aiming to renovate its entire building stock by 
2050  (See  Annex  6).  National  measures, 
including  the  ones  envisaged  by  the  RRP  are 
expected to increase the renovation rate in the 
upcoming  years,  and  contribute  to  achieving 
an  annual  renovation  rate  of  3%  by  2030. 
However, low uptake of installation of rooftop 
photovoltaics,  especially  in  multi  apartment 
buildings, remains a challenge due to complex 
legislative 
framework  and  administrative 
procedures,  which  represents  a  significant 
obstacle 
In 
addition,  the  uptake  of  installation  of  heat 
pumps also remains low. Furthermore, current 
investments  to  improve  the  energy  efficiency 
in  the  building  sector  still  rely  heavily  on 
grants  and  subsidies, 
the 
possibility  to  crowd-in  private  investments 
towards  the  achievement of  the  2030  energy 
efficiency targets.   

in  achieving  energy  savings. 

limiting 

thus 

Transport  accounts  for  a  growing  share 
of  greenhouse  gas  emissions  and  air 
pollution.  The  share  of  renewable  energy 
sources in the transport sector (7% in 2021) is 
one of the lowest in the EU, and well below the 
2030  target  of  14% (9).  Sustainable  and 
alternative solutions are developing slowly. For 
example, rail has a share of 2.5% in passenger 
land  transport,  well  below  the  8%  in  the  EU. 

(9)  Statistics | Eurostat (europa.eu) 

13 

The  successful  completion  of  the  core  Trans-
European  Transport  Network  (TEN-T)  sections 
in  Croatia,  in  particular  the  rail  network, 
remains  a  priority.  The  implementation  of  the 
Railway Development Strategy adopted by the 
Croatian  government  in  2022  will  be  crucial 
for  modernising  the  infrastructure  and  rolling 
stock, thus increasing the attractiveness of rail 
as an alternative transport mode. The low rate 
of  electrified  rail  tracks  could  be  mitigated 
with alternative solutions, such as hydrogen or 
battery-powered locomotives. 

in 

Despite increasing in 2021, the uptake of 
electric  vehicles  remains  one  of  the 
lowest  in  the  EU.  The  share  of  newly 
in  2021 
registered  electric  cars  doubled 
compared  to  2020,  but  it  is  still  one  of  the 
the  EU (10).  Besides 
lowest 
financial 
incentives for the purchase of electric vehicles, 
the 
such  as 
Environmental 
Energy 
Protection 
Efficiency  Fund  in  2022,  additional  measures 
re 
zero-emission 
to 
necessary,  including  the  adaptations  of  the 
regulatory 
the 
retrofitting  of  internal  combustion  cars  into 
battery  electric vehicles  and  scaling-up  the  e-
charging infrastructure. 

implemented  by 

to  accelerate 

framework 

the  one 

promote 

vehicles 

and 

Strengthening productivity by 
reinforcing innovation, adult 
learning and skills  

Despite  progress  over  the 
last  two 
decades,  labour  productivity  in  Croatia 
remains  relatively  low.  Croatia’s  labour 
productivity has been slowly catching up to EU 
levels  but  managed  to  reach  an  all-time  high 
of  78%  of  the  EU  average  in  2022.  The 
productivity  gap  is  particularly  acute  in  micro 
companies, where productivity levels are about 
half  the  EU’s  (see  Annex  12).   This  highlights 
the  need  to  increase  the  dynamism  of  the 
Croatian business environment, reduce market 

(10)  Battery electric vehicles (BEV) and plug-in hybrid electric 
vehicles (PHEV), respectively from 1.47 % to 2.95% in 
2021 and from 0.62% to 1.35% in 2021. EEA, 2021, 
https://www.eea.europa.eu/data-and-maps/figures/new-
electric-vehicles-by-country-1 

 
                                                 
                                                 
inefficiencies,  improve  human  capital,  and 
promote investment in Research Development 
(R&D)  and  Innovation.  Underperformance  in 
education and innovation areas, persistent low 
efficiency  of  public  institutions  and  the  low 
quality  of  the  business  environment  hamper 
labour  productivity  in  Croatia.  In  addition, 
payment  gap  increases  both  in  business-to-
business  payments  and  in  public  sector-to-
business  payments  are  hampering  resilience 
and  growth  for  small  and  medium-sized 
companies  (see Annex 12). 

(see  Annex  11). 

The  intensity  of  R&D  investment  is  low, 
while  high  fragmentation  in the  research 
sector  persists.  R&D  intensity  in  Croatia  is 
substantially  lower  than  the  EU  average  and 
linkages  between  academia  and  business  are 
underdeveloped 
  R&D 
expenditure,  which  is  crucial  to  stimulating 
productivity  gains  and  boosting  the  economic 
potential of less-developed Croatian regions, is 
unequally  distributed  across 
the  country. 
Streamlining  the  fragmented  R&D  system 
(currently 
different 
organisations)  would  be  conducive  towards 
its  performance  and  spending 
improving 
collaboration 
and 
efficiency 
between universities and with business. 

numbering 

facilitating 

445 

regional  dimension.  The  up-  and 
strong 
reskilling  measures  implemented  under  the 
RRP  and  European  Social  Fund  Plus  (ESF+) 
(such  as  the  new  round  of  active  labour 
market policies, a voucher system, and a plan 
to establish individual learning accounts) need 
to  be  substantially  boosted  to  meet  the 
ambitious  national  target  for  adult  learning 
and  to  address  skills  needs  in  the  labour 
market.   

The  lack  of  relevant  green  skills  creates 
bottlenecks in the transition to a net-zero 
economy.  In  2022,  labour  shortages  were 
reported  in  Croatia  for  31  occupations  that 
required  specific  skills  or  knowledge  for  the 
green  transition (11).  The  job  vacancy  rate 
increased  across  most  key  sectors,  such  as 
construction  and  manufacturing,  with  both 
sectors  standing  below  the  EU  average  for 
construction (12).  In  2022,  labour  shortages 
were 
reported  as  a  factor  constraining 
production in industry (for 34.0% of firms) and 
firms) (13). 
construction 
Upskilling  and 
the  green 
including  for  the  people  most 
transition, 
labour 
affected,  and  promoting 
to 
markets,  are  essential  policy 
accelerate  the  transition  to  net-zero  and 
ensure the outcome is fair (see Annex 8).  

(for  47.3% 
reskilling 

of 
for 

inclusive 

levers 

to 

Longstanding  skills  mismatches  pose 
employment, 
obstacles 
competitiveness  and  potential  growth. 
Labour  activation  measures  are  insufficiently 
integrated  with  related  policy  areas  such  as 
social  policy,  adult  learning,  and  vocational 
training. There is a lack of alignment between 
active  labour  market  policies  and  persistent 
shortages in  the  Croatian labour market. High 
low 
levels  of  skills  mismatches 
employment  chances  for  medium-skilled  and 
especially 
Skills 
mismatches  are  especially  prominent  among 
young workers. The levels of labour shortages 
in  the  last  quarter  of  2022  are  higher  than 
pre-pandemic  levels  in  all  sectors  and  higher 
in 
than 
information  and  communication  technologies 
(ICT),  construction,  healthcare  and  social 
welfare.  Labour  shortages  are  the  result  of 
skills  gaps  and  a  shrinking  population  (9.64% 
decrease  in  population  in  2021  compared  to 
2011  according  to  census  data),  and  have  a 

the  EU  averages, 

low-skilled 

especially 

workers. 

reflect 

Addressing the risk of poverty and 
social exclusion 

social 

protection 

system 
The 
insufficiently 
the  most 
protects 
disadvantaged  persons.    While  the  rate  of 
the  population  at  risk  of  poverty  and  social 
exclusion is lower than the EU average, groups 
at  higher  risk  include  older  people,  especially 
women,  and  people  with  disabilities.  Single 

(11)  See figures of the European Labour Authority (2023) 
and the EURES Report on labour shortages and 
surpluses.  

(12)  From 1.5% in 2015 to 2.2% in 2021 for the 

construction sector, against an EU average of 6%, from 
0.6% in 2015 to 1.4% for manufacturing in 2021 
against an EU average of 1.9%, Eurostat 
(JVS_A_RATE_R2). 

(13)  European Business and Consumer Survey 

14 

 
                                                 
by ageing. The LTC system is fragmented and 
severely  underfunded  in  Croatia,  with  public 
spending amongst the lowest in the EU (0.23% 
of  GDP  against  1.81% 
in  2020).  This 
particularly  affects  older  people  (65+),  who 
already suffer from low pension adequacy and 
high  poverty  levels.  The  new  Social  Welfare 
Act  adopted  in  line  with  the  RRP  introduces 
structural  changes  to  long-term  care  and 
to  home  and 
facilitates 
transition 
community-based 
Substantial 
support  to  LTC  and  deinstitutionalisation  has 
been  programmed  under  RRF,  ESF+  and  the 
European  Regional  Development  Fund  (ERDF), 
but  these  developments  need  to  be  stepped 
up, including by the adoption of a LTC strategic 
framework  which  is  planned  for  2023,  to 
ensure  substantially  better  access  to  higher 
quality social services.  

services. 

the 

parents  experience  a  particularly  high  in-work 
at-risk-of-poverty  rate  in  comparison  to  the 
total  population  (21%  vs  4.9%  in  2021). 
Poorer  people  are  also  disproportionately 
affected  by  energy  poverty  (see  Annex  8). 
Furthermore,  the  at-risk-of-poverty  rate  gap 
indicator  value (14)  is  still  among  the  worst  in 
Europe.  Total  expenditure  on  social  protection 
continues to be relatively low (24% of GDP vs. 
31.7% in the EU in 2020).  

Graph 3.1: People at risk of poverty or social 
exclusion by age (%) 

Source: Eurostat 

The  impact  of social transfers  (excluding 
pensions)  on  poverty  reduction  has  been 
reached 
continually  decreasing  and 
20.66% in 2021, among the lowest in the 
EU. The already low capacity of the minimum 
income  scheme  to  mitigate  poverty  would 
have been further eroded by inflation and the 
energy  crisis,  if  it  had  not  been  offset  by  the 
recent  increases  introduced  under  the  RRP. 
Effective access to social protection is low for 
the  unemployed, 
the  self-employed  and 
temporary workers. 

Availability  and  quality  of  affordable 
social  services,  and  especially  long-term 
care (LTC) is a key challenge exacerbated 

(14)  At-risk-of-poverty rate gap indicator: the relative 

median at-risk-of-poverty gap is calculated as the 
difference between the median equivalised total net 
income of persons below the at-risk-of-poverty 
threshold and the at-risk-of-poverty threshold, 
expressed as a percentage of the at-risk-of-poverty 
threshold (cut-off point: 60% of median equivalised 
income). 

15 

1015202530352015201620172018201920202021From 18 to 64 years - EU27From 18 to 64 years - HR65 years or over - EU2765 years or over - HRLess than 18 years -EU27Less than 18 years - HR 
  
                                                 
KEY FINDINGS 

Croatia’s Recovery and Resilience Plan includes 
measures  to  address  a  series  of  structural 
challenges by:   

  Reducing  overall  dependence  on  fossil 
fuels, thereby increasing security of supply 
and 
while 
accelerating decarbonisation. 

affordability 

ensuring 

  Supporting 

protection 

the  green 

transition  by 
promoting  energy  efficiency,    renewable 
energy  and  related  storage,  as  well  as 
necessary  electricity  grid  development, 
sustainable transport, the circular economy, 
the 
and 
of 
ecosystems,  efficient  water  management, 
investment  in  building  renovation  and  the 
decarbonisation  of  businesses.  Reducing 
the discrepancy between electricity and gas 
prices  for  households,  to  promote  the 
switch from gas heating to heat pumps. 

biodiversity 

  Accelerating 

the  digital 

transition  by 
developing  digital  processes 
in  public 
administration, education and business, and 
reducing  the  digital  divide  between  urban 
and remote rural areas. 

  Boosting 

private 

investment, 

the  economic 

recovery  by 
leveraging 
lifting 
regulatory  and  administrative  constraints, 
accelerating  the  development  of  the  green 
and  digital  economies  and  incentivising 
research,  development  and 
innovation 
(R&D&I). 

  Implementing  labour  market  policies  and 
developing  appropriate  skills  to  match 
current  and 
labour  market  demand, 
the  development  of  skills 
prioritising 
the  green  and  digital 
for 
necessary 
transitions.  

  Further 

improving 

the  efficiency  and 
resilience  of  public  administration,  the 
judiciary  and  the  management  of  state 
assets. 

  Strengthening 

the  quality, 

efficiency, 
accessibility  and  financial  sustainability  of 
the healthcare and long-term care systems.  

  Developing  family  and  community-based 
reduce  poverty  and  help 

services 
integrate disadvantaged groups  

to 

  Increasing  the  share  of  children  in  early 
childhood education and care and of pupils 
going  to  one-shift  schools  in  primary  and 
general  secondary  school.  Improving  the 
quality  of  education  and  increasing  its 
labour market relevance.  

  Tackling  regional  fragmentation  to  reduce 
disparities  between  different  regions  and 
different social groups. 

Beyond  the  reforms  and  investment  in  the 
RRP, Croatia would benefit from:   

  Decarbonising  its  energy  and  transport 
sectors, 
in  particular  by  streamlining 
permitting procedures for the development 
of  renewable  energy  sources,  stepping-up 
performance  in  the  energy  efficiency  of 
buildings,  reinforcing  investment  in  the 
railway  sector  and  incentivising  the  use  of 
clean vehicles.  

  Reinforcing  the  diversification,  productivity 
and  resilience  of  the  Croatian  economy, 
including  by  stepping  up  efforts  to  meet 
the  2030  spending  targets  on  R&D&I  and 
adult 
implementing  up-  and 
reskilling  measures  to  tackle  labour  skills 
mismatches 
the 
and 
fragmentation of the research sector. 

addressing 

learning, 

16 

 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Cross-cutting indicators 

A1.  Sustainable Development Goals 

A2.  Progress in the implementation of country-specific recommendations 

A3.  Recovery and resilience plan - overview 

A4.  Other EU instruments for recovery and growth 

A5.  Resilience 

Environmental sustainability 

A6.  European Green Deal 

A7.  Energy security and affordability 

A8.  Fair transition to climate neutrality 

Productivity 

A9.  Resource productivity, efficiency and circularity 

A10.  Digital transformation 

A11.  Innovation 

A12.  Industry and single market 

A13.  Public administration 

Fairness 

A14.  Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

A15.  Education and training 

A16.  Health and health systems 

A17.  Economic and social performance at regional level 

Macroeconomic stability 

A18.  Key financial sector developments 

A19.  Taxation 

A20.  Table with economic and financial indicators 

A21.  Debt sustainability analysis 

LIST OF TABLES 

A2.1. 
A3.1. 

Summary table on 2019-2022 CSRs 
Key elements of Croatia's RRP 

19 

21 

21 

23 

26 

28 

31 

32 

32 

37 

41 

44 

44 

46 

49 

51 

55 

57 

57 

60 

62 

64 

66 

66 

68 

70 

71 

24 
26 

 
 
 
A5.1. 
Resilience indices summarising the situation across RDB dimensions and areas 
A6.1. 
Indicators tracking progress on the European Green Deal from a macroeconomic perspective 
A7.1. 
Key Energy Indicators 
A8.1. 
Key indicators for a fair transition in Croatia 
A9.1. 
Overall and systemic indicators on circularity 
A10.1.  Key Digital Decade targets monitored by DESI indicators 
A11.1.  Key innovation indicators 
A12.1. 
Industry and the single market 
A13.1.  Public administration indicators 
A14.1.  Social Scoreboard for Croatia 
A14.2.  Situation of Croatia on 2030 employment, skills and poverty reduction targets 
A15.1.  EU-level targets and other contextual indicators under the European Education Area strategic framework 
A16.1.  Key health indicators 
A17.1.  Selected indicators at regional level in Croatia 
A18.1.  Financial soundness indicators 
A19.1.  Taxation indicators 
A20.1.  Key economic and financial indicators 
A21.1.  Debt sustainability analysis - Croatia 
A21.2.  Heat map of fiscal sustainability risks - Croatia 

LIST OF GRAPHS 

Progress towards the SDGs in Croatia in the last 5 years 
Croatia’s progress on the 2019-2022 CSRs (2023 European Semester) 
Disbursement per pillar 
Total grants disbursed under the RRF 
Fulfilment status of milestones and targets 
Cohesion policy funds 2021-2027 in Croatia: budget by fund 
Cohesion policy funds contribution to the SDGs in 2014-2020 and 2021-2027 in Croatia 
Thematic - greenhouse gas emissions from the effort sharing sectors in Mt CO2eq, 2005-2021 
Thematic - Energy mix (top) and electricity mix (bottom), 2021 
Thematic – environmental investment needs and current investment, p.a 2014-2020 
Underground gas storage levels in Croatia 
Share of gas consumption per sector, 2021 
Fair transition challenges in Croatia 
Distributional impacts of energy prices due to rising energy expenditure (2021-2023) 
Trend in material use 
Treatment of municipal waste 

A1.1. 
A2.1. 
A3.1. 
A3.2. 
A3.3. 
A4.1. 
A4.2. 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2. 
A8.1. 
A8.2. 
A9.1. 
A9.2. 
A11.1.  R&D intensity (GERD as % of GDP) 2010 - 2021 
A12.1.  Hourly productivity in PPS (% of EU) 
A12.2.  Business environment and productivity drivers 
A13.1.  Croatia. Scope index of independent fiscal institutions 
A15.1.  Changes in primary school pupils’ population in Croatia between 2013/2014 and 2022/2023 (by region) 
A16.1.  Life expectancy at birth, years 
A16.2.  Projected increase in public expenditure healthcare over 2019-2070 
A17.1.  GDP per capita (2010) and GDP growth (2011-2020) 
A17.2.  Labour productivity (2000-2020) 
A18.1.  Evolution of credit activity 
A18.2.  Housing prices 
A19.1.  Tax revenues from different tax types, % of total taxation 
A19.2.  Tax wedge for single and second earners, % of total labour costs, 2022 

LIST OF MAPS 

A17.1.  Regional Competitiveness in Croatia (2022) 

20 

31 
36 
37 
43 
45 
48 
50 
53 
55 
57 
58 
61 
63 
65 
66 
68 
70 
73 
73 

21 
23 
26 
27 
27 
28 
29 
32 
33 
34 
37 
38 
41 
42 
44 
45 
49 
51 
54 
55 
60 
62 
62 
64 
64 
66 
67 
69 
69 

65 

 
 
 
 
CROSS-CUTTING INDICATORS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 

This  Annex  assesses  Croatia’s  progress  on 
the  Sustainable  Development  Goals  (SDGs) 
along  the  four  dimensions  of  competitive 
sustainability.  The  17  SDGs  and  their  related 
indicators  provide  a  policy  framework  under  the 
UN’s  2030  Agenda  for  Sustainable  Development. 
The  aim  is  to  end  all  forms  of  poverty,  fight 
inequalities  and  tackle  climate  change  and  the 
environmental crisis, while ensuring that no one is 
left  behind.  The  EU  and  its  Member  States  are 
committed  to  this  historic  global  framework 
agreement  and  to  playing  an  active  role  in 
maximising  progress  on  the  SDGs.  The  graph 
below  is  based  on  the  EU  SDG  indicator  set 
developed  to monitor progress  on  the  SDGs  in  an 
EU context. 

related 

Croatia  is  improving  on  all  of  the  SDG 
environmental 
indicators 
sustainability (SDGs 2, 6, 7, 9, 11, 12 13, 14, 
15).  However,  it  still  needs  to  make  additional 
efforts to catch up with the EU average in some of 

to 

recovery  and 

them,  especially  SDGs  9,  2,  11  and  12.  Croatia 
performs better than the EU (52.1% vs 47.6%) on 
SDG 15 (Life on land). This is because it is in the 
top 3 EU countries (after Slovenia and Estonia) for 
its share of forest area (58% vs an EU average of 
43.5%).  Croatia  is improving  on  SDG  7,  especially 
on  the  share  of  renewable  energy  in  gross  final 
energy  consumption  (from  28.3%  in  2016  to 
31.3% in 2021; above the EU  average of 21.8%). 
Croatia’s 
(RRP) 
includes  measures  to  further  improve  on  energy-
the  energy 
related  challenges,  namely  on 
renovation  of  buildings,  increasing  overall  energy 
efficiency  and  advancing  the  decarbonisation  of 
lagging 
the  energy  sector.  The  country 
significantly behind the EU average on SDG 9 due 
to  R&D  indicators  like  the  number  of  patent 
applications  and  gross  domestic  expenditure  on 
R&D.  The  RRP  has  a  component  dedicated  to 
supporting  R&D  development.  Croatia  needs  to 
catch up on SDG 12 in particular due to a decrease 
in  gross  value  added  in  the  environmental  goods 

resilience  plan 

is 

Graph A1.1: Progress towards the SDGs in Croatia in the last 5 years 

For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable development in the European Union’; for 
details on extensive country-specific data on the short-term progress of Member States: Key findings – Sustainable development 
indicators – Eurostat (europa.eu). The status of each SDG in a country is the aggregation of all indicators for the specific goal 
compared to the EU average. A high status does not mean that a country is close to reaching a specific SDG, but signals that it is 
doing better than the EU on average. The progress score is an absolute measure based on the indicator trends over the past 5 
years. The calculation does not take into account any target values as most EU policy targets are only valid for the aggregate EU 
level. Depending on data availability for each goal, not all 17 SDGs are shown for each country. 
Source: Eurostat, latest update of early April 2023, except for the EU Labour Force Survey (LFS) indicators released on 27 April 
2023. Data mainly refer to 2016-2021 or 2017-2022. 

21 

 
 
 
 
 
 
and services sector ( 1.5% in 2020; EU average for 
2020  was  2.5%)  and  an  increase  in  the  material 
footprint  (13.1  tonnes  in  2020,  while  the  EU 
average  is  13.7  tonnes  in  2020).  Croatia  also 
performed  worse  than  the  EU  average  in  SDG  11 
indicators.  The  RRP 
due  to  waste  recycling 
envisages  measures 
these 
shortcomings,  with  a  dedicated  component  to 
improve  waste  management  and  recycling  and 
investments to boost the green transition and the 
circular economy. Croatia is also lagging compared 
to EU average on SDG 2, due mainly to the higher 
obesity  rate  and  lower  sustainable  agricultural 
production indicators.  

improve 

to 

Croatia  is  improving  on  all  SDG  indicators 
related to fairness (SDGs 1, 3, 4, 5, 7, 8, 10), 
but  still  needs  to  catch  up  with  the  EU 
average  on  SDGs  3,  4,  and  8.  It  is  performing 
well on the share of the population unable to keep 
their homes adequately warm (SDG 7; from 9.3% 
in  2016  to  5.7%  in  2021,  and  above  the  EU 
average  of  6.9%).  Significant  improvements  were 
made  to  scored  better  than  the  EU  average  on 
poverty  indicators  (SDG  1)  such  as  the  severe 
material and social deprivation rate and for the at-
risk-of-poverty  rate  indicator  (See  annex  14). 
Croatia  made  improvements  in  the  gender  gap 
indicator of people outside the labour force due to 
caring responsibilities (SDG 8; from 2% of persons 
aged 20-64 in 2017 to 0.7% in 2022, better then 
the EU average of 1.2%). The RRP plans to further 
improve  on  these  issues  through  a  dedicated 
component  for  the  welfare  system  that  includes 
the  National  Plan  against  Poverty  and  Social 
Exclusion  2021-2027  adopted  in  2021,  and  the 
new  Social  Welfare  Act  that  increases  minimum 
benefits. Although improvements have been made, 
Croatia is still performing below the EU average on 
SDG 3 (Good health and well-being) and on SDG 4 
(Quality  education).  This  goes  in  particular  for 
healthy  life  years  at  birth  (SDG  3;  58.5  years  in 
2020  compared  to  the  EU  average  of  64  years), 
the participation in early childhood education (SDG 
4;  78.8%  of  children  aged  3  and  over  in  2020 
compared  to  the  EU  average  of  93%)  and  adult 
participation  in  learning  (4.4%  of  the  population 
aged 25-64 in 2020 vs an EU average of 11.9%). 
The  RRP  envisages  measures  to  tackle  these 
issues  through  dedicated  components  for  health 
and  education.  These  include  actions  such  as  the 
National  Health  Development  Plan  2021-2027 
adopted  in  2021;  revised  legal  framework  for 
adult  learning  adopted  in  2021;  and  a  model  for 
financing early childhood education and care. 

Croatia  is  improving  on  all  of  the  SDGs 
related  to  productivity,  but  still  needs  to 
catch  up  with the  EU  average  in  all of  them 
(SDGs  4,  8,  9).  Although  it  scores  above  the  EU 
average on adults with at least basic digital  skills 
(SDG 4; 63.4% of individuals aged 16-74 in 2021 
vs  an  EU  average  of  53.9%),  it  is  lagging  behind 
on  the  share  of  households  with  a  high-speed 
internet  connection  (SDG  9).  This  is  a  long-
standing  issue  in  Croatia  due  to  it's  coastal  area 
(51.7%  of  households  in  2021  vs  an  EU  average 
of  70.2%).  Taking  this  into  account,  the  RRP  has 
increasing  broadband 
measures  dedicated  to 
access  for  households.  Employment  indicators 
from  SDG  8,  which  have  improved  in  the  last  5 
years,  are  still  below  the  EU  average;  13.3%  of 
young  people  aged  15-29  were  not  in  education, 
employment or training (NEET) in 2022 (vs an EU 
average  of  11.7%);  the  employment  rate  for  the 
population aged 20-64 was 69.7% in 2022 (vs an 
EU average of 74.6%). 

is 

Croatia 
indicators 
improving  on  SDG 
related  to  macroeconomic  stability  (SDGs  8, 
16,  17),  but  still  needs  to  catch  up  with  the 
EU  on  SDGs  8  and  16.  While  two  of  the 
indicators  linked  to  sustainable  economic  growth 
from  SDG  8  showed  improvement  (real  GDP  per 
capita and the investment share of GDP) they are 
still below EU average, while the material footprint 
indicator deteriorated from 12.5 tonnes per capita 
in 2015 to 13.1 tonnes in 2020, better than the EU 
average  of  13.7  tonnes.  Croatia  has  made  strong 
improvements  in  the  long-term  unemployment 
rate (SDG 8; from 4.6% of the active population in 
2017 to 2.4% in 2022, similar to the EU average). 
Access  to  justice  and  the  corruption  perception 
Indexes  are  below  the  EU  average  and  point  to 
structural 
linked  to  these  areas.  The 
Commission  is  monitoring  this  through  different 
channels like the Rule of Law Report and it issued 
a country-specific recommendation in 2019 linked 
to fighting corruption. In addition, the RRP has two 
components  dedicated  to  modernising  the  justice 
system  and  preventing  and  combating  corruption. 
General  government  gross  debt  (SDG  17)  was 
68.4%  of  GDP  in  2022,  below  the  EU  average  of 
84.%. The debt level is expected to drop further in 
the medium term driven by strong nominal growth 
that supports government revenues. 

issues 

As the SDGs form an overarching framework, any 
links  to  relevant  SDGs  are  either  explained  or 
depicted with icons in the other Annexes. 

22 

 
ANNEX 2: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
RECOMMENDATIONS 

Graph A2.1: Croatia’s progress on the 2019-2022 
CSRs (2023 European Semester) 

The Commission has assessed the 2019-2022 
country-specific  recommendations  (CSRs) (15) 
addressed to Croatia as part of the European 
Semester.  These  recommendations  concern  a 
wide  range  of  policy  areas  that  are  related  to  15 
of  the  17  Sustainable  Development  Goals  (see 
Annexes  1  and  3). The  assessment  considers  the 
policy action taken by  Croatia to date (16)  and the 
commitments  in  its  RRP (17).  At  its  stage  of  RRP 
implementation,  51%  of  the  CSRs  focusing  on 
structural  issues  from  2019-2022  have  recorded 
at  least  ‘some  progress’,  while  47%  recorded 
‘limited  progress’  (see  Graph  A2.1).  As  the  RRP  is 
implemented  further,  considerable  progress  in 
addressing structural CSRs is expected in the years 
to come. 

Source: European Commission  

(15)  2022 CSRs: EUR-Lex - 32022H0901(11) - EN - EUR-Lex 

(europa.eu) 
2021 CSRs: EUR-Lex - 32021H0729(11) - EN - EUR-Lex 
(europa.eu) 
2020 CSRs: EUR-Lex - 32020H0826(11) - EN - EUR-Lex 
(europa.eu) 
2019 CSRs: EUR-Lex - 32019H0905(11) - EN - EUR-Lex 
(europa.eu) 

(16)  Including policy action reported in the national reform 

programme and in Recovery and Resilience Facility (RRF) 
reporting (twice a year reporting on progress in implementing 
milestones and targets and resulting from the payment 
requests assessment). 

(17)  Member States were asked to effectively address all or a 

significant subset of the relevant country-specific 
recommendations issued by the Council in 2019 and 2020 in 
their RRPs. The CSR assessment presented here considers the 
degree of implementation of the measures included in the 
RRP and of those carried out outside of the RRP at the time 
of assessment. Measures laid down in the Annex of the 
adopted Council Implementing Decision on approving the 
assessment of the RRP, which are not yet adopted or 
implemented but considered credibly announced, in line with 
the CSR assessment methodology, warrant ‘limited progress’. 
Once implemented, these measures can lead to 
‘some/substantial progress or full implementation’, 
depending on their relevance. 

23 

No progress2%Limited progress47%Some progress35%Substantial progress7%Full implementation9% 
 
                                                 
            
 
 
 
 
 
Table A2.1: Summary table on 2019-2022 CSRs 

(Continued on the next page) 

24 

CroatiaAssessment in May 2023*RRP coverage of CSRs until 2026**Relevant SDGs2019 CSR 1Limited ProgressReinforce the budgetary framework and monitoring of contingent liabilities at central and local level. Some ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2023 and 2025SDG 8, 16Reducetheterritorialfragmentationofthepublicadministrationandstreamline the functional distribution of competencies.Limited ProgressRelevant RRP measures planned as of 2022, 2023 and 2025SDG 10, 11, 162019 CSR 2Limited ProgressDeliver on the education reform and improve both access to education and training at all levels and their quality and labour market relevance. Some ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2025 and 2026SDG 4, 5Consolidate social benefits and improve their capacity to reduce poverty. Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2023, 2024 and 2025SDG 1, 2, 10Strengthen labour market measures and institutions and their coordination with social services. Some ProgressRelevant RRP measures planned as of 2022, 2023, 2024, 2025 and 2026SDG 8In consultation with the social partners, introduce harmonised wage-setting frameworks across the public administration and public services.Limited ProgressRelevant RRP measures planned as of 2023 and 2024SDG 82019 CSR 3Limited ProgressFocus investment-related economic policy on research and innovation, Some ProgressRelevant RRP measures planned as of 2022, 2024, 2025 and 2026SDG 9, 10, 11sustainable urban and railway transport, Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2024, 2025 and 2026SDG 10, 11energy efficiency, renewables and environmental infrastructure, taking into account regional disparities.Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2023, 2024, 2025 and 2026SDG 6, 7, 9, 10, 11, 12, 13 Increase the administration's capacity to design and implement public projects and policies.Some ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2023 and 2025SDG 162019 CSR 4Limited ProgressImprove corporate governance in State-owned enterprises and intensify the sale of such enterprises and non-productive assets.Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2024 and 2026SDG 9Enhancethepreventionandsanctioningofcorruption,inparticularat the local level. Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2024, 2025 and 2026SDG 16Reducethedurationofcourtproceedingsandimproveelectroniccommunication in courts. Limited ProgressRelevant RRP measures planned as of 2022, 2023, 2024 and 2026SDG 16Reduce the most burdensome parafiscal chargesSubstantial ProgressRelevant RRP measures planned as of 2022, 2023 and 2024 SDG 8, 9 and excessive product and services market regulation.Some ProgressRelevant RRP measures planned as of 2022, 2023 and 2024 SDG 92020 CSR 1Limited ProgressInlinewiththegeneralescapeclause,takeallnecessarymeasurestoeffectivelyaddressthepandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuringdebtsustainability,whileenhancinginvestment.Not relevant anymoreNot applicableSDG 8, 16Enhancetheresilienceofthehealthsystem.Promotebalancedgeographicaldistributionofhealthworkersandfacilities,closercooperationbetweenalllevelsofadministrationandinvestmentsine-health.Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2023, 2024, 2025 and 2026SDG 32020 CSR 2Some ProgressStrengthen labour market measures and institutionsSome ProgressRelevant RRP measures planned as of 2022, 2023, 2024, 2025 and 2026SDG 8and improve the adequacy of unemployment benefits and minimum income schemes.Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2023, 2024 and 2025SDG 1, 2, 10Increase access to digital infrastructure and services.Limited ProgressRelevant RRP measures planned as of 2022, 2023, 2024, 2025 and 2026SDG 9Promote the acquisition of skills.Some ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2023 and 2026SDG 42020 CSR 3Some ProgressMaintain measures to provide liquidity to small and medium-sized enterprises and the self-employed.Full ImplementationRelevant RRP measures planned as of 2022, 2025 and 2026SDG 8, 9Further reduce parafiscal charges andSubstantial ProgressRelevant RRP measures planned as of 2022, 2023 and 2024 SDG 8, 9restrictions in goods and services market regulation.Some ProgressRelevant RRP measures planned as of 2022, 2023 and 2024 SDG 9Front-load mature public investment projectsSome ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022SDG 8, 16and promote private investment to foster the economic recovery.Limited ProgressRelevant RRP measures planned as of 2022, 2024, 2025 and 2026SDG 8, 9Focusinvestmentonthegreenanddigitaltransition,inparticularonenvironmental infrastructure, Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2023, 2024, 2025 and 2026SDG 6, 12, 15 
 
 
 
  
 
Table (continued) 

Note:            
* See footnote (17). 
** RRP measures included in this table contribute to the implementation of CSRs. Nevertheless, additional measures outside the 
RRP are necessary to fully implement CSRs and address their underlying challenges. Measures indicated as 'being implemented' 
are only those included in the RRF payment requests submitted and positively assessed by the European Commission.  
Source: European Commission 

25 

sustainable urban and rail transport,Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2024, 2025 and 2026SDG 11clean and efficient production and use of energyLimited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2023, 2024, 2025 and 2026SDG 7, 9, 13and highspeed broadband.Some ProgressRelevant RRP measures planned as of 2023 and 2026SDG 92020 CSR 4Limited ProgressReinforcethecapacityandefficiencyofthepublicadministrationtodesignandimplementpublicprojectsandpoliciesatcentralandlocal levels.Some ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2023 and 2025SDG 16Improve the efficiency of the judicial system.Limited ProgressRelevant RRP measures planned as of 2022, 2023, 2024 and 2026SDG 162021 CSR 1Substantial ProgressIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilienceFacility,andpreservenationallyfinancedinvestment.Keepthegrowthofnationallyfinanced current expenditure under control.Substantial ProgressNot applicableSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.Full ImplementationNot applicableSDG 8, 16At the same time, enhance investment to boost growth potential(cid:13)Payparticularattentiontothecompositionofpublicfinances,bothontherevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasures,toensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,notably supporting the green and digital transition.Some ProgressNot applicableSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,includingbystrengtheningthecoverage,adequacy,andsustainabilityofhealthandsocialprotection systems for all.Limited ProgressNot applicableSDG 8, 162022 CSR 1Substantial ProgressIn 2023, ensure that the growth of nationally financed primary current expenditureisinlinewithanoverallneutralpolicystance,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadytoadjustcurrentspendingtotheevolvingsituation.No ProgressNot applicableSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandother Union funds.Full ImplementationNot applicableSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachieving prudent medium-term fiscal positions.Full ImplementationNot applicableSDG 8, 162022 CSR 2Proceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestonesandtargetsincludedintheCouncilImplementing Decision of 20 July 2021.SwiftlyfinalisethenegotiationswiththeCommissionon2021-2027cohesionpolicyprogrammingdocumentswithaviewtostartingtheirimplementation.2022 CSR 3Limited ProgressDiversifyfossil-fuelimportsandreduceoverallrelianceonfossilfuels.Limited ProgressRelevant RRP measures being planned as of  2023, 2024, 2025, and 2026SDG 7, 9, 13Acceleratethedeploymentofrenewables,focussinginparticularonwind,solarandgeothermalsources,includingthroughsmall-scalerenewableenergyproductionanddevelopingenergycommunities,mainlybystreamliningproceduresforadministrativeauthorisationand permits.Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of  2024, 2025 and 2026SDG 7, 8, 9, 13Furtherupgradeelectricitytransmissionanddistributiongridsandinvest in electricity storage.Limited ProgressRelevant RRP measures being planned as of  2024, and 2026SDG 7, 9, 13Stepupeffortstoreduceenergydemandbyincreasingenergyefficiency in industry and in private and public building stock.Some ProgressRelevant RRP measures being planned as of 2022, 2024, 2025 and 2026SDG 7and transport sectors.Some ProgressRelevant RRP measures being planned as of  2024, 2025, and 2026SDG 11RRP implementation is monitored by assessing RRP payment requests and analysing reports published twice a year on the achievement of the milestones and targets. These are to be reflected in the country reports. Progress on the cohesion policy programming documents is monitored under the EU cohesion policy. 
 
  
 
ANNEX 3: RECOVERY AND RESILIENCE PLAN - OVERVIEW 

the RRF as a whole, in a transparent manner. The 
graphs in this Annex show the current state of play 
of  the  milestones  and  targets  to  be  reached  by 
Croatia 
as 
subsequently 
satisfactorily fulfilled by the Commission. 

assessed 

and 

EUR  2.2  billion  has  so  far  been  disbursed  to 
Croatia  under  the  RRF.  The  Commission 
disbursed  EUR  818.4  million  to  Croatia  in  pre-
financing  on  28  September  2021,  equivalent  to 
13%  of  the  financial  allocation.  Croatia’s  first 
payment  request  was  positively  assessed  by  the 
Commission, taking into account the opinion of the 
Economic and Financial Committee, leading to EUR 
1,4 billion being disbursed in financial support (net 
of  pre-financing)  on  16  December  2022.  The 
related  25  milestones  cover  several  reforms  and 
investments  in the  areas of  public  administration, 
the judiciary, social policy, employment, education, 
skills,  energy  and  energy  efficiency,  water 
management and connectivity.   

In  September  2022,  Croatia  submitted  its 
second payment request for EUR 700 million. 
On 10 November 2022 the Commission published 
its positive preliminary assessment which after the 
positive  discussion  in  the  committee’s  led  to  the 
disbursement  of  the  money  on  16  December 
2022. The related 25 milestones and targets cover 
several  reforms  and  investments  in  the areas  of 
energy and energy efficiency, water management, 
transport  and  digital  connectivity,  employment, 
education, skills, health, and social  welfare, public 
administration and the judiciary (See Section 2). 

The  Recovery  and  Resilience  Facility  (RRF)  is 
the centrepiece of the EU’s efforts to help it 
recover  from  the  COVID-19  pandemic,  speed 
up  the  twin  transition  and  strengthen 
resilience against future shocks. The RRF also 
contributes  to  implementation  of  the  SDGs  and 
Specific 
helps 
to 
Recommendations 
Croatia 
(see 
submitted  its  current  recovery  and  resilience  plan 
(RRP) on 14 May 2021. The Commission’s positive 
assessment on 8 July 2021 and Council’s approval 
on  28  July  2021  paved  the  way  for  disbursing 
EUR 6.3  billion  in  grants  under  the  RRF  over  the 
2021-2026 period.   

Country 
Annex 2). 

address 

the 

Table A3.1: Key elements of Croatia's RRP 

Source: RRF Scoreboard 

Since  the  entry 
into  force  of  the  RRF 
Regulation  and  the  assessment  of  the 
national  recovery  and  resilience  plans, 
geopolitical  and  economic  developments 
have caused major disruptions across the EU. 
In  order  to  effectively  address  these  disruptions, 
the  (adjusted)  RRF  Regulation  allows  Member 
States to amend their recovery and resilience plan 
for  a  variety  of  reasons.  In  line  with  article  11(2) 
of the RRF, the maximum financial contribution for 
Croatia  was  moreover  updated  on  30  June  2022 
to  an  amount  of  EUR  5.5  billion  in  grants.  No 
revision  was  submitted  at  the  time  of  publication 
of this country report. 

Croatia’s progress in implementing its plan is 
published  in  the  Recovery  and  Resilience 
Scoreboard (18).  The  Scoreboard  also  gives  an 
overview  of  the  progress  made  in  implementing 

(18)  https://ec.europa.eu/economy_finance/recovery-and-

resilience-scoreboard/country_overview.html 

26 

Current RRPScope Initial planCID adoption date28 June 2021Total allocation EUR 6.3 billion in grants (11.0% of 2021 GDP)Investments and reforms 146 investments and 76 reforms Total number of milestones and targets372 
 
 
  
 
                                                 
 
 
 
 
 
 
 
 
 
 
 
 
Graph A3.1: Disbursement per pillar 

Note: Each disbursement reflects progress in the implementation of the RRF, across the six policy pillars. This graph displays how 
disbursements under the RRF (excluding pre-financing) relate to the pillars. The amounts were calculated by linking the milestones 
and targets covered by a given disbursement to the pillar tagging (primary and secondary) of their respective measures. 
Source: RRF Scoreboard 

Graph A3.2: Total grants disbursed under the RRF 

Graph A3.3: Fulfilment status of milestones and 
targets 

Note: This graph displays the amount of grants disbursed so 
far under the RRF. Grants are non-repayable financial 
contributions. The total amount of grants given to each 
Member State is determined by an allocation key and the 
total estimated cost of the respective RRP. 
Source: RRF Scoreboard 

This graph displays the share of satisfactorily fulfilled 
milestones and targets. A milestone or target is satisfactorily 
fulfilled once a Member State has provided evidence to the 
Commission that it has reached the milestone or target and 
the Commission has assessed it positively in an implementing 
decision. 
Source: RRF Scoreboard 

27 

€ 2.22billionSatisfactorily fulfilledNot fulfilled0 mn100 mn200 mn300 mn400 mnGreen transitionDigitaltransformationSmart,sustainable andinclusive growthSocial andterritorialcohesionHealth, andeconomic, socialand institutionalresiliencePolicies for thenext generation 
 
 
   
 
 
 
 
   
 
 
 
   
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

The  EU  budget  of  over  EUR  1.2  trillion  for 
2021-2027  is  geared  towards  implementing 
the  EU’s  main  priorities.  Cohesion  policy 
investment amounts to EUR 392 billion across the 
EU and represents almost a third of the overall EU 
budget, including around EUR 48 billion invested in 
line with REPowerEU objectives. 

Graph A4.1: Cohesion policy funds 2021-2027 in 
Croatia: budget by fund 

(1) million EUR in current prices, % of total; (total amount 
including EU and national co-financing) 
Source: European Commission, Cohesion Open Data 

In  2021-2027,  in  Croatia,  cohesion  policy 
funds (19)  will  invest  EUR  4.5  billion  in  the 
green  transition  and  EUR  0.3  billion  in  the 
digital  transformation  as  part  of  the 
country’s total allocation of EUR 10.2 billion. 
In  particular,  the  European  Regional  Development 
Fund  (ERDF)  will  boost  R&D,  innovation  and 
digitalisation  by  supporting  more  than  13 500 
companies.  More  than  EUR  500  million  of  ERDF 
investments  will  be  allocated  to  projects  that  will 
lead to 20% primary energy savings and increase 
the  share  of  renewables  to  60%  of  electricity 
production in 2030. Particular attention should be 
the  ambitious  new 
paid 
to 
integrated 
(ITP),  which 
combines ERDF support for the industrial transition 
of  regions  and  sustainable  development  of  cities 
and islands, with mitigation of the negative effects 
of  energy  transition  in  the  two  most  affected 
counties  through  the  Just  Transition  Fund  (JTF).  
The JTF will support new technologies, the creation 
of  new  jobs  for  technical  professions,  improving 
the  links  between  businesses  and  educational 
institutions,  increasing  the  supply  of  non-formal 
education  and  reskilling  and  upskilling  workers. 
This  will  help  Croatia  fulfil  its  commitment  to 

implementing 
territorial  programme 

(19)  European Regional Development Fund (ERDF), Cohesion Fund 
(CF), European Social Fund+ (ESF+), Just Transition Fund 
(JTF) and Interreg. The total amount including national and 
EU contributions. Data source: Cohesion Open Data. 

28 

phase out the use of coal by 2033. The European 
Social  Fund  Plus  (ESF+)  is  key  to  supporting 
investment  in  people  and reforms in  the  areas  of 
employment,  education  and  training,  and  social 
inclusion.  Croatia  allocated  EUR  855  million  to 
support  education  and  skills.  This  funding  will 
include  strengthening  green  and  digital  skills  by 
aligning  vocational  education  and  training  (VET) 
with labour market demand.  

Of  the  investments  mentioned  above,  EUR 
639  million  will  be  invested  in  line  with 
REPowerEU objectives. This is on top of the EUR 
533  million  dedicated  to  REPowerEU  under  the 
2014-2020 budget. EUR 499 million (2021-2027) 
and  EUR 
is  for 
improving  energy  efficiency;  EUR  112  million 
(2021-2027) and EUR 339 million (2014-2020) is 
for  renewable  energy  and  low-carbon  R&I;  and 
EUR  28  million  (2021-2027)  is  for  smart  energy 
systems. 

[195]  million 

(2014-2020) 

Graph A4.2: Synergies between cohesion policy 
funds and the RRF with its six pillars in Croatia 

(1) million EUR in current prices (total amount, including EU 
and national co-financing)   
Source: European Commission  

In  2014-2020,  cohesion  policy  funds  made 
EUR  9.1  billion  available  to  Croatia (20)  with 
an  absorption  of  65% (21).  Including  national 
financing,  the  total  investment  amounts  to  EUR 
10.5 billion - around 3% of GDP for 2014-2020.  

Croatia  continues  to  benefit  from  cohesion 
policy 
support  economic 
to 
recovery,  step  up  convergence  and  provide 
vital support to regions following the COVID-

flexibility 

(20)  Cohesion policy funds include the ERDF, CF, ESF and the 
Youth Employment Initiative (YEI). ETC programmes are 
excluded here. According to the ‘N+3 rule’, the funds 
committed for 2014-2020 must be spent by 2023. REACT-
EU is included in all figures. The total amount includes EU 
and national co-financing. Data source: Cohesion Open Data. 

(21)  2014-2020 Cohesion policy EU payments by MS is updated 

daily on Cohesion Open Data.   

1,39114%6,35862%2,26822%2192%CFERDFESF+JTF 
 
  
                                                 
  
                                                 
 
 
19  pandemic.  The  Recovery  Assistance  for 
Cohesion and the Territories of Europe instrument 
(REACT-EU) (22)  under  NextGenerationEU  provides 
EUR  673  million  on  top  of  the  2014-2020 
cohesion  policy  allocation  for  Croatia.  REACT-EU 
supported  274  SMEs  in  the  area  of  green  and/or 
digital  technologies,  with  a  view  to  increase  their 
competitiveness  and  the  ability  to  respond  to 
market  challenges  caused  by  COVID-19.  Funding 
also  helped  save  the  jobs  of  around  280 000 
people  working  in  sectors  affected  by  the  crises, 
i.e.  accommodation  and  food  production.  With 
SAFE  (Supporting  Affordable  Energy),  the  2014-
2020 cohesion policy funds may also be mobilised 
by  Croatia  to  support  vulnerable  households,  jobs 
and  companies  particularly  affected  by  high 
energy prices. 

Graph A4.2: Cohesion policy funds contribution to 
the SDGs in 2014-2020 and 2021-2027 in Croatia 

(1) 5 largest contributions to SDGs in million (EUR) current 
prices 
Source: European Commission  

In both 2014-2020 and 2021-2027, cohesion 
policy  funds  have  contributed  substantially 
the  Sustainable  Development  Goals 
to 
(SDGs).  These  funds  support  11  of  the  17  SDGs, 
notably  SDG  9 
innovation  and 
‘industry, 
infrastructure’  and  SDG  8 
‘decent  work  and 
economic growth’ (23). 

Other  EU  funds  make  significant  resources 
available  for  Croatia.  The  common  agricultural 
policy  (CAP)  made  available  EUR  4.2  billion  in 
2014-2022.  It  will  keep  supporting  Croatia  with 
EUR 3.4 billion in 2023-2027. The two CAP Funds 
(European  Agricultural  Guarantee  Fund  and 
Rural 
European 

Agricultural 

Fund 

for 

(22)  REACT-EU allocation on Cohesion Open Data. 

(23)  Other EU funds contribute to the implementation of the 
SDGs. In 2014-2022, this includes both the European 
Agricultural Fund for Rural Development (EARDF) and the 
European Maritime and Fisheries Fund (EMFF). 

29 

Development),  contribute  to  the  European  Green 
Deal while ensuring long-term food security. They 
promote  social,  environmental  and  economic 
sustainability  and  innovation  in  agriculture  and 
rural  areas,  in  coordination  with  other  EU  funds. 
The  European  Maritime  and  Fisheries  Fund  made 
EUR 253 million available to Croatia in 2014-2020 
and 
the  European  Maritime,  Fisheries  and 
Aquaculture  Fund  will  make  available  EUR  244 
million in 2021-2027. 

Croatia  also  benefits 
from  other  EU 
programmes,  notably  the  Connecting  Europe 
Facility, which  under CEF  2  (2021-2027)  has 
so  far  allocated  EU  funding  of  EUR  2.7 
million to three specific projects on strategic 
transport  networks.  Similarly,  Horizon  Europe 
has so far allocated more than EUR 24 million for 
Croatian  R&I  actors,  while 
the  previous 
programming  period,  Horizon  2020  earmarked 
EUR  138  billion.  The  Public  Sector  Loan  Facility 
established  under  the  Just  Transition  Mechanism 
makes EUR 14.1 million of grant support from the 
Commission available in 2021-2027, which will be 
combined  with  loans  from  the  EIB  to  support 
investments  by  public  sector  entities 
just 
transition regions. 

in 

in 

for 

risks 

temporary 

unemployment 

support 
in 

Croatia received support under the European 
to 
instrument 
mitigate 
an 
emergency  (SURE)  to  finance  short-time 
work  schemes  and  similar  measures  to 
mitigate the  impact of COVID-19.  The  Council 
granted financial assistance to Croatia of EUR 1.6 
billion  in  loans,  which  supported  around  40%  of 
workers  and  30%  of  firms  in  2020,  and  around 
13% of workers and 15% of firms in 2021. 

Croatia 

Instrument 
designing 

(TSI) 
The  Technical  Support 
and 
supports 
in 
reforms, 
implementing  growth-enhancing 
implementation  of  specific 
including  the 
reforms  in  its  recovery  and  resilience  plan 
(RRP).  Croatia  has  received  significant  support 
since  2016,  including  for  (i)  identifying  the  most 
suitable  reforms  and  investments  in  line  with  the 
REPowerEU  plan; 
the  establishment  of 
helicopter emergency medical services and (iii) the 
a 
implementation 
impact 
is  also  helping  Croatia 
assessment.  The  TSI 
implement  specific 
investments 
included  in  its  RRP,  e.g.  improving  digitalisation 
and  transparency  in  the  judiciary  and  support  the 

reforms  and 

regulatory 

(ii) 

of 

2 919 2 595 8236064523 004 1 525 1 060 954 901 05001 0001 5002 0002 5003 0003 500SDG 9 Industry,innovation, infrastructureSDG 8 Decent work andeconomic growthSDG 4 Quality educationSDG 7 Affordable andclean energySDG 1 No povertyEU CP 2014-2020 (millions EUR)EU CP 2021-2027 (millions EUR) 
   
                                                 
tourism  sector  in  becoming  more  sustainable, 
resilient and digitalised (24).  

(24)  Country factsheets on reform support are available here. 

30 

 
                                                 
ANNEX 5: RESILIENCE 

This  Annex 
illustrates  Croatia’s  relative 
resilience capacities and vulnerabilities using 
the  Commission’s 
resilience  dashboards 
(RDB) (25).  Comprising  a  set  of  124  quantitative 
indicators,  the  RDB  provide  broad  indications  of 
Member  States’  ability  to  make  progress  across 
four interrelated dimensions: social and economic, 
green, digital, and geopolitical. The indicators show 
vulnerabilities (26)  and  capacities (27)  that  can 
become  increasingly  relevant,  both  to  navigate 
ongoing  transitions  and  to  cope  with  potential 
future shocks. To this end, the RDB help to identify 
areas  that  need  further  efforts  to  build  stronger 
and  more  resilient  economies  and  societies.  They 
in  Table  A5.1  as  synthetic 
are  summarised 
resilience 
illustrate  the  overall 
relative  situation  for  each  of  the  four  dimensions 
and their underlying areas for Croatia and the EU-
27 (28).  

indices,  which 

Compared  to  the  EU  average,  Croatia  shows 
an overall lower level of capacities across all 
RDB  indicators.  It  has  medium-high  resilience 
capacities  in  the  green,  digital  and  geopolitical 
dimensions,  and  medium  capacities  in  the  social 
and  economic  dimension.  Croatia  shows  stronger 
capacities  than  the  EU  average  in  the  areas  of 
‘ecosystems,  biodiversity,  sustainable  agriculture’, 
‘raw material and energy supply’ and ‘value chains 
and  trade’.  There 
is  considerable  room  for 
improving capacities compared to the EU average 
in  'health,  education  and  work’,  ‘climate  change 
‘financial 
adaptation’ 
and 
mitigation 
globalisation’, among others.   

and 

Table A5.1: Resilience indices summarising the 
situation across RDB dimensions and areas 

According  to  the  set  of  resilience  indicators 
under  the  RDB,  Croatia  generally  displays  a 
similar  level  of  vulnerabilities  compared  to 
the  EU  average.  Croatia  shows  medium-high 
vulnerabilities in the digital dimension of the RDB, 
medium vulnerabilities in the social and economic 
dimension,  and  medium-low  vulnerabilities  in  the 
green  and  geopolitical  dimension.  It  has  higher 
vulnerabilities  than  the  EU  average  in  the  areas 
and 
‘digitalisation 
space’ 
relatively 
‘cybersecurity’. 
low 
‘economic  and 
vulnerabilities 
‘climate 
financial  stability  and  sustainability’, 
change  mitigation 
and 
'sustainable use of resources’ (29). 

public 
has 
to 

the 
Croatia 

adaptation’, 

relation 

and 

for 

in 

Data are for 2021, and EU-27 refers to the value for the EU 
as a whole. Data underlying EU-27 vulnerabilities in the area 
‘value chains and trade’ are not available as they comprise 
partner concentration measures that are not comparable with 
Member States’ level values. 
Source: JRC Resilience Dashboards - European Commission 

(25)  For details see https://ec.europa.eu/info/strategy/strategic-
planning/strategic-foresight/2020-strategic-foresight-
report/resilience-dashboards_en; see also 2020 Strategic 
Foresight Report (COM(2020) 493). 

(26)  Vulnerabilities describe features that can exacerbate the 

negative impact of crises and transitions, or obstacles that 
may hinder the achievement of long-term strategic goals. 

(27)  Capacities refer to enablers or abilities to cope with crises 
and structural changes and to manage the transitions.  

(28)  This Annex is linked to Annex 1 on SDGs, Annex 6 on the 
green deal, Annex 8 on the fair transition to climate 
neutrality, Annex 9 on resource productivity, efficiency and 
circularity, Annex 10 on the digital transition and Annex 14 
on the European pillar of social rights. 

(29)  Although Croatia has higher vulnerability challenges with 

respect to climate extremes, the overall lower vulnerabilities 
in this area are driven by its lower GHG emissions per capita 
and CO2 emissions from road transport. 

31 

HREU-27HREU-27Vulnerabilities IndexHighMedium-highMediumMedium-lowLowNot availableCapacities IndexHighMedium-highMediumMedium-lowLowNot availableDimension/AreaVulnerabilitiesCapacitiesSocial and economicHealth, education and workInequalities and social impact of the transitionsGreenEconomic & financial stability and sustainabilitySustainable use of resourcesClimate change mitigation & adaptationDigitalEcosystems, biodiversity, sustainable agricultureDigital for industryDigital for personal spaceCybersecurityDigital for public spaceRaw material and energy supplyGeopoliticalValue chains and tradeFinancial globalisationSecurity and demography 
 
                                                 
 
  
 
 
 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 6: EUROPEAN GREEN DEAL 

Implementation  of  the  European  Green  Deal 
is  underway  in  Croatia,  requiring  continued 
action  on  renewables,  sustainable  mobility, 
and  climate  adaptation.  This  Annex  provides  a 
snapshot of the key areas involved (30). 

Croatia  is  projected  to  reach  its  new  2030 
climate  policy  target  for  the  effort  sharing 
sectors if it implements additional measures 
tabled (31).  Data  for  2021  on  greenhouse  gas 
emissions  in  these  sectors  are  expected  to  show 
that  the  country  generated  less  than  its  annual 
emission allocations (32). Current policies in Croatia 
are  projected  to  reduce  these  emissions  by  14% 
relative  to  2005  levels  in  2030,  more  than 
sufficient to reach the effort sharing target before 
the  target  was  raised  in  line  with  the  EU’s  55% 
objective.  The  additional  measures  tabled  would 
bring  a  sharper  reduction  in  emissions  of  19%, 
surpassing  the  new  target  of  16.7% (33).  Croatia 
allocates  40.3%  of  its  Recovery  and  Resilience 
Facility  grants  to  key  reforms  and  investments  to 
attain  the  climate  objectives (34).  In  its  long-term 

(30)  The overview in this Annex is complemented by the 

information provided in Annex 7 on energy security and 
affordability, Annex 8 on the fair transition to climate 
neutrality and environmental sustainability, Annex 9 on 
resource productivity, efficiency and circularity, Annex 11 on 
innovation, and Annex 19 on taxation. 

(31)  Member States’ greenhouse gas emission targets for 2030 
(‘effort sharing targets’) were increased by Regulation (EU) 
2023/857 (the Effort Sharing Regulation) amending 
Regulation (EU) 2018/842, aligning the action in the 
concerned sectors with the objective to reach EU-level, 
economy-wide greenhouse gas emission reductions of at 
least 55% relative to 1990 levels. The Regulation sets 
national targets for sectors outside the current EU Emissions 
Trading System, notably: buildings (heating and cooling), road 
transport, agriculture, waste, and small industry. Emissions 
covered by the EU ETS and the Effort Sharing Regulation are 
complemented by net removals in the land use sector, 
regulated by Regulation (EU) 2018/841 (the Land Use, Land 
Use Change and Forestry (LULUCF) Regulation) amended by 
Regulation (EU) 2023/839. 

(32)  Croatia's annual emission allocations for 2021 amount were 
some 17.5 Mt CO2eq, and its approximated 2021 emissions 
were at 16.2 Mt (see European Commission, Accelerating the 
transition to climate neutrality for Europe’s security and 
prosperity: EU Climate Action Progress Report 2022, 
SWD(2022)343). 

(33)  See the information on the distance to the 2030 climate 

policy target in Table A6.1. Existing and additional measures 
as of 15 March 2021. 

(34)  For example, investments in energy efficiency of buildings, 

modernisation of energy infrastructure to connect 1 500 MW 
of renewable energy, production of advanced biofuels and 
renewable hydrogen, innovative carbon capture and storage 

decarbonisation strategy, Croatia has set the goal 
of reducing greenhouse gas emissions to between 
57%  and  73%  by  2050  (excluding  land  use  and 
forestry).  The  five-year  action  plan  to  implement 
the  strategy  is  currently  being  revised  to  align  it 
with the more ambitious 2030 target. 

Graph A6.1: Thematic - greenhouse gas emissions 
from the effort sharing sectors in Mt CO2eq, 
2005-2021 

Source: European Environmental Agency 

Croatia’s  net  carbon  removals  through  the 
land  use  sector  are  slightly  above  its  2030 
target. Croatia’s forests achieve a major share of 
net  carbon  removals  through  land  use.  Croatia’s 
2030  land  use,  land-use  change  and  forestry 
(LULUCF)  net  removals  target  implies  to  remove 
5 527  kt CO2eq,  slightly  below 
reported  net 
removals  for  2020 (see  Table  A6.1) (35).  However, 
Croatia’s carbon sink capacity is facing risks from 
increasingly 
the 
unfavourable age structure of its forests. Croatia’s 
action plan for planting 1 million trees per year by 
2030 awaits adoption.  

fires  and 

frequent 

forest 

Fossil  fuels  still  play  a  substantial  role  in 
Croatia’s  energy mix,  but  in  2021, the  share 
of  renewable  energy  increased.  In  total,  the 
share  of  fossil  fuels  in  Croatia’s  energy  mix  was 
69%.  Although  the  share  of  gas  dropped  slightly 
from  32%  in  2020 to  29%  in  2021, the  share  of 
oil  decreased  1pp  when  compared  with  2020, 
while  the  one  of  coal  and  coal  products  remain 
stable at 5% in 2021. In 2021, renewable sources 
increased  by  3pp  from  2020,  accounting  for  a 
share of 31% in the energy mix (see Graph A6.2). 

projects, zero-emission vehicles and vessels and charging 
stations for electric vehicles.  

(35)  This value is indicative and will be updated in 2025 (as 

mandated by Regulation (EU) 2023/839). 

32 

0246810121416182020052021Domestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
 
 
                                                 
     
                                                                              
 
 
Croatia’s  electricity  mix 
is  already  highly 
decarbonised,  with  a  70%  share  from  renewable 
sources  in  2021  and  30%  from  fossil  fuels. 
However, in 2020, Croatia relied on natural gas for 
71% of its heat and on primary solid biofuels for 
up to 24%. Croatia envisages phasing out coal by 
2033. 

Graph A6.2: Thematic - Energy mix (top) and 
electricity mix (bottom), 2021 

to  increase  its  renewable  energy  target  in  the 
updated  NECP  to  make  a  stronger  contribution  to 
the more ambitious EU climate and energy targets 
in  the  Fit  for  55  Package  and  in  the  REPowerEU 
Plan.  Croatia’s  RRP  comprises: 
legislative 
reform  to  improve  the  uptake  of  renewables;  ii) 
investment  in  upgrading  550 km  of  the  electricity 
grid;  iii) exploration  of  geothermal  potential  in 
district heating; and iv) reforms and investments in 
hydrogen production capacity. 

i) a 

in 

Actions  on  energy  efficiency  are  still  to  be 
scaled-up  to  reach  their  full  potential  in 
Croatia.  Croatia’s  NECP  targets  for  primary  and 
final  energy  consumption  (PEC  and  FEC)  were 
considered  of 
the  2020 
low  ambition 
Commission  assessment.  Based  on  the  energy 
consumption  trajectory  for  2018-2021,  Croatia  is 
expected  to  be  on  track  to  meet  its  2030  target 
for PEC and for FEC as notified in its NECP (36). Its 
building renovation rate is currently low; however, 
the  investment  plans  for  energy  renovation  in 
private and public buildings have been stepped up, 
aiming  to  reach  an  annual  renovation  rate  of  3% 
by 2030, 3.5% by 2040 and 4% by 2050. Croatia 
aims to renovate its entire building stock by 2050. 
Its  RRP  is  helping  the  country  attain  energy 
efficiency 
and 
investments  concerning  the  energy  renovation  of 
buildings,  and  investments  in  SMEs  and  large 
companies.  Notwithstanding,  the  crowding-in  of 
to  grants  and 
private 
subsidies  is  necessary  to  improve  the  energy 
efficiency  in  the  building  sector  and  achieve 
achievement  of  the  2030  energy  efficiency 
targets. 

investments 

reforms 

through 

targets, 

further 

There  is  ample  room  for  more  greening 
transport in Croatia. In contrast to the trend at 
EU level, greenhouse gas emissions from domestic 
transport in Croatia increased since 2005 and are 
projected  to  do  so  until  2030.  In  view  of  the 
increasing number of cars on roads, there is scope 
to  promote  zero-emission  vehicles  and  related 
infrastructure,  public  transport,  and  active  modes 
of transport. Rail has a share of 2.5% in passenger 
land  transport  (EU  average:  8%),  while  it  reaches 
21% in freight land transport (vs an EU average of 
19%).  Unless  efforts  are  stepped  up, 
the 
construction  of  the  Croatian  part  of  the  core 

(36)  After the conclusion of the negotiations for a recast EED, the 
ambition of both the EU and national targets as well as of 
the national measures for energy efficiency to meet these 
targets is expected to increase 

33 

The energy mix is based on gross inland consumption, and 
excludes heat and electricity. The share of renewables 
includes biofuels and non-renewable waste.  
Source: Eurostat. 

have 

from 

Renewable  energy  plays  a  central  role  in 
decarbonising  Croatia’s  energy 
system. 
Lately,  roughly  over  two  thirds  of  Croatia’s 
renewables, 
come 
electricity 
predominantly  hydropower  (with  shares  varying 
depending  on  whether  it  is  a  dry  or  moist  year); 
hydropower  reached  a  48%  share  in  2021(4  pp 
above  2020).  The  share  of  wind  energy  reached 
14% in the 2021 electricity mix, while the share of 
solar  energy  was  1%,  slightly  over  geothermal 
with  0.6%.  Croatia’s  target  of  36.6%  of  share  of 
energy  from  renewable  sources  in  gross  final 
energy  consumption  by  2030  included  in  the 
National  Energy  and  Climate  Plan  (NECP)  was 
considered sufficiently ambitious. Croatia will need 

10%20%70%Coal and coal productsNatural gasRenewables5%29%35%31%Solid fossil fuels, peatand oil shaleGasOilRenewables 
      
                                                 
Trans-European  Transport  Network  (TEN-T)  risks 
not being completed by 2030. In particular, the rail 
network  is  lagging  behind  in  terms  of  modern 
connections  and  TEN-T  compliance.  Under  the 
recently  adopted  railway  development  strategy, 
Croatia plans to modernise its fleet, provide a new 
public  service  obligation  contract  with  passenger 
transport operators, and restructure HZ Cargo, the 
freight  services  company.  Air  pollution  remains  a 
concern,  with  traffic  congestion  being  among  the 
main causes, especially in bigger cities.  

Graph A6.3: Thematic – environmental investment 
needs and current investment, p.a 2014-2020 

Source: European Commission. 

Croatia would benefit from investing more in 
environmental  protection  and  in  measures 
biodiversity  and  addressing 
protecting 
pollution (37).  Between  2014 
and  2020, 
environmental  investment  needs  were  estimated 
at  about  EUR  1.7  billion,  while  investments  stood 
at  only  EUR  764  million,  leaving  a  gap  of  about 
901 million per year (see Graph A6.3) (38). The gap 
is  especially  high  for  biodiversity  and  pollution 
prevention  and  control.  Over  a  third  of  Croatia’s 
land  area 
is  covered  by  the  Natura  2000 
network (39),  but  most  of  its  species  and  habitats 

(37)  Environmental objectives include pollution prevention and 
control, water management, circular economy and waste, 
biodiversity and ecosystems (European Commission, 2022, 
Environmental Implementation Review, country report 
Croatia). 

(38)  When also accounting for needs estimated at EU level only 

(e.g., water protection, higher circularity, biodiversity 
strategy).  

(39)  In 2021, Croatia had 38.1% terrestrial protected areas 

(Natura 2000 and nationally designated areas), against the 

34 

are  in  bad  or  poor  conservation  status (40),  calling 
for  action  on  conservation  and  management,  as 
well as investments. Croatia has not yet completed 
designating 
its  marine  Natura  2000  sites. 
Furthermore,  investment  is  needed  in  wastewater 
treatment:  93%  of  urban 
collection  and 
wastewater  was  either  not  collected  or  failed  to 
meet the requirements for biological  treatment in 
2018 (41). 

regional 

Croatia is among the EU Member States with 
higher  vulnerability  to  climate  risks.  Longer 
and  more  frequent  droughts  and  floods  are 
affecting, among other things, agriculture, and the 
energy  sector.  This  implies  higher  water  demand, 
lower hydropower production and increased energy 
demand  for  cooling.  Key  sectors  such  as  tourism, 
fisheries  and  forestry  are  also  highly  affected. 
While  Croatia  has  a  national  adaptation  strategy 
and  a  multi-level  governance  framework  in  place, 
sectoral 
national, 
implementation  plans  are  lagging  behind,  and 
implementation  is  not  being  monitored.  Various 
actions  are  planned,  also  with  the  support  of  EU 
funds, to improve administrative capacities to deal 
with  climate  adaptation  and  raise  awareness  in 
general. Within the EU, Croatia has had one of the 
highest  cumulative  shares  of  damage  from 
extreme weather and climate events in relation to 
GDP (42).  There  is  already  a  pronounced  insurance 
protection  gap  for  floods,  while  the  gap  for 
wildfires could pose a risk to public finances if the 
insurance penetration remains low.  

local, 

and 

Croatia  provides  fossil  fuel  and  other 
environmentally harmful subsidies that could 
be  considered  for  reform,  while  ensuring 
food  and  energy  security  and  mitigating 
social effects. Environmentally harmful subsidies 
have  been  identified,  via  an  initial  assessment,  in 
the  agriculture,  forestry  and  fishing,  electricity, 
gas, steam and air conditioning, transportation and 

EU average of 26.4% (European Environment Agency, 2023, 
Natura 2000 Barometer). 

(40)  European Commission and European Environment Agency 
(EEA), 2023, Biodiversity information system for Europe, 
Croatia 

(41)  European Commission, country profile on urban waste water 

treatment: Croatia. 

(42)  Climate change, impacts and vulnerability in Europe 2016, 
EEA Report No 1/2017. It is estimated that these losses, 
between 1980 and 2013, amounted to around EUR 2.25 
billion or EUR 68 million per year. These losses increased 
significantly during 2014 and 2015 (up to EUR 2.83 billion in 
2015).  

982681731231022913292536811110.0100.0200.0300.0400.0500.0600.0700.0800.0Pollutionprevention andcontrolWater (industries,excl. protection)Circular economy(incl. waste)Biodiversity andecosystemsR&I&D and otherEUR million (at current prices)Current investmentTotal need 
      
                                                 
                                                                              
storage,  mining  and  quarrying  sectors.  Examples 
of such subsidies include the reduced VAT rate for 
fertilisers  and pesticides, the  energy tax  relief  for 
companies  in  agriculture  and  forestry  for  gas  oil, 
the  excise  duty  exemptions  on  diesel  used  for 
agricultural,  fishing,  aquaculture  and  navigation 
purposes,  the  reimbursement  of  excise  duty  on 
diesel  used  in  freight  and  other  categories  of 
passenger  transport  or  the  excise  tax  exemption 
and  tax  relief  for  natural  gas  for  industrial 
consumers (43).  A  mapping  of  all  environmentally 
harmful  subsidies by  Croatia  would  help  prioritise 
candidates for reform. 

Croatia could use tax instruments to promote 
waste  reduction.  Unlike  in  the  EU  on  average, 
greenhouse  gas  emissions  from  waste  in  Croatia 
have  been  increasing  since  2005.  Only  31.5%  of 
municipal waste  were recycled in 2021. Taxes for 
landfilling residual  and biowaste  could  reduce the 
risk of not meeting the legal 2025 recycling target 
of  55%.  Also,  recycling  of  packaging  waste  could 
be 
in  the 
extended  producer  responsibility  scheme.  Croatia 
rely  more  on 
also  has 
environmental  taxes  to  reduce  air  pollution (44) 
(see Annex 19). 

improved  with  differentiated  fees 

the  potential 

to 

(43)  Fossil fuel figures in EUR of 2021 from the 2022 State of 

the Energy Union report. Initial assessment of 
environmentally harmful subsidies done by the Commission 
in the 2022 toolbox for reforming environmentally harmful 
subsidies in Europe, using OECD definitions, and based on the 
following datasets: OECD Agriculture Policy Monitoring and 
Evaluations; OECD Policy Instruments for the Environment 
(PINE) Database; OECD Statistical Database for Fossil Fuels 
Support; IMF country-level energy subsidy estimates. Annex 4 
of the toolbox contains detailed examples of subsidies on 
the candidates for reform. – Croatia introduced the VAT 
reduction and energy tax relief for gas oil as temporary 
measures to mitigate the impact of energy price inflation. 

(44)  European Commission, 2021, Green taxation and other 

economic instruments – Internalising environmental costs to 
make the polluter pay, Ensuring that polluters pay.  

35 

 
                                                 
Table A6.1: Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

Sources: (1) Historical and projected emissions, as well as Member States’ climate policy targets and 2005 base year emissions 
under the Effort Sharing Decision (for 2020) are measured in global warming potential (GWP) values from the 4th Assessment 
Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC). Member States’ climate policy targets and 2005 base 
year emissions under the Effort Sharing Regulation (for 2030) are in GWP values from the 5th Assessment Report (AR5). The 
table above shows the base year emissions 2005 under the Effort Sharing Decision, using AR4 GWP values. Emissions for 2017-
2021 are expressed in percentage change from 2005 base year emissions, with AR4 GWP values. 2021 data are preliminary. The 
table shows the 2030 target under Regulation (EU) 2023/857 that aligns it with the EU’s 55% objective, in percentage change 
from 2005 base year emissions (AR5 GWP). Distance to target is the gap between Member States’ 2030 target (with AR5 GWP 
values) and projected emissions with existing measures (WEM) and with additional measures (WAM) (with AR4 GWP values), in 
percentage change from the 2005 base year emissions. Due to the difference in global warming potential values, the distance to 
target is only illustrative. The measures included reflect the state of play as of 15 March 2021.  
(2) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2023 
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839 
amending Regulation (EU) 2018/841 (LULUCF Regulation) – Annex IIa, kilotons of CO2 equivalent, based on 2020 submissions. 
(3) Renewable energy and energy efficiency targets and national contributions are in line with the methodology established under 
Regulation (EU) 2018/1999 (Governance Regulation).  
(4) Percentage of total revenue from taxes and social contributions (excluding imputed social contributions). Revenue from the EU 
Emissions Trading System is included in environmental tax revenue.  
(5) Expenditure on gross fixed capital formation for the production of environmental protection services (abatement and 
prevention of pollution) covering government, industry, and specialised providers.  
(6) European Commission, Study on energy subsidies and other government interventions in the European Union, 2022 edition.  
(7) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters. This 
indicator is based on modelling of the current risk from floods, wildfires and windstorms as well as earthquakes, and an 
estimation of the current insurance penetration rate. The indicator does not provide information on the split between the 
private/public costs of climate-related disasters. A score of 0 means no protection gap, while a score of 4 corresponds to a very 
high gap (EIOPA, 2022).  
(8) Sulphur oxides (SO2 equivalent), ammonia, particulates < 10 µm, nitrogen oxides in total economy (divided by GDP).  
(9) Battery electric vehicles (BEV) and fuel cell electric vehicles (FCEV). 

36 

2030200520172018201920202021target/valueWEMWAMGreenhouse gas emission reductions in effort sharing sectors (1)Mt CO2eq; %; pp17.4-4%-7%-8%-5%--16.7%-2.72.3Net carbon removals from LULUCF (2)kt CO2eq-7 969-4 896-5 504-5 736-5 667-5 802-5527n/an/a200520172018201920202021Share of energy from renewable sources in gross final consumption of energy (3)%24%27%28%28%31%31%36%Energy efficiency: primary energy consumption (3)Mtoe9.18.38.28.27.88.38.2Energy efficiency: final energy consumption (3)Mtoe7.26.96.96.96.57.06.9201620172018201920202021201920202021Environmental taxes (% of GDP)% of GDP3.43.53.53.43.33.12.42.22.2Environmental taxes (% of total taxation) (4)% of taxation 9.39.49.49.28.98.85.95.65.5Government expenditure on environmental protection% of total exp.2.42.02.12.32.43.11.71.61.6Investment in environmental protection (5) % of GDP0.50.50.50.4--0.40.40.4Fossil fuel subsidies (6)EUR2021bn0.10.10.10.10.10.153.050.0-Climate protection gap (7) score 1-42.42.11.5Net greenhouse gas emissions1990 = 10076.079.076.076.075.073.076.069.072.0Greenhouse gas emission intensity of the economykg/EUR'100.520.510.480.460.49-0.310.300.26Energy intensity of the economykgoe/EUR'100.180.180.170.170.17-0.110.11-Final energy consumption (FEC)2015=100100.8105.1104.0104.998.2105.8102.994.6-FEC in residential building sector2015=10099.198.594.692.193.7100.5101.3101.3106.8FEC in services building sector2015=100102.3107.1109.1109.599.2111.1100.194.4100.7Smog-precursor emission intensity (to GDP) (8)tonne/EUR'101.61.61.51.21.70.90.9-Years of life lost due to air pollution by PM2.5per 100.000 inh.1349.11456.91419.61011.21056.1-581.6544.5-Years of life lost due to air pollution by NO2per 100.000 inh.192.5224.0206.7194.2154.7-309.6218.8-Nitrates in ground watermg NO3/litre------21.020.8-Land protected areas% of total37.537.8-38.038.038.126.226.426.4Marine protected areas% of total9.1--9.5-9.510.7-12.1Organic farming% of total utilised agricultural area6.16.56.97.27.28.38.59.1-201720182019202020212022202020212022Share of zero-emission vehicles (9)% in new registrations0.00.20.41.53.32.85.48.910.7Number of AC/DC recharging points (AFIR categorisation)---5009361317188626330028432518Share of electrified railways%37.237.237.137.137.137.156.6n/a56.6Congestion (average number of hours spent in road congestion per year by a representative commuting driver)23.724.023.123.6n/an/a28.7n/an/a'Fit for 55'DistanceProgress to policy targetsNational contribution to 2030 EU targetCroatiaEUMobilityFiscal and financialindicatorsEnergyPollutionBiodiversityClimate 
 
  
 
ANNEX 7: ENERGY SECURITY AND AFFORDABILITY 

Before  Russia  invaded  Ukraine,  Croatia  was 
imports 
indirectly  dependent  on  Russian 
through  intra-EU  trade.  Croatia  has  an  overall 
high  dependence  on  imported  fossil  fuels  which 
requires  it  to  step  up  efforts  in  the  energy 
transition. Croatia is heavily dependent on gas for 
its  heating  (71%),  which  is  much  higher  than  the 
EU  average  (37%).  This  makes  its  economy 
particularly sensitive to global price developments, 
with 
for  energy  security  and 
affordability.  Croatia  has  an  enormous  potential 
on  the  clean  transition  to  explore.  This  Annex (45) 
sets  out  actions  carried  out  by  Croatia  to  achieve 
the  REPowerEU  objectives,  including  through  the 
implementation of its recovery and resilience plan 
(RRP),  in  order  to  improve  energy  security  and 
affordability  while  accelerating  the  clean  energy 
transition  and  contributing  to  enhancing  the  EU’s 
competitiveness in the clean energy sector (46).  

implications 

Croatia  has  achieved  a  high  level  of  gas 
supply  security  following  the  entry  into 
service  of  the  liquefied  natural  gas  (LNG) 
terminal in Krk in January 2021. More recently, 
in  2022,  the  capacity  of  the  Krk  terminal  was 
expanded with a technical upgrade from 2.6 to 2.9 
billion  cubic  metres  (bcm)/year,  thereby  enabling 
the supply of all of Croatia's gas needs, which are 
complemented  by  national  gas  production. 
It 
fulfilled  its  gas  storage  obligations,  reaching 
97.03%  by  1  November  2022,  and  ended  the 
heating  season  with  a  filling  level  of  gas  storage 
at  73.38%  by  15  April  2023 (47).  Croatia  has  one 
underground gas storage facility with a capacity of 
0.49  bcm.  With  the  construction  of  the  LNG 
terminal in Krk and its technical upgrade in 2022, 
Croatia has managed to secure all its gas supplies. 

(45)  It is complemented by Annex 6, as the European Green Deal 
focuses on the clean energy transition, by Annex 8 on the 
actions taken to mitigate energy poverty and protect the 
most vulnerable ones, by Annex 9, as the transition to a 
circular economy will unlock significant energy and resource 
savings, further strengthening energy security and 
affordability, and by Annex 12 on industry and single market, 
complementing ongoing efforts under the European Green 
Deal and REPowerEU. 

(46)  In line with the Green Deal Industrial Plan COM(2023) 62 
final, and the proposed Net-Zero Industry Act COM(2023) 
161 final 

(47)  Regulation of the European Parliament and of the Council 
amending Regulations (EU) 2017/1938 and (EC) No 
715/2009 with regard to gas storage and Implementing 
Regulation (EU) 2022/2301 of 23 November 2022 setting 
the filling trajectory with intermediary targets for 2023 for 
each Member State with underground gas storage facilities 
on its territory and directly interconnected to its market area 

The  country  plans  to  further  expand  the  capacity 
of the Krk terminal to 6.1 bcm/year and to further 
develop  the  internal  gas  transmission  pipelines 
towards  Slovenia,  Hungary  and  Bosnia  and 
Herzegovina,  thereby  becoming  a  regional  gas 
energy hub in South-East Europe region. The Krško 
nuclear  power  plant  located  in  Slovenia  equally 
owned  by  the  Slovenian  GEN  Energija  and 
Croatia's  Hrvatska  Elektroprivreda  (HEP)  has  been 
given  permission  to  operate  until  the  end  of 
2043 (48);  its  nuclear  production  corresponded  to 
14.4% of electricity demand in Croatia in 2022.  

Graph A7.1: Underground gas storage levels in 
Croatia 

Source: JRC calculation based on AGSI+ Transparency 
Platform, 2022 (Last update 2 May 2023) 

The 

comprised 
alongside 

demand 
energy 
Croatian 

To  address  security  of  supply,  Croatia’s 
reduction 
response 
measures 
efficiency 
government 
improvements. 
adopted  energy  saving  guidelines  from  1  August 
2022  to  31  March  2023.  Over  the  period  August 
2022 – March 2023, 22% of gas consumption has 
been saved in Croatia compared to the previous 5-
years  average.  While  energy  efficiency  measures 
would have the potential to significantly contribute 
to  energy  security  and  affordability,  Croatia  did 
not  develop  specific  awareness  campaigns  on 
saving energy. It also did not introduce mandatory 
obligations 
energy 
temporarily 
consumption,  and  did  not  take  actions  to  step  up 
its  energy  efficiency  ambition  to  structurally 
reduce energy consumption.  

reduce 

to 

(48)  Apart from the environmental licence, the condition for the 

extension of operation followed the adoption of the 
programme to upgrade nuclear safety, an investment of 
€370 million, equally secured by HEP and GEN Energija.   

37 

 
 
                                                 
 
                                                 
 
 
Graph A7.2: Share of gas consumption per sector, 
2021 

Graph A7.3: Croatia´s retail energy prices for 
industry (top) and households (bottom) 

Source: Eurostat 

facilitate 

to  significantly  upgrade 

Croatia is relatively well interconnected with 
its  neighbours 
in  terms  of  electricity. 
However,  to  increase  integration  of  renewable 
energy  resources  located  mainly  in  the  south,  the 
country  needs 
its 
transmission  network.  Croatia  will  carry  out 
investments  under  its  RRP  to  strengthen  the  grid 
(e.g,  upgrade  of  550  km  of  the  high  voltage 
network  -  220/110  -  to  integrate  the  south  of 
Croatia);  however,  further  investments  in  grid 
development  projects  would 
the 
integration  of  renewables  making  the  energy 
system more efficient and avoiding energy losses. 
It  is  estimated  that  between  EUR  600  and  800 
million is required in terms of grid expansion costs 
to enable the integration of another 4 GW of wind 
(bringing the total to 5 GW). Other investments are 
also planned to make the electricity infrastructure 
more  efficient  and  strengthen  the  distribution 
the 
network. 
underground cables that connect the six islands to 
the mainland  network is progressing.  Two  out  the 
six  sections  of  submarine  cables  were  completed 
in  operation 
during  2022  and  are  currently 
(Crikvenica  -  Krk)  or  trial  operation  (Dugi  Rat  - 
Postira); activities on other sections will be carried 
out  and  finalized  during  2023.  Furthermore, 
Croatia  has  one  Project  of  Common  Interest 
(‘Green  Switch’)  for  the  development  of  an 
electricity  smart  grid  with  Slovenia  and  Austria, 
expected to be completed in 2027. 

upgrading 

process 

The 

of 

(1) On electricity, the consumption band is DC for households 
and ID for industry 
(2) On gas, the consumption band is D2 for households and I4 
for industry 
Source: Eurostat 

Croatia  has  taken  important  measures  to 
protect  households  and  businesses  in  the 
face of increasing energy prices, but has also 
adopted  measures  that  restrict  exports  in 
the  internal  market.  In  addition  to  VAT  cuts 
introduced  in  spring  2022,  Croatia  presented  its 
‘Autumn package’ on 8 September 2022 to protect 
households and businesses from rising energy and 
food 
being 
implemented  from  1  October  2022  to  31  March 
2023,  and  are  estimated  to  amount  to  EUR  2.8 
billion  in  total  (6.3%  of  GDP).  In  addition,  Croatia 
has  imposed  an  export  ban  for  October  2022-
March  2024,  whereby  all  natural  gas  produced  in 
Croatia will be used for public service obligations.  

prices.  Most  measures 

are 

the  use  of 

Croatia  imports  about  53%  of  the  total 
energy  consumed  annually.  The  country  has 
great  potential  to  decrease  energy  imports  by 
increasing 
resources. 
Renewable  energy  is  taking  off,  but  solar  is 
the  country’s 
lagging  behind.  The  bulk  of 
renewable energy comes from hydropower plants, 
the  second-highest  hydropower  share 
in  the 
electricity  mix  in  the  EU  (49%  of  Croatia’s  total 
electricity  generation).  Wood  biomass  plays  a 

renewable 

38 

41.2%26.2%0.2%9.6%21.6%1.2%EnergyIndustryTransportServices and public sectorHouseholdsAgriculture, forestry andfishery 
     
  
 
for 

renewables 

self-consumers 

significant role, with a share of respectively 18 % 
and  24%  share  in  the  energy  mix  and  in  the 
heating sector. The lower hydropower output in the 
wake of more frequent droughts, together with an 
increased  risk  of  forest  fires,  is  a  trend  that  can 
affect  Croatia’s  security  of  energy  supply.  The 
share  of  wind  energy  has  increased  steadily  over 
the  last  10  years;  it  has  become  the  third  source 
of  Croatian  electricity  (13%  share),  ahead  of 
declining  coal-based  generation.  Despite  an  high 
potential with 2,700 hours of sun estimated on its 
coast annually, solar energy provided less than 1% 
of  electricity  in  2021.  In  that  context,  financial 
support 
is 
proposed in order to accelerate the installation of 
solar  panels  on  rooftops;  while  renewables  power 
plants  and  heating  stations  is  also  stimulated, 
including by abolishing the VAT on the installation 
and  delivery  of  solar  panels.  Nevertheless,  people 
seem  hesitant  due 
the 
implementation  of  the  existing  framework,  and  in 
particular the effects of feeding back into the grid 
more electricity than what they take from the grid. 
Furthermore,  renewable  energy  auctions  launched 
by  the  government  have  been  undersubscribed. 
Croatia  adopted  a  new  legislative  framework 
related  to  the 
implementation  of  renewable 
energy  sources  in  2021,  and  in  2022  worked  on 
the  adoption  of  by-laws  that  reduce  obstacles  to 
renewables 
administrative 
procedures  for  the  greater  use  of  renewables. 
However,  barriers  to  the  acceleration  of  self-
consumption  and  renewable  energy  communities 
have  been 
identified,  and  still  need  to  be 
addressed.  

to  doubts  over 

facilitate 

and 

to 

as 

its  energy 
Croatia  has  still  to  exploit 
efficiency  potential  across  key  sectors,  in 
order  to  contribute  to  energy  security  and 
EU 
as  well 
affordability, 
competitiveness  and  decarbonisation.  Energy 
consumption  in  the  residential  sector  in  Croatia 
account to 35% of total energy consumption, while 
energy  consumption  in  industry  and  commercial 
and  public  services  account  respectively  to  17% 
and  12%.  Existing  programmes  in  place  for  the 
energy  renovation  of  the  existing  building  stock 
stepped-up,  addressing  deep 
need 
renovations,  the  deployment  of  renewable  energy 
and 
the  decarbonisation  of  heating,  and 
addressing  energy  poverty.  The  development  of 
(public  guarantees,  soft 
financial 
loans)  at  scale  to  mobilise  further  investments  in 
energy 
in  buildings  seem  also 
relevant. Further to this, Croatia needs  to secure a 

instruments 

renovations 

to  be 

in 

trained  workforce 
the  construction  and 
integrated  renovation  services,  including  installers 
of  heating  appliances.;  an  evaluation  of  the 
needed workforce as well as the one of re-skilling 
and upskilling is relevant in that context. Croatia is 
carrying out a relatively low number of checks on 
products  covered  by  ecodesign  and  energy 
labelling.  This  generates  concerns  with  respect  to 
the  level  playing  field  among  economic  operators 
and uncertainty as to the compliance levels of the 
concerned products, and therefore possible missed 
energy and CO2 savings (49). 

Croatia is in the top 10 concerning jobs in the 
clean  energy  value  chains  with  over  40%  of 
renewable  energy  jobs  in  the  manufacturing 
in  this  sector.  In  2021  Croatia  had  a  total  of 
14,600 (50)  people  working 
in  the  renewable 
energy  sector,  which  represents  0,85%  of  all 
jobs (51). More than 85% of these jobs are in solid 
biomass,  wind  and  liquid  biofuels (52).  Venture 
capital  investments  in  climate  tech  start-ups  and 
scale-ups went up drastically from 2020 with only 
0.1  to  EUR  140.0  million  in  2021  and  represents 
72.6%  of  total  VC  investment  in  Croatia  in  2021. 
Croatia  has  a  relatively  high  number  of  highly 
cited  scientific  articles  on  geothermal  energy,  yet 
not many people working in that field. 

(49)  The internet-supported information and communication 
system for the pan-European market surveillance 

(50)  https://www.irena.org/Data/View-data-by-

topic/Benefits/Renewable-Energy-Employment-by-Country  

(51)  There are 3,5 Million people living in Croatia (as of 2021), 

and 1,7 Million people were employed: 
https://eures.ec.europa.eu/living-and-working/labour-market-
information/labour-market-information-croatia_en  

(52)  https://www.irena.org/Publications/2022/Sep/Renewable-

Energy-and-Jobs-Annual-Review-2022  

39 

 
                                                 
Table A7.1: Key Energy Indicators 

(1)  The ranking of the main suppliers is based on the latest available figures (for 2021) 
(2) FSRU included 
(3) Venture Capital investments include Venture Capital deals (all stages) and Private Equity Growth/Expansion deals (for 
companies that have previously been part of the portfolio of a VC investment firm). 
Source: Eurostat, Gas Infrastructure Europe (Storage and LNG Transparency Platform), JRC SETIS (2022), JRC elaboration based 
on PitchBook data (06/2022 

40 

EU20182019202020212018201920202021Import Dependency [%] 53%56%54%55%58%61%57%56%of Solid fossil fuels 91%107%106%101%44%44%36%37%of Oil and petroleum products 82%76%74%78%95%97%97%92%of Natural Gas 53%66%69%74%83%90%84%83%Dependency from Russian Fossil Fuels [%]of Hard Coal44%90%76%79%40%44%49%47%of Crude Oil18%8%0%0%30%27%26%25%of Natural Gas 0%0%0%0%40%40%38%41%20152016201720182019202020212022Gross Electricity Production (GWh)11,40312,82011,98413,63212,76013,38515,210-Combustible Fuels3,9944,6825,1934,4355,1855,6655,681-Nuclear0000000-Hydro6,5567,0585,5087,7855,9335,8107,229-Wind7961,0141,2041,3351,4671,7212,062-Solar 576679758396149-Geothermal 0002929490-Other Sources0000000-Net Imports of Electricity (GWh)6,7895,5316,9545,3886,1334,6393,961-   As a % of electricity available for final consumption 43%35%42%32%37%30%24% -Electricity Interconnection (%)--52.00%53.21%50.0%52.0%45.6%60.0%20152016201720182019202020212022Gas Consumption (in bcm)2.62.73.12.83.03.12.92.5Gas Imports - by type (in bcm)1.11.31.81.62.02.13.9-Gas imports - pipeline1.11.31.81.62.02.12.3-Gas imports - LNG0.00.00.00.00.00.01.7-Gas Imports - by main source supplier (in bcm)* (1)United States0.00.00.00.00.00.01.9-Nigeria0.00.00.00.00.00.00.4-Qatar0.00.00.00.00.00.00.3-Hungary0.40.51.01.31.51.50.3-Others0.70.70.90.30.50.71.0-2019202020212022LNG TerminalsNumber of LNG Terminals (2)0011LNG Storage capacity (m3 LNG)00140,000140,000Underground StorageNumber of storage facilities1111Operational Storage Capacity (bcm)0.60.50.50.52019202020212022VC investments in climate tech start-ups and scale-ups (EUR Mln) (3)0.00.1140.0n.a.as a % of total VC investments in Croatia0.0%0.2%72.6%n.a.Research & Innovation spending in Energy Union R&i priorites (2)Public R&I (EUR mln)n.a.n.a.n.a.n.a.Public R&I (% GDP)n.a.n.a.n.a.Private R&I (EUR mln)3.3n.a.n.a.n.a.Private R&I (% GDP)0.01%n.a.n.a.n.a.CLEAN ENERGYDIVERSIFICATION OF GAS SUPPLIESELECTRICITYCROATIAENERGY DEPENDENCE 
 
   
 
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY 

construction, a key sector for the green transition, 
was 1.7% vs 4.0% in EU as per 2022 (56). 

Graph A8.1: Fair transition challenges in Croatia 

This  Annex  monitors  Croatia’s  progress  in 
ensuring  a  fair  transition  towards  climate 
neutrality  and  environmental  sustainability, 
notably  for  workers  and  households 
in 
vulnerable  situations.  The  number  of  jobs  in 
Croatia’s  green  economy  has  risen  quickly.  Skills 
for  the  green  transition,  in  line  with  the  Council 
Recommendation (53),  support  the  fair  transition 
and  the  implementation  of  REPowerEU.  Croatia’s 
recovery  and  resilience  plan  (RRP)  outlines  crucial 
reforms,  such  as  acquisition  of  green  skills,  and 
transition (54), 
investments  for  a  fair  green 
complementing  the  territorial  just  transition  plans 
and action supported by the European Social Fund 
Plus (ESF+). 

in 

in 

(EII) 

in  Croatia’s 

represented  2% 

industries  most 
Jobs  grew 
affected by the green transition, in line with 
total employment, and the green economy is 
also  expanding.  The  greenhouse  gas  (GHG) 
emissions intensity of Croatia’s workforce declined 
from  12.0  to  10.4  tonnes  per  worker  between 
2015  and  2021,  below  the  EU  average  of  13.7 
tonnes  in  2021  (see  Graph A8.1  and  Table A8.1). 
energy-intensive 
Employment 
Croatia’s 
of 
industries 
total 
employment 
the  EU. 
in  2020  vs  3.0% 
Employment in mining and quarrying increased by 
5.4%  since  2015  (to  around  6 000  workers),  and 
jobs  in  other  EII  sectors  rose  by  over  15%  each. 
Two  counties,  Sisak–Moslavina  and  Istria  county, 
were  identified,  on  the  basis  of  their  greenhouse 
gas  emissions  intensity,  as  priorities  for  support 
from the Just Transition Fund (55). Croatia has also 
joined 
the  Alliance  for  Coal-Free  Electricity 
Production.  One  remaining  coal  power  plant  in 
Croatia is set to cease production by 2033. Jobs in 
the environmental goods and services sector grew 
by  4.6%  (to  38 500)  during  2015-2020  (EU: 
+8.3%), reaching 2.3% of total employment, close 
to  the  EU  average  of  2.2%  (see  Annex  9  for 
circular  jobs  specifically).  The  job  vacancy  rate  in 

Source: Eurostat, EMPL-JRC GD-AMEDI/AMEDI+ projects and 
World Inequality Database (see Table A8.1).           

In 

sectors. 

Upskilling  and  reskilling  in  declining  and 
transforming  sectors  remains  low  compared 
to  the  EU  average.  Skills  are  key  for  smooth 
labour  market  transitions  and  preserving  jobs  in 
energy-intensive 
transforming 
industries,  workers’  participation  in  education  and 
training  slightly  declined  from  3.4%  in  2020  to 
3.3% in 2022 and remains below the EU average 
(10.4%).  In  Croatia,  33%  of  citizens  believe  they 
do  not  have  the  necessary  skills  to  contribute  to 
the green transition (EU: 38%) (57). To address this 
challenge, specific investment is planned under the 
RRP  and  the  Just  Transition  Mechanism.  The 
Croatian  RRP  aims  to  address  up-skilling  and 
acquisition of skills related to the green and digital 
transitions  by 
labour 
market policies for the long-term unemployed and 
less  employable  people  from  disadvantaged 
groups, and also by introducing a voucher system 
for  adult  education.  In  Croatia,  2.6%  of  ESF+ 
funding contributes to green skills and jobs, adding 
to  RRP 
investment  and  aligning  vocational 
education and training (VET) to the labour market 
needs of the green transition. 

introducing  new  active 

(53)  Council Recommendation of 16 June 2022 on ensuring a fair 
transition towards climate neutrality (2022/C 243/04) covers 
employment, skills, tax-benefit and social protection 
systems, essential services and housing. 

(54)  See 2022 Country Report (Annex 6). 

(55)  In these counties, some of the ETS installations in the 

chemical and cement sectors might possibly undergo a 
process of transition towards less emissions in line with their 
existing plans; however only those installations that are 
compliant with the JTF regulation and fulfil the “substantially 
below the benchmark” and other requirements are eligible for 
JTF funding.   

The  situation  regarding  energy  poverty  has 
improved  significantly  in  recent  years,  but 
households,  in  particular  vulnerable  ones, 
were  burdened  by  energy  costs  already 
before the price spike since 2021. The share of 
the  total  population  unable  to  keep  their  homes 

(56)  Eurostat (JVS_A_RATE_R2)   

(57)  Special Eurobarometer 527. Fairness perceptions of the 

green transition (May – June 2022). 

41 

00.20.40.60.811.21.4GHG per workerEmployment EIIEducation &training EIIEnergy povertyTransportpoverty(proxy)CarboninequalityEU LatestHR Latest (vs EU Latest)HR 2015 (vs EU Latest) 
 
                                                 
   
                                                 
 
adequately  warm  declined  from  9.9%  in  2015  to 
5.7%  in  2021  (vs  and  EU  average  of  6.9%  in 
2021) (58). In particular, 18.2% of the population at 
risk  of  poverty  (AROP)  (vs  16.4%  in  the  EU  in 
2021),  but  only  4.6%  of  lower  middle-income 
households (in deciles 4-5) were affected in 2021 
(vs  8.2%  in  the  EU  in  2021).  Before  the  energy 
price  hikes,  an  estimated  48.4%  of  the  total 
population  and  84.8%  of  the  (expenditure-based) 
AROP  population  had  residential  expenditure  on 
electricity,  gas,  and  other  fuels (59)  above  10%  of 
their  household  budget  (significantly  above  the 
estimated  EU  average  of  26.9%  and  48.2%, 
respectively). As part of the initiative related to the 
renovation  of  buildings,  the  RRP  envisages  the 
publication of a National Skills Development Plan, 
which  will  promote  the  acquisition  of  green  skills 
in  the  context  of  Croatia’s  energy  and  post-
earthquake renovation. 

Graph A8.2: Distributional impacts of energy prices 
due to rising energy expenditure (2021-2023) 

Mean change of energy expenditure as a percentage (%) of 
total expenditure per income decile (D) due to observed price 
changes (August 2021 – January 2023 relative to the 18 
months prior), excl. policy support and behavioural responses. 
Source: EMPL-JRC GD-AMEDI/AMEDI+ projects, based on 
Household Budget Survey 2015 and Eurostat inflation data 
for CP0451 and CP0452. 

The  increased  energy  prices  in  2021-2023 
negatively  affected  household  budgets,  but 
less than the estimated EU-level effects. As a 
result  of  energy  price  changes  during  the  August 
2021  to  January  2023  period  relative  to  the  18 
months prior (cf. Annex 7), in the absence of policy 
support  and  behavioural  responses,  the  share  of 
individuals living in households which spend more 

(58)  Energy poverty is a multi-dimensional concept. The indicator 
used focuses on an outcome of energy poverty. Further 
indicators are available at the Energy Poverty Advisory Hub. 

(59)  Products defined according to the European Classification of 

low  and 

less 
and 

than 
19.1 pps, 

than  10%  of  their  budget  on  energy  would  have 
increased by 7.1 pps for the whole population and 
by  3.4 pps  among  the  (expenditure-based)  AROP 
the  EU-wide  effects 
population, 
respectively) (60). 
(16.4 pps 
lower-middle 
Expenditure  shares  of 
income groups would have increased the most for 
electricity  (in  line  with  EU-wide  patterns),  in 
contrast to gas, for which expenditure would have 
increased  the  most  in  mid  and  high-income 
groups,  as  shown  in  Graph A8.2.  Among  the 
(expenditure-based) AROP population, the share of 
individuals living in households with budget shares 
for  private  transport  fuels (61)  above  6%  would 
have increased more than the EU average (6.1 pps 
vs  5.3 pps  in  the  EU),  reaching  32.5%  in  January 
2021  due  to  the  increase  in  transport  fuel  prices 
(EU: 37.1%).  

Access to public transport displays an urban-
rural  divide.  Citizens’  perception  of  public 
transport  is  below  the  EU  average  in  terms  of 
availability  (51%  vs  55%  in  the  EU),  affordability 
(50%  vs  54%)  and  quality  (52%  vs  60%).  As 
regards  these  perceptions,  rural  areas  in  Croatia 
perform  worse  than  urban  areas  and  when 
compared to rural areas in the EU overall (62). The 
average  carbon  footprint  of  the  top  10%  of 
emitters among the population in Croatia is about 
4.7 times higher than that of the bottom 50% (see 
Graph  A8.1), i.e.  slightly  less  pronounced  than  the 
EU  average  (5.0  times).  In  Croatia,  the  average 
levels of air pollution in 2020 stood above the EU 
average  (15.4  vs  11.2  µg/m  PM2.5),  with  88%  of 
the population living in regions exposed to critical 
levels  of  air  pollution (63),  leading  to  significant 
health impacts, in particular on vulnerable groups, 
and 4 128 premature deaths annually (64).  

(60)  EMPL-JRC GD-AMEDI/AMEDI+ ; see details in the related 

technical brief.  

(61)  ECOICOP: CP0722. 

(62)  EU (rural): 46%, 48% and 56% respectively. Special 

Eurobarometer 527. 

(63)  Two times higher than the recommendations in the WHO Air 

Quality Guidelines (annual exposure of 5µg/m3) 

Individual Consumption according to Purpose (ECOICOP):  CP045. 

(64)  EEA- Air Quality Health Risk Assessment 

42 

0.0%0.5%1.0%1.5%2.0%2.5%3.0%ElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasD1D2D3D4D5D6D7D8D9D10HR GasHR ElectricityEU GasEU Electricity 
   
                                                 
                                                 
Table A8.1: Key indicators for a fair transition in Croatia 

Source: Eurostat (env_ac_ainah_r2, nama_10_a64_e, ilc_mdes01), EU Labour Force Survey (break in time series in 2021), EMPL-
JRC GD-AMEDI/AMEDI+ projects and World Inequality Database (WID).      

43 

IndicatorDescriptionHR 2015HR LatestEU LatestGHG per workerGreenhouse gas emissions per worker - CO2 equivalent tonnes1210.4 (2021)13.7 (2021)Employment EIIEmployment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20), minerals (C23), metals (C24), automotive (C29) - %1.92 (2020)3 (2020)Education & training EIIAdult participation in education and training (last 4 weeks) in energy-intensive industries - %3.3 (2022)10.4 (2022)Energy povertyShare of the total population living in a household unable to keep its home adequately warm - %9.95.7 (2021)6.9 (2021)Transport poverty (proxy)Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport - %26.432.5 (2023)37.1 (2023)Carbon inequalityAverage emissions per capita of top 10% of emitters vs bottom 50% of emitters4.64.7 (2020)5 (2020) 
 
 
 
 
 
   
 
PRODUCTIVITY 
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY 

The  circular  economy  transition  is  key  to 
climate  and 
delivering  on 
the  EU’s 
environmental  goals  and  provides 
large 
socio-economic  benefits. It  spurs  job  growth, 
innovation  and  competitiveness  and 
fosters 
resilience  and  resource  security.  The  circularity 
transition  of  industry,  the  built  environment  and 
agri-food  can  generate  significant  environmental 
improvements (see Annex 6), as they rank among 
the most resource-intensive systems. 

Croatia’s  circular  economy  transition  is  still 
insufficient  and  needs  accelerating  to  meet 
the  EU’s  circular  economy  goals,  but  there 
has  been  improvement  in  certain  areas.  The 
2020 circular economy action plan (CEAP) aims at 
doubling  circular  material  use  by  2030  vs  2020. 
Croatia’s  use  of  circular  material  increased  from 
4.6%  in  2016 to  5.7% in 2021,  far  below  the  EU 
average  of  11.7%.  There  is  a  clear  need  to 
significantly increase  efforts  and  rely  less  on  raw 
materials.  The  CEAP  also  aims  to  substantially 
reduce  the  EU’s  material  footprint.  Croatia’s 
material  footprint  was  below  the  EU  average  in 
2020  with  13.1%.  The  labour  market  benefits  of 
the  circular  economy  remain  limited  but  with  a 
positive trend. Croatia experienced major growth in 
direct  circular  jobs  in  2019  (+12.4%).  As  regards 
health and safety in circular jobs, fatal accidents in 
waste  management  and  materials  recovery  are 
above  the  average  of  all  economic  sectors  in 
Croatia and above the EU average (65). 

Croatia  recently  adopted  new  reforms  to 
address  circular  economy  challenges,  but 
more  measures  are  needed.  Currently,  Croatia 
has  neither  a  comprehensive  circular  economy 
strategy nor sectoral strategies. However, ways to 
introduce  circular  economy  approaches  into  its 
national waste management plans are considered, 
starting  from  construction  and  demolition  waste. 
In  this  sector,  a  circular  economy  action  plan  is 
under development with the support of the World 
Bank. The upcoming plan could be a forerunner for 
a  comprehensive  strategy  including  food,  plastics 
and  textiles,  and  could  help  Croatia  achieve  its 
circular economy targets. 

(65)  Eurostat [HSW_N2_02] for NACE Rev. 2 sector E38; 11.04 

fatal accidents p. 100 000 employed in 2018-2020 vs 2.96 
for all sectors in HR; 6.33 in the EU-27 for sector E38 

The treatment of municipal waste in Croatia 
is  still  problematic.  With  a  municipal  waste 
recycling  rate  of  31.4%  in  2021,  Croatia  has 
missed  the  EU  target  of  50%  recycling  by  2020. 
Croatia  is  at  risk  of  missing  the  EU’s  recycling 
targets  for  municipal  and  packaging  waste  for 
2025  and  the  landfill  reduction  target  for  2035.  
58%  of  Croatia’s  municipal  waste  was  still 
landfilled  in  2021,  almost  three  times  more  than 
the  EU  average  (23%  in  2019).  Illegal  or  sub-
standard  landfilling  is  still  problematic.  It  diverts 
materials  and  resources  that  could  be  reused, 
remanufactured  or  recycled.  This  challenge  is 
particularly relevant given that Croatia imported a 
higher  share  of  recyclable  materials  than the  EU-
27 average.  

Graph A9.1: Trend in material use 

Source: Eurostat 

The industrial system still struggles to adopt 
circular  approaches.  Even  though  the  trend  is 
positive,  the  economy  does  not  yet  use  materials 
efficiently compared to the EU-27 average, with a 
resource  productivity  of  2.0  purchasing  power 
standard  per  kilogramme  vs  2.3  for  the  EU  in 
2021.  This  rate  has  remained  stable  since  2017, 
indicating  that  there  is  significant  potential  to 
boost  repair,  reuse  and the  use  of  secondary  raw 
materials.  Croatia  should  engage  more  with  the 
private sector and stakeholders in the transition to 
circular  economy  and  could  do  so  by  investing  in 
areas  such  as  eco-design,  repair,  reuse  and 
remanufacturing  as  well  as  in  new  business 
models to improve the very low uptake of Ecolabel 
and  EMAS 
this  would  help 
take-up.  All 
tremendously to reach the CEAP objectives.   

44 

0.020.040.060.080.0100.0120.0140.0160.00.02.04.06.08.010.012.014.016.0201620172018201920202021kg/capitatonnes/capitaMaterial footprint Croatia (tonnes/capita)Material footprint EU-27 (tonnes/capita)Trade in recyclable raw materials Croatia (imports extra EU, kg/capita)Trade in recyclable raw materials EU-27 (imports extra EU, kg/capita) 
 
 
                                                 
      
 
Graph A9.2: Treatment of municipal waste 

construction  and  demolition  waste  sector,  but 
in  terms  of 
improvements  are  still  needed 
implementation,  training  of  public  bodies  and  the 
private  sector,  data  gathering,  and  preventing 
illegal dumping of waste.  

The agri-food system must reduce and better 
manage  food  waste.  Although 
increased, 
composting  and  anaerobic  digestion  remains  far 
below the EU  average in 2021 at 22 kg per head 
vs  100  kg.  More  investments  in  this  sector  could 
enhance  Croatia’s 
by 
generating  bio-methane  and/or  producing  organic 
fertilisers.  

autonomy 

strategic 

Source: Eurostat 

The  built  environment  system  continues  to 
resources 
the  depletion  of 
exacerbate 
despite  recent  improvements.  The  recovery 
rate  of  construction  and  demolition  waste  has 
increased steadily since 2016 and reached the EU 
average  (89%)  in  2021.  Soil  sealing  progressed 
between 2015 and 2018 and is slightly below the 
EU  average.  Croatia  has  established  a  legislative 
framework  in  line  with  the  EU  directives  in  the 

There remains a financing gap in the circular 
including  waste  management.  
economy, 
Additional  investments  are  required  to  address 
growing  needs.  The  financing  gap  was  estimated 
at  EUR  80  million  per  year  between  2014  and 
2020.  Over  this  period,  investment  needs  were 
estimated to be at least EUR 253 million per year 
while  investment  baselines  were  EUR  173  million 
per  year  (see  Annex  6).  To  meet  the  recycling 
targets for municipal waste and packaging waste, 
Croatia needs to invest EUR 14 million per year on 
recycling  processors,  biowaste  treatment,  waste 
sorting facilities and digitalisation until 2027. This 
does  not  include  plastic,  textiles  and  furniture 
waste  streams,  which  would  require  additional 
investments. 

Table A9.1: Overall and systemic indicators on circularity 

(1) Persons employed in the circular economy only tracks direct jobs in selected sub-sectors of NACE codes E, C, G and S; (2) the 
circular material use rate measures the share of material recovered and fed back into the economy in overall material use, 
including composting and digestion; (3) the recovery rate of construction and demolition waste includes waste which is prepared 
for reuse, recycled or subject to material recovery, including through backfilling operations; (4) soil sealing: 2016 column refers to 
2015 data; (5) food waste includes primary production, processing and manufacturing, retail and distribution, restaurants and 
food services, and households.  
Source: Eurostat, European Environment Agency 

45 

4034164324454184460100200300400500600201620172018201920202021Kg per capita Difference waste generated/treatmentLandfill/disposalTotal incineration (including energy recovery)Composting and digestionMaterial recyclingEU-27AREA201620172018201920202021EU-27 Latest year EU-27Overall state of the circular economyMaterial footprint (tonnes/capita)12.513.313.714.413.1-13.72020YoY growth in persons employed in the circular economy (%)1-0.90.9-12.4--2.92019Water exploitation index plus (WEI+) (%)0.20.20.20.2--3.62019IndustryResource productivity (purchasing power standard (PPS) per kilogram)1.71.91.91.91.82.02.32021Circular material use rate (%)24.65.25.05.25.75.711.72021Recycling rate (% of municipal waste)21.023.625.330.229.531.449.62021Built environmentRecovery rate from construction and demolition waste (%)376.0-78.0-89.0-89.02020Soil sealing index (base year = 2006)4103.7-107.3---108.32018Agri-foodFood waste (kg per capita)5----71.0-131.02020Composting and digestion (kg per capita)7.09.012.015.021.022.0100.02021 
 
      
 
           
 
ANNEX 10: DIGITAL TRANSFORMATION 

transformation  by  2030, 

Digital  transformation  is  key  to  ensuring  a 
resilient and competitive economy. In line with 
the  Digital  Decade  Policy  Programme,  and  in 
particular  with  the  targets  in  that  Programme  for 
digital 
this  Annex 
describes  Croatia’s  performance  on  digital  skills, 
digital 
the 
digitalisation  of  businesses  and  public  services. 
Where relevant, it makes reference to progress on 
implementing  the  Recovery  and  Resilience  Plan 
(RRP).  Croatia  allocates  20%  of  its  total  RRP 
budget to digital (EUR 1.3 billion) (66). 

infrastructure/connectivity 

and 

The  Digital  Decade  Policy  Programme  sets 
out a pathway for Europe’s successful digital 
transformation  by  2030.  The  Programme 
provides  a  framework  for  assessing  the  EU’s  and 
Member States’ digital transformation, notably via 
the  Digital  Economy  and  Society  Index  (DESI).  It 
also  provides  a  way  for  the  EU  and  its  Member 
States  to  work  together,  including  via  multi-
country  projects,  to  accelerate  progress  towards 
the  Digital  Decade  digital  targets  and  general 
objectives (67).  More  generally,  several  aspects  of 
digital  transformation  are  particularly  relevant  in 
the current context. In 2023, the European Year of 
Skills, building the appropriate skillset to make full 
use of the opportunities that digital transformation 
offers  is  a  priority.  A  digitally  skilled  population 
increases the development and adoption of digital 
technologies  and  leads  to  productivity  gains (68). 
Digital  technologies,  infrastructure  and  tools  all 
play  a  role  in  the  fundamental  transformation 
needed to adapt the energy system to the current 
structural challenges (69). 

The  lack  and  retaining  of  ICT  specialists  are 
key  challenges  for  Croatia.  Croatia  makes 
some progress in the field of digital skills with the 
Croatian  Academic  and  Research  Network 

(66)  The share of financial allocations that contribute to digital 
objectives has been calculated using Annex VII of the RRF 
Regulation. 

(67)  The Digital Decade targets as measured by DESI indicators 
and complementary data sources are integrated to the 
extent currently available and/or considered particularly 
relevant in the MS-specific context.  

(68)  See for example OECD (2019): OECD Economic Outlook, 

Digitalisation and productivity: A story of complementarities, 
OECD Economic Outlook, Volume 2019 Issue 1 | OECD 
iLibrary (oecd-ilibrary.org). 

(69)  The need and possible actions for a digitalisation of the 
energy system are laid out in the Communication 
‘Digitalisation the energy system – EU action plan’ 
(COM(2022)552. 

of 

the  National 

(CQF).  However, 

(CARNET), the eUniversities, the eSchools projects, 
Education 
the  adoption 
Development  Plan  2027  and  the  Act  on  Croatian 
ICT 
Qualification  Framework 
specialists  continue  to  account  for  a 
lower 
percentage of the workforce in Croatia than the EU 
average. The percentage of female ICT specialists 
is  slightly  above  the  EU  average  (19%  vs  21%). 
The  lack  of  specialists  is  also  felt  on  the  labour 
market,  with  68.3% (70) of  enterprises  (vs  an  EU 
average of 62.8%)  who are recruiting or trying to 
recruit  ICT  professionals  reporting  problems  in 
finding  suitable  candidates.  As  part  of  its  RRP, 
Croatia  put  in  place  a  voucher  system  to  support 
the acquisition of new skills, particularly green and 
digital  skills.  Further  complementary  measures 
could also be envisaged by both public and private 
stakeholders 
ICT 
professionals in Croatia.  

increase  and 

retain 

to 

Croatia  has  a  mixed  performance  on  digital 
infrastructure/connectivity.  Fixed  very  high-
capacity  networks 
(VHCN)  coverage  steadily 
increases,  however  it  remains  significantly  below 
the EU average. Croatia has an overall penetration 
of  100Mbps  services  at  28%,  well  below  the  EU 
average  of  55%.  Croatia’s  coverage  of  fixed  very 
high  capacity  network  (VHCN)  at  61%  is  also 
below  the  EU  average  at  73%.  Croatia’s  overall 
fibre  to  the  premises  (FTTP)  coverage  at  54%  is 
marginally below the EU average of 56%.  Croatia 
has assigned all 5G spectrum in the pioneer bands 
and  scores  around  the  EU  average  for  overall  5G 
coverage.  However,  the  5G  coverage  on  the  3.4-
3.8  GHz  spectrum  band  is  only  at  37%,  four 
percentage  points  below  the  EU  average.    To 
address 
issues,  Croatia 
connectivity 
improved  its  permit  granting  process,  selected  a 
Universal  Service  provider,  and  programmed  an 
additional €50M (ERDF) to connectivity. These RRP 
and  ERDF  connectivity  measures  aim  to  expand 
VHCN 
reducing 
administrative  burden  and  regulatory  barriers 
hampering  the  construction  by  streamlining  the 
licensing/authorisation process. 

coverage  while 

and  5G 

these 

Croatian businesses perform satisfactorily in 
indicators  for  the 
most  of  the  DESI 
digitalisation of businesses. Despite the mostly 
positive results, the share of SMEs with at least a 
basic  level  of  digital  intensity  remains  at  58% 
below  the  EU  average  of  69%.  But  Croatian 

(70)  Source: Eurostat – European Union Survey on ICT Usage and 

eCommerce in Enterprises 

46 

 
 
                                                 
                                                 
 
businesses  are  making  good  use  of 
the 
technologies  offer.  For 
opportunities  digital 
example,  use  of  artificial  intelligence  and  cloud 
computing  services  are  marginally  above  the  EU 
average,  while  use  of  big  data  matches  the  EU 
average.  As  part  of  its  RRP,  Croatia  put  in  place 
vouchers  and  financial  schemes  that  support  the 
digitalisation of SMEs as well as large companies, 
including 
the  digitalisation  of 
in 
investment 
production and business processes.  

Croatia  continues  to  perform  below  the  EU 
average  in  terms  of  digitalisation  of  public 
services. Croatia scores below the EU  average in 
terms  of  the  availability  and  usage  of  digital 
online services for citizens (score of 71 compared 
to  77)  and,  particularly,  for  businesses  (score  of 
67  compared  to  84).  Other  DESI  indicators  in  this 
dimension  (pre-filled  forms;  and  e-Government 
users) are mostly below the EU average. However, 
Croatia scores high on access to electronic health 
records  (score  of  85  out  of  100  compared  to  EU 
average at 71). Progress in the e-health domain is 
evident  with  the  development  of  the  Central 
Health  Information  System  of  the  Republic  of 
Croatia  (CEZIH),  which  has  successfully  digitalised 
business processes in the health system including 
the introduction of Artificial Intelligence for Smart 
(AI4Health.Cro).  As 
Healthcare  and  Medicine 
regards  electronic  identification  (eID),  Croatia  has 
one eID card notified under the eIDAS regulation.  

47 

 
Table A10.1: Key Digital Decade targets monitored by DESI indicators 

(1) The 20 million target represents about 10% of total employment. 
(2) The Fibre to the Premises coverage indicator is included separately as its evaluation will also be monitored separately and 
taken into consideration when interpreting VHCN coverage date in the Digital Decade. 
(3) At least 75% of Union enterprises have taken up one or more of the following, in line with their business operations: (i) cloud 
computing services; (ii) big data; (iii) artificial intelligence. 
Source: Digital Economy and Society Index 

48 

EUDigital Decade target by 2030 DESI 2021DESI 2022DESI 2023DESI 2023(EU)Digital skillsAt least basic digital skillsNA63%63%54%80%% individuals2021202120212030ICT specialists (1)3.7%3.6%3.6%4.5%20 million% individuals in employment aged 15-7420202021202120212030Digital infrastructure/connectivityFixed Very High Capacity Network (VHCN) coverage47%52%61%73%100%% households20202021202220222030Fibre to the Premises (FTTP) coverage (2)36%39%54%56%-% households20202021202220222030Overall 5G coverage0%34%82%81%100%% populated areas202020212022202220305G coverage on the 3.4-3.8 GHz spectrum bandNANA37%41%-% populated areas202220222030Digitalisation of businessesSMEs with at least a basic level of digital intensityNANA58%69%90%% SMEs202220222030Big data (3)14%14%14%14%75%% enterprises20202020202020202030Cloud (3)NA35%35%34%75%% enterprises2021202120212030Artificial Intelligence (3)NA9%9%8%75%% enterprises2021202120212030Digitalisation of public servicesDigital public services for citizensNA697177100Score (0 to 100)2021202220222030Digital public services for businessesNA686784100Score (0 to 100)2021202220222030Access to e-health recordsNANA8571100Score (0 to 100)202320232030Croatia 
 
  
 
ANNEX 11: INNOVATION 

This  Annex  provides  a  general  overview  of  the 
performance  of  Croatia’s  research  and  innovation 
system,  which  is  essential  for  delivering  the  twin 
green and digital transition. 

investment  in  the  post-RRP  period.  Reaching 
the  R&D  expenditure  target  of  3%  intensity  by 
2030  requires  further  measures  and  a  budgetary 
plan to ensure it can be met. 

Croatia  is  an  ‘emerging  innovator’  and  the 
gap  between  its  performance  and  the  EU 
average  is  shrinking.  According  to  the  2022 
edition of the European Innovation Scoreboard (71), 
since  2015  Croatia’s  innovation  performance  has 
grown  faster  than  the  EU  average,  driven  in 
particular  by 
capital 
expenditure  and  an  increased  number  of  public-
private co-publications. 

in  venture 

increases 

R&D  intensity (72)  stood  at  1.24%  in  2021, 
the  European 
still  significantly  below 
average of 2.26%. While both public expenditure 
on  R&D  and  business  enterprise  expenditure  on 
R&D  have  increased  over  the  last  years  (0.67% 
and  0.58%  of  GDP  in  2021),  they  remain  well 
below 
(0.76%  and  1.49% 
respectively). 

the  EU  average 

Graph A11.1: R&D intensity (GERD as % of GDP) 
2010 - 2021 

the 

level  of 

the  high 

the  number  of 

Croatia  continues  to  produce  scientific 
outputs  of  modest  quality  and  struggles  to 
tackle 
institutional 
fragmentation  in  its  public  research  system. 
The  share  of  the  country’s  scientific  publications 
among 
top  10%  most  cited  scientific 
publications  worldwide  has  slightly  increased  in 
recent years (4.2% in 2019 vs 3.6% in 2015) but 
remains substantially below the EU average, in the 
bottom tier of EU Member States (9.8% in 2019). 
Similarly, 
international  co-
publications  as  a  percentage  of  total  publications 
remains low (45.1% in 2021 vs an EU average of 
55.4%), 
of 
the 
internationalisation of the public science base. The 
reforms in the Croatian RRP are aimed at fostering 
excellence,  through  performance-based  funding 
for  public  research  organisations  and  attempts  to 
consolidate 
the 
severity  of  the  fragmentation,  with  more  than  a 
hundred  faculties,  academies  and  universities,  all 
with  a  significant  degree  of  autonomy (74), 
continued  efforts  are  required  to  better  achieve 
interdisciplinary 
critical  mass  and  promote 
research,  as  described  in  a  recent  World  Bank 
report (75). 

them.  However,  considering 

reflecting 

degree 

low 

Source: Eurostat, 2022 

The  recovery  and  resilience  plan  (RRP)  will 
help  address  this  underinvestment;  the 
savings  which  are  expected  to  result  from 
the  reform  of  the  institutional  research 
funding system (73) are to be used to support 

(71)  2022 European Innovation Scoreboard, Country profile: 

Croatia https://ec.europa.eu/assets/rtd/eis/2022/ec_rtd_eis-
country-profile-hr.pdf The EIS provides a comparative 
analysis of innovation performance in EU countries, including 
the relative strengths and weaknesses of their national 
innovation systems (also compared to the EU average). 

(72)  Defined as gross domestic expenditure on R&D as a 

percentage of GDP. 

Business-science 
linkages  show  signs  of 
improvement but research commercialisation 
is still limited. The number of public-private co-
publications as a share of total publications was at 
8.4% in 2021, above the EU average of 7.1%; it is 
on  an  upward  trend  (6.4%  in  2016).  The  RRP 
contains  targeted  investments  to  further  support 
joint 
collaboration 
science-business 
projects  between  academia  and  businesses. 
However,  the  business  sector  remains  poorly 
involved in financing public R&D (0.030% in 2020 
vs  an  EU  average  of  0.054%).  Findings  from  a 
Policy Support Facility report highlight that further 
efforts are needed to make knowledge valorisation 

through 

(74)  European Commission (2022): PSF to support early stages of 

innovation and science-business linkages in Croatia – 
Background Report. https://op.europa.eu/en/publication-
detail/-/publication/82617640-1dd8-11ed-8fa0-
01aa75ed71a1/language-en/format-PDF/source-search 

(73)  Investment C3.2 R1-I1 – Development of a system of 

programme agreements for funding universities and research 
institutes focused on innovation, research and development. 

(75)  The World Bank (2019): Analysis of the quality and 

coherence of the policy mix – Croatia Public Expenditure 
Review in STI. 

49 

00.511.522.520102015201620172018201920202021EUHR 
 
   
                                                 
                                                 
 
Table A11.1: Key innovation indicators 

(1) EU average for the last available year or the year with the highest number of country data. 
Source: Eurostat, OECD, DG JRC, Science-Metrix (Scopus database and EPO’s Patent Statistical database), Invest EU 

and 

(R&I) 

of research results a key component in all relevant 
research 
support 
innovation 
programmes  in  the  policy  mix.  This  need  is 
demonstrated  by  the 
low  number  of  patent 
applications  filed  under  the  Patent  Cooperation 
Treaty per billion GDP (0.6 vs an EU average of 3.3 
in 2019). The efforts would be facilitated through 
the  launch  of  joint  calls  between  the  main  R&I 
funders  (such  as  the  Croatian  Science  Foundation 
and 
a  more 
institutionalised dialogue during implementation of 
the  smart  specialisation  strategy  (e.g.  in  the 
Innovation  Councils) (77).  This  would 
Thematic 
support  follow-up  of  projects  as  they  mature 
through  the  technology  readiness  scale,  to  avoid 
failure  (the  ‘valley  of  death’)  and  tackle  historical 
gaps in financing. 

HAMAG-BICRO (76)) 

and 

The  framework  conditions  for  businesses  to 
innovate  and  invest  in  R&D  require  further 
improvement.  Public  sector  support  for  business 
R&D  has  been  low  (0.037%  in  2019  vs  an  EU 
average of 0.194%). However, signs of significant 
relative increases have been observed since 2018. 
The  reforms  under  the  RRP  to  promote  business 
innovation  are  aimed  at  analysing  the  existing 
R&D tax incentive scheme and complementing the 
legal  framework  for  R&D  tax 
incentives  to 
encourage  the  private  sector  to  increase  its  R&D 
investment.  These  reforms  are  complemented  by 
calls  aimed  at  fostering  innovation  in  SMEs.  The 
availability  of  venture  capital  helping  to  improve 
access  to  finance  for  innovative  young  firms  has 
increased since 2019 and reached 0.027% of GDP 
in  2021,  but  it  remains  below  the  EU  average  of 
0.074% of GDP. 

(76)  HAMAG-BICRO is the Croatian Agency for SMEs, Innovations 

and Investments (HAMAG-BICRO). 

(77)  Ibid. 

50 

EUaverage (1)R&D intensity (GERD as % of GDP)0.740.831.081.241.242.26Public expenditure on R&D as % of GDP0.410.400.550.650.670.76Business enterprise expenditure on R&D (BERD) as % of GDP0.320.420.530.590.581.49Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 2.83.64.2::9.8Patent Cooperation Treaty (PCT)  patent applications per billion GDP (in PPS)0.70.40.6::3.3Public-private scientific co-publications as % of total publications6.76.48.98.48.47.1Public expenditure on R&D financed by business enterprise (national) as % of GDP0.0300.0330.0080.030:0.054New graduates in science & engineering per thousand pop. aged 25-3411.812.815.916.6:16.0Total public sector support for BERD as % of GDP0.0130.0050.037::0.194R&D tax incentives: foregone revenues as % of GDP000.0005::0.100Share of environment-related patents in total patent applications filed under PCT (%)16.712.84.1: :13.3Venture capital (market statistics) as % of GDP0.0030.0060.0040.0090.00270.074Employment in fast-growing enterprises in 50% most innovative sectors2.63.34.2::5.52021Finance for innovation and economic renewalKey indicators Quality of the R&I systemAcademia-business cooperationHuman capital and skills availabilityPublic support for business enterprise expenditure on R&D (BERD)Green innovation 2020Croatia201020152019 
                                                 
 
  
 
ANNEX 12: INDUSTRY AND SINGLE MARKET 

(78%  of 

the  2022  EU  average 

Croatia’s  productivity  is  relatively  low,  but 
the  trends  are  positive.  Croatia’s  real  labour 
productivity  per  person  has  risen  by  12.6%  since 
2015  –  well  above  the  EU  average  of  4.1%. 
However,  labour  productivity  is  still  relatively  low 
in 
overall 
purchasing  power  standards) (78)  and  as  such 
remains  an  obstacle  for  faster  convergence 
levels.  Labour 
towards  average  EU 
productivity  in  industry  grew  slightly  below  the 
EU’s  average  in  2022  (1.1%  year-on-year  growth 
compared  with  the  EU  average  of  1.4%).  Low 
is 
productivity 
problematic 
light  of  the  very  significant 
investments in the Croatian recovery and resilience 
plan  for  renovating  buildings  and  reconstructing 
buildings  damaged  in  the  2020  earthquakes. 
Furthermore,  shortage  of  professional  and  skilled 
workers in the construction sector continues to be 
a major concern (79).  

construction 

income 

sector 

in 
in 

the 

The  productivity  gap  is  also  particularly 
acute in micro companies, where productivity 
levels  are  about  half  the  EU’s (80).    This 
highlights  the  need  to  increase  the  dynamism  of 
the Croatian business environment, reduce market 
inefficiencies, improve human capital, and promote 
investment. While both public expenditure on R&D 
(at  0.67%  of  GDP  in  2021)  as  well  as  business 
enterprise  expenditure  on  R&D  (0.58%  of  GDP  in 
2021)  are  on  an  upward  trend,  they  remain  well 
(0.76%  and  1.49% 
below 
respectively – see Annex 11). Underperformance in 
education  and  innovation  areas,  persistent  low 
efficiency of public institutions and the low quality 
of  the  business  environment  result  in  low  labour 
productivity in Croatia. In addition, Croatia suffers 
from  a  high  level  of  skills  mismatch,  which 
significantly  affects  its  economic  growth  and 
productivity. (81) 

the  EU  average 

(78)  Eurostat (NAMA_10_LP_ULC) 

(79)  European Construction Sector Observatory 

(80)  Eurostat (SBS_SC_SCA_R2) 

Graph A12.1: Hourly productivity in PPS (% of EU) 

Source: European Commission calculations based on AMECO 

has 

competitiveness 

Croatia’s 
been 
improving,  but  challenges  remain.  While  the 
competitiveness  of  the  Croatian  economy  has 
been improving in recent years, it is important for 
the  Croatian  economy  to  diversify  to  other 
competitive  sectors,  in  addition  to  making  its 
tourism sector smarter, more innovative and more 
IMD  World 
sustainable. 
Competitiveness  Ranking,  Croatia  is  ranked  46th 
overall,  up  13  places  from  last  year  thanks  to  its 
economic  performance 
the  strong 
economic  rebound  of  its  tourism  sector.  Many 
survey-based 
business 
practices  and  confidence  in  Croatia  displayed 
progress  too,  highlighting  a  general  increase  in 
business confidence in the country (82). 

assessing 

indicators 

linked 

2022 

the 

to 

In 

Additional  challenges  are  related  to  the 
impact  of  the  war  in  Ukraine,  particularly 
rising energy costs and containing production 
costs.  The  energy  crisis  has  a  substantial  impact 
on  the  operations  of  businesses,  especially  for 
energy-intensive  industries  such  as  aluminium, 
construction materials, shipbuilding and fertilisers, 
resulting in layoffs and the reduction or closure of 
production processes. Despite the number of firms 
in  industry  reporting  materials  shortages  being 
below the EU average (25% vs 47%), the share of 
firms  suffering  from  supply  chain  disruptions  has 
increased  rapidly  since  2019  when  only  4%  of 
firms  in  industry  reported  materials  constraints. 
Labour shortages are affecting industry even more 
severely,  with  34%  of  surveyed  firms  facing 
constraints compared to the EU average of 28%. 

(81)  Education and training monitor 2022 

(82)  IMD World Competitiveness Rankings 

51 

020406080100120140160CroatiaFranceSpain 
 
                                                 
   
                                                 
 
 
The  Single  Market  Scoreboard  indicates  that 
Croatia  performs  relatively  well  but  could 
monitor  the  timely  transposition  of  EU 
directives  better.  While  Croatia’s  transposition 
deficit is  slightly  below the  EU  average,  it is  on  a 
worsening trend (1.4% this year vs 1.2% last year). 
Croatia is also on the path of reducing its average 
delay in transposing directives (10.1 months vs the 
EU  average  of  8.6  months)  and  converging  with 
the EU average on conformity deficit (1.4% vs the 
EU average of 1.3%). On infringements, Croatia is 
substantially  below  the  EU  average  on  pending 
cases  and  average  case  duration.  And  while 
Croatia’s  average  case  duration  has  increased  by 
34%  in  the  last  3 years,  it  is  in  a  group  of 
6 Member States whose duration of cases is below 
the  36-month  indicative  target.  Despite  a  good 
performance  in  handling  times  for  SOLVIT  cases, 
low  levels  of  staffing  and  a  large  caseload  could 
disrupt the operations of businesses. 

reduce 

The  business  environment  is  improving,  but 
challenges  remain.  Through  its  recovery  and 
resilience  plan,  Croatia  is  committed  to  the  full 
implementation of existing action plans to improve 
the  business  environment  and 
the 
excessive regulatory burden on businesses. On the 
other hand,  in Croatia there is still  a higher share 
of  firms  than  in  the  rest  of  the  EU  who  consider 
restrictive  business  regulations  to  be  a  major 
obstacle  to  their  capacity  to  make  long-term 
investment (42.2% compared to the EU average of 
29.6%).  Furthermore,  Croatia 
is  also  notably 
largely  underperforming 
in  connectivity  and 
digitalisation  of  public  services,  according  to  the 
Digital  Economy  and  Society  Index  2022 (84)  (see 
also  Annex  10).  In  addition,  payment  gaps  are 
increasing  both  in  business-to-business  payments 
and 
in  public  sector-to-business  sectors,  the 
situation  is  worsening  compared  with  2021.  The 
timeliness  of  payments,  especially  in  sectors  with 
a  significant  presence  of  SMEs,  such  as 
construction,  transport  and  distribution  and  retail 
trade, is not satisfactory. (85) 

the  deployment  of 

is  performing  well 

Croatia 
in  terms  of 
installed  renewables  for  electricity  capacity; 
however  significant  administrative  barriers 
remain  when 
to  permitting 
it  comes 
procedures  for  renewable  energy.  Investment 
in 
renewable  energy 
infrastructure  is  hampered  by  long  permitting 
procedures.  According  to  the  barriers  identified 
under  the  Single  Market  Enforcement  Taskforce, 
delays are often due to the confusing and complex 
legal  framework,  the  lack  of  process  overviews, 
the unclear process steps and shortages of skilled 
staff in the competent authorities. Addressing such 
barriers  would  speed  up  the  uptake  of  wind  and 
solar  power,  which  remains  slow  in  Croatia  (see 
Annex  7),  and  help  decrease  dependency  on 
imported energy. 

other 

guides. 

Croatia  could  further  benefit  from  the 
advantages of the Single Market. While Croatia 
has  been  among  the  fastest  countries  when  it 
comes to trade integration into the Single Market, 
it is  still  slightly  below the  EU  average (45.1%  of 
GDP  vs  45.8%  of  GDP).  Despite  recent  reforms, 
several  professions  remain  highly  regulated  and 
face  higher  regulatory  restrictions  than  their  EU 
counterparts (83).  This  is  particularly  acute  for 
lawyers,  architects,  tax  advisors,  engineers  and 
tourist 
factors, 
Among 
competitiveness  across  engineering  professions  is 
restricted  by  a  combination  of  costly  mandatory 
professional  chamber  membership  (including  an 
register  separately 
obligation 
for  each 
to 
specialisation), 
the  sitting  of  an  additional 
professional exam after graduation, the setting of 
significant 
recommended 
fragmentation  of  exclusive  rights.  Lawyers  in 
Croatia  are  subject  to  legal  form,  incompatibility 
rules and multidisciplinary restrictions, all of which 
could affect the potential of this sector to innovate 
and  roll  out  digital  solutions  and  new  business 
models.  The  diverging 
regulations 
governing tourist guides seem to hinder access to 
the  market  and  affect  both  national  service 
providers  and 
the  cross-border  provision  of 
services.  The  recovery  and  resilience  plan  puts 
forward  an  ambitious  package  of  action  plans  on 
the  liberalisation  of  the  services  markets,  but 
several 
remain, 
undermining  the  productivity  and  competitiveness 
of the professional services’ sector. 

restrictions 

significant 

regional 

prices 

and 

(83)  Communication on updating the reform recommendations 
for regulation in professional services, COM(2021)385.  

(84)  Digital Economy and Society Index 2022 

(85)  Dun&Bradstreet Payment Study 2022 

52 

 
                                                 
                                                 
Table A12.1: Industry and the single market 

(*) last available year 
Source: (1) AMECO, (2) Eurostat, (3) ECFIN BCS, (4) Eurostat, (5) COMEXT and Commission calculations, (6) Eurostat, (7) Eurostat, 
(8) OECD, (9) Single Market Scoreboard, (10) EIB survey, (11) Eurostat: (12) Intrum, (13) SAFE Survey, (14) EIF SME Access to 
Finance Index. 

quasi-equity  instruments  to  support  businesses, 
are  included  in  Croatia’s  recovery  and  resilience 
plan,  but  more  needs  to  be  done  to  further 
promote  availability  of  finance  to  entrepreneurs, 
notably  small  and  medium  companies  and 
innovative firms. 

Improving  access  to  finance  also  remains 
integral  to  boosting  investment.  Access  to 
in 
finance  continues 
indicators  for  both 
loans  and  equity,  which 
hampers investment potential in Croatia.  

to  be  underdeveloped 

The  EIF  loan  index  in  2021  was  still  below 
the  EU  average  and  decreased  compared  to 
previous  years.  The  equity  index,  despite  a 
substantial improvement from 2020, remains well 
below  the  EU  average,  showing  that  access  to 
equity  remains  constrained,  especially  for  SMEs 
(0.12  in  2021  compared  to  the  EU  average  of 
0.23). Financial instruments, as well as equity and 

53 

POLICY AREAINDICATOR NAME20182019202020212022EU27 average (*)Net private investment, level of private capital stock, net of depreciation, % GDP (1)43.722.743.7Net public investment, level of public capital stock, net of depreciation, % GDP (1)011.71.20.60.4Real labour productivity per person in industry (% yoy)(2)-4.9-2-5.57.11.11.4Cost competitive-nessNominal unit labour cost in industry (% yoy)(2)50.43.61.17.72.9Material shortage (industry), firms facing constraints, % (3)748132547Labour shortage using survey data (industry), firms facing constraints, % (3)283014183428Vacancy rate (business economy)(4)1.71.411.51.53.1Concentration in selected raw materials, Import concentration index based on a basket of critical raw materials (5)0.130.130.150.140.150.18Installed renewables electricity capacity, % of total electricity produced (6)59.164.669.370.4n.a.50.9Single Market integrationEU trade integration, % (7)35.036.032.636.845.145.8RestrictionsEEA Services Trade Restrictiveness Index (8)n.a.n.a.n.a.n.a.n.a.0.05Public procurement Single bids, % of total contractors (9)221725212329Investment obstaclesImpact of regulation on long-term investment, % of firms reporting business regulation as major obstacle (10)4645.438.838.742.229.6Bankruptcies, Index (2015=100)(11)250.8197.5146.5191.6211.786.8Business registrations, Index (2015=100) (11)141.3154.3112.9138.9152.5121.2Payment gap - corporates B2B, difference in days between offered and actual payment (12)111016121413Payment gap - public sector, difference in days between offered and actual payment (12)6720101515Share of SMEs experiencing late payments in past 6 months, % (13)n.a.50.250.74840.643EIF Access to finance index - Loan, Composite: SME external financing over last 6 months, index values between 0 and 1 (14)0.540.570.50.43n.a.0.46EIF Access to finance index - Equity, Composite: VC/GDP, IPO/GDP, SMEs using equity, index values between 0 and 1 (14)0.080.090.050.12n.a.0.23BUSINESS ENVIRONMENT - SMEsBusiness demographyLate paymentsAccess to financeHEADLINE INDICATORSEconomic StructureRESILIENCEShortagesStrategic dependenciesSINGLE MARKET 
 
   
 
Graph A12.2: Business environment and 
productivity drivers 

Source: 1) % of GDP, 2021 Eurostat;  
2) composite indicator, 2021 European Investment Fund 
access to finance index;  
3) average payment delay in number of days, 2022 Intrum;  
4) % of firms in manufacturing facing constraints, 2022 
European Commission business consumer survey;  
5) proportion of contracts awarded with a single bidder, 2022 
Single Market Scoreboard. 

54 

1) Businessinvestments2) EIF access tofinance index3) Payment gap- G2B3) Payment gap- B2B4) Materialshortage4) Labourshortage5) Single bidsEuropean UnionCroatia 
   
ANNEX 13: PUBLIC ADMINISTRATION 

continues 

reforms.  Croatia 

This  Annex  outlines  the  performance  of 
is 
Croatia’s  public  administration,  which 
essential for providing services and carrying 
out 
rank 
significantly  below  the  EU-27  average  in  the 
its  public  administration (86). 
effectiveness  of 
Several  reforms  have  been  launched  under  the 
recovery and resilience plan (RRP) to resolve some 
policymaking, 
long-standing 
territorial  fragmentation,  the  civil  service,  public 
service delivery and digital government.  

challenges 

to 

in 

The  reform  under  Croatia’s  RRP  addressing 
local  government  fragmentation  is  facing 
headwinds.  Some  municipalities  have  expressed 
a  certain  degree  of  interest  in  providing  selected 
local services jointly. However, interest in merging 
local  entities remains lacklustre,  thus jeopardising 
the intention of merging 20% of municipalities by 
2026.  Insufficient  financial  and  administrative 
capacities  in  local  government  result  in  wide 
disparities in the provision of public services.  

during 

COVID-19 

the 
the  digital 

The  overall  maturity  of  e-government 
continues  to  be  below  the  EU  average (Table 
A13.1  and  Annex  10).  However,  the  number  of  e-
services  available  on  the  E-Citizens  platform  for 
the  integrated  provision  of  the  government’s 
digital services and the number of users, increased 
sharply 
pandemic. 
Nevertheless, 
transformation  of 
Croatia’s  public  administration  is  jeopardised  by 
the  weak  leadership  role  of  the  Central  State 
Office for the Development of Digital Society. The 
RRP contains targets (a few of which are to be met 
by  the  end  of  2023)  to  improve  digitalisation  of 
the  public  administration, interoperability,  and  the 
supply  of  digital  public  services.  The  lack  of 
targeted  measures  to  develop  digital  skills  in  the 
public administration remains a drawback (87). 

challenges 

stakeholder 

engagement 

was 
While 
strengthened 
in 
somewhat, 
regulatory governance remain. Amendments to 
the  Act  on  the  System  of  Strategic  Planning  and 
Management  of  Development  were  introduced,  to 
improve  the  effectiveness  of  strategic  planning. 
However,  significant  challenges  like  coordination 
remain.  Frequent  changes 
legislation  and 
concerns  about  the  quality  of  the  law-making 

in 

processes  negatively  affect  investors’  perceptions 
of  the  effectiveness  of  investment  protection  in 
Croatia.  The  Parliament  has  reduced  the  use  of 
emergency procedures, but the share of unplanned 
legislation  submitted  to  Parliament  remains  high 
(31%  in  2021),  which  contributes  to  a  lack  of 
predictability (88).  Reforms  under  Croatia’s  RRP 
seek  to  improve  the  evaluation  of  public  policies 
through  amendments  to  the  Regulatory  Impact 
Assessment  Act  and  the  upgrade  of  the  e-
consultation website to integrate local government 
regulations.  

Challenges remain in the management of the 
civil  service  in  Croatia.  The  indicators  show  a 
relatively  low  share  (5.5%  in  2022)  of  civil 
servants  who  participate  in  adult  learning  (Table 
A13.1).  Croatia’s  RRP  aim  to  create  a  new 
competence 
sector 
employees;  introduce  a  new  method  for  setting 
wages and improve the recruitment process. 

framework 

public 

for 

Graph A13.1: Croatia. Scope index of independent 
fiscal institutions 

Source: European Commission 

The  mandate  of  Croatia’s  independent  fiscal 
institution  (IFI)  is  narrower  than  that  of  the 
average  EU  country  (Graph  A13.1).  Currently, 
Croatia’s  IFI  is  building  capacity  to  fully  carry  out 
the  traditional  IFI  tasks  set  out  in  EU  legislation, 
such  as  endorsing/producing  macroeconomic 
forecasts.  Performance  is  also  below  the  EU 
average  in  the  design  of  the  national  medium-
term budgetary framework.  

(86)  Worldwide Governance Indicators, 2021  

(87)  European Commission, Public administration and governance: 
Croatia, Publications Office of the EU, 2023 (forthcoming). 

(88)  2022 Rule of Law Report, country chapter on the rule of law 

situation in Croatia. 

55 

01020304050607005101520253035MonitoringcomplianceMacro forecastBudget forecastSustainabilityassessmentFiscaltransparencyNormativeassessmentsTotalSubcomponentsTotal (rhs)HREU-27 
 
                                                 
   
                                                 
 
 
Table A13.1: Public administration indicators 

(1) High values denote a good performance, except for indicator # 6. (2) 2022 value. If not available, the 2021 value is shown. 
(3) Measures the user centricity and transparency of digital public services as well as the existence of key enablers for the 
provision of those services. (4) Defined as the absolute value of the difference between the percentage of men and women in 
senior civil service positions. Flags: (b) break in time series; (d) definition differs; (u) low reliability. 
Source: CT use survey, Eurostat (# 1); E-government benchmark report (# 2); Open data maturity report (# 3); Labour Force 
Survey, Eurostat (# 4, 5, 7), European Institute for Gender Equality (# 6); Fiscal Governance Database (# 8, 9); OECD Indicators of 
Regulatory Policy and Governance (# 10).  

Despite plans to privatise it, the state-owned 
enterprise  (SOE)  sector  in  Croatia  is  one  of 
the  largest  in  the  EU  in  relative  terms.  The 
2021  overview  of  the  governance  of  Croatia’s 
SOEs (91)  revealed  various  weaknesses  relative  to 
best practices: the ownership framework is mostly 
decentralised across line ministries and there is no 
SOE  policy  in  Croatia.  Furthermore,  disclosure 
requirements for non-listed large SOEs are weaker 
than those for listed companies and there is room 
to  strengthen  the  autonomy  and  independence  of 
boards.  

There is scope to improve the efficiency and 
quality  of 
justice.  The  use  of  electronic 
communication  tools  was  increased  and  backlogs 
were  reduced  in  higher  courts,  but  the  level  of 
backlogs  and  the  length  of  proceedings  remain 
among the highest in the EU. In 2021, the backlog 
of  court  cases  older  than  7  years  decreased  by 
about  12%  compared  to  2020,  and  around  15% 
compared to 2019 (89). The RRP aims to reduce the 
duration of litigation, the number of pending cases 
and the share of cases that are more than 3 years 
old.  On  the  quality  of  the  justice  system,  there  is 
information  and 
room  for  a  better  use  of 
case 
communication 
management  and  for  electronic  communication 
between courts and parties to cases. The resources 
of  the  State  Judicial  Council  and  the  State 
increased.  No 
Attorney’s  Council  are  being 
systematic  deficiencies  in  judicial  independence 
have been reported. (90)  

technologies 

for 

(89)  Supreme Court of the Republic of Croatia 2021 Report, 

2022. 

(90)  For a more detailed analysis of the performance of the 
justice system in Croatia, see the 2023 EU Justice 

Scoreboard (forthcoming) and the country chapter for Croatia 
in the 2023 Rule of Law Report (forthcoming). 

(91)  OECD (2021), OECD Review of the Corporate Governance of 

State-Owned Enterprises: Croatia. 

56 

HR201720182019202020212022EU-27(2)146.948.141.351.955.0n/a64.82n/an/an/a60.660.663.272.93n/a0.60.70.80.80.70.8446.745.849.749.349.9 (b)47.852.052.2 (u)2.7 (u)3.4 (u)3.7 (u)8.0 (bu)5.5 (u)16.9612.88.09.414.215.218.411.072.11.91.71.81.6 (b)1.51.580.60.60.60.60.6n/a0.79-0.2-0.21.31.31.3n/a1.5101.54n/an/an/a1.75n/a1.7Medium term budgetary framework indexIndicator (1)E-government and open government dataShare of individuals who used the internet within the last year to interact with public authorities (%)E-government benchmark overall score (3) Open data and portal maturity indexEducational attainment level, adult learning, gender parity and ageingShare of public administration employees with tertiary education (levels 5-8, %)Participation rate of public administration employees in adult learning (%)Gender parity in senior civil service positions (4)Ratio of 25-49 to 50-64 year olds in NACE sector OPublic financial management Strength of fiscal rules indexEvidence-based policy makingRegulatory governance 
                                                 
                                                                              
 
   
 
FAIRNESS 
ANNEX 14: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  

The  European  Pillar  of  Social  Rights  is  the 
compass  for  upward  convergence  towards 
better  working  and  living  conditions  in  the 
EU.  This  Annex  provides  an  overview  of  Croatia’s 
progress in implementing the Pillar’s 20 principles 
and EU headline and national targets for 2030 on 
employment, skills and poverty reduction. 

Table A14.1: Social Scoreboard for Croatia 

unemployment  rate  decreased  in  2022,  reaching 
7%  in  2022,  closing  in  on  the  average  EU 
unemployment  rate  which  dropped  to  6.2%  in 
2022. Under Croatia’s recovery and resilience plan 
(RRP),  the  Labour  Act  and  the  new  Law  on 
Undeclared work were adopted in December 2022. 
This  creates  a  better 
legal  framework  that 
regulates work and encourages the transition from 
undeclared  work  to  declared  work.  Active  labour 
market policy measures are being revamped under 
the RRP and the European Social Fund Plus (ESF+) 
to make them more efficient. 

in 

Women,  low-skilled  workers,  persons  with 
disabilities  and  young  people  not 
in 
employment,  education  or  training  (NEET) 
continue  to  face  particular  challenges  in 
getting access to quality employment. One of 
the main reasons is that they lack adequate skills, 
with  qualifications  not  matching  market  needs. 
The  disability  employment  gap  is  still  high,  even 
though it has slightly decreased (28.7 pps in 2021 
against  23.1  pps 
the  EU).  The  gender 
employment  gap  dipped  to  9.5  pps  in  2022  (EU: 
10.7 pps). The share of informal carers, especially 
women,  is  higher  than  the  EU  average  and  keeps 
many people outside the labour market (28.4% of 
women  and  22.9%  of  men  vs  19.1%  of  women 
and  14.8%  of  men  in  the  EU).  The  employment 
rate  of  low-skilled  workers  (42.1%  in  2021)  lags 
considerably  behind  those  of  medium-skilled  and 
high-skilled  workers 
84.1% 
respectively).  This  highlights  the  importance  of 
efforts to reach the 2030 target on adult learning. 
The  rate  of  young  people  NEET  (aged  15-29) 
worsened  slightly  during 
the  pandemic  and 
remains  above  the  EU  average.  Moreover,  there 
are  disparities  in  employment  across  different 
regions,  along  with  a  noticeable  decrease  in  the 
population.  The  ESF+  programme  puts  an 
emphasis  on  investing  in  quality  employment  for 
women  and  disadvantaged  groups  and  prioritises 
youth employment. Boosting measures to address 
these  challenges  would  support  progress  towards 
the national employment rate target for 2030. 

(67.1% 

and 

and 

training 

reforms 

Education 
are 
happening  at  different  levels  and  could 
positively  affect  employment 
(see  also 
Annex 15).  Participation  in  formal  childcare  for 
children below the age of 3 increased considerably 
to  33.3%  in  2021,  coming  closer  to  the  EU 

(1) Update of 27 April 2023. Members States are classified on 
the Social Scoreboard according to a statistical methodology 
agreed with the EMCO and SPC Committees. It looks jointly at 
levels and changes of the indicators in comparison with the 
respective EU averages and classifies Member States in seven 
categories. For methodological details, please consult the 
Joint Employment Report 2023. Due to changes in the 
definition of the individuals' level of digital skills in 2021, 
exceptionally only levels are used in the assessment of this 
indicator; NEET: neither in employment nor in education and 
training; GDHI: gross disposable household income.         
Source: Eurostat. 

On  the  back  of  the  economic  recovery  from 
the COVID-19 crisis, Croatia’s labour market 
continued 
its  upward  trend,  albeit  with 
increasing  labour  shortages  and  persisting 
employment  challenges  for  disadvantaged 
groups.  The  employment  rate  in  Croatia  further 
increased  to  69.7%  in  2022,  but  it  is  still 
significantly  below  the  EU  average  of  74.6%.  The 

57 

2.363.3713.39.54.7869.772.4122.2320.918.620.6628.74.533.31.7Critical situationTo watchWeak but improvingGood but to monitorOn averageBetter than averageBest performersSocial protection and inclusionAt risk of poverty or social exclusion rate                                            (% of total population, 2021)At risk of poverty or social exclusion rate for children                       (% of population aged 0-17, 2021)Impact of social transfers (other than pensions) on poverty reduction (% reduction of AROP, 2021)Disability employment gap(percentage points, 2021)Housing cost overburden(% of total population, 2021)Children aged less than 3 years in formal childcare(% of population under 3-years-old, 2021)Self-reported unmet need for medical care(% of population 16+, 2021)Policy areaHeadline indicatorDynamic labour markets and fair working conditionsEmployment rate(% of population aged 20-64, 2022)Unemployment rate(% of active population aged 15-74, 2022)Long term unemployment(% of active population aged 15-74, 2022)GDHI per capita growth                                                              (2008=100, 2021)Equal opportunities and access to the labour marketEarly leavers from education and training(% of population aged 18-24, 2022)Share of individuals who have basic or above basic overall digital skills (% of population aged 16-74, 2021)Youth NEET rate(% of population aged 15-29, 2022)Gender employment gap(percentage points, 2022)Income quintile ratio(S80/S20, 2021) 
 
 
 
  
 
 
the 

labour  market. 

average of 36.2%. Croatia is reforming vocational 
training  and  education  to make it more  attractive 
and  relevant  to 
  New 
programmes  are  being  aligned  with  the  Croatian 
system 
qualification 
standards.  The  Recovery  and  Resilience  Facility, 
the ESF+ and the European Regional Development 
Fund  (ERDF)  provide  substantial  investments  in 
these areas (see Annex 15). 

occupational 

and 

of 

Table A14.2: Situation of Croatia on 2030 
employment, skills and poverty reduction targets 

(1) Adult Education Survey, adults in learning in the past 12 
months. 
(2) Number of persons at risk of poverty or social exclusion 
(AROPE), reference year 2019. 
Source: Eurostat, DG EMPL. 

Croatia  is  boosting  up-  and  reskilling  faced 
with  persisting  labour  shortages  and  skills 
mismatches  and  weak  adult  learning.  Only 
5.1%  of  Croatian  adults  participated  in  learning 
over  the  past  4  weeks  in 2021,  against  10.8%  in 
the  EU,  and  the  take-up  is  even  lower  among 
disadvantaged  groups  and  low-qualified  workers. 
The  new  Act  on  Adult  Education  under  the  RRP 
adopted in December 2021, requires adult learning 
to  comply  with 
the  Croatian  Qualification 
Framework  and  introduces  quality  assurance.  The 
RRP also provides for a voucher system for re- and 
upskilling  that  was  launched  in  April  2022.  The 
ESF+ programme will expand these measures and 
develop  building  blocks  to  provide 
individual 
learning accounts. Investment in skills will need to 
be further boosted to reach the national target of 
at least 55% of all adults participating in training 
every year by 2030 (against the baseline of 26.9% 
in 2016).  

Despite  Croatia’s  robust  economic  growth, 
some  groups  are  being  left  behind  due  to 
continuing  weaknesses 
social 
protection  system.  The  overall  share  of  the 
population  at  risk  of  poverty  or  social  exclusion 
(AROPE) in Croatia increased during the COVID-19 

the 

in 

in  the  EU 

crisis but remained slightly  below the EU  average 
in  2021). 
(20.9%  against  21.7% 
However,  the  AROPE  rate  is  substantially  higher 
than the EU average (33.8% against 19.4% in the 
EU  in  2020)  for  older  people,  especially  women 
(37.3% against 21.8% in the EU), and persons with 
disabilities  (36.9%  against  28.8%  in  the  EU). 
Energy  poverty  is  a  serious  problem,  with  arrears 
on  utility  bills  for  households  at  risk  of  poverty 
(27.4% in 2021) much higher than the EU average 
(15.9%).  Considerable  effort  is  needed  to  reach 
the national target for poverty reduction by 2030. 

The  impact  of  social  transfers  on  reducing 
poverty  remains  critically  low.  The  indicator 
stood  at  20.7%  in  2021  (EU:  37%),  down  from 
24.7%  in  2019  and  it  is  expected  to  deteriorate 
further  due  to  the  current  inflationary  pressures. 
The  national  minimum  income  scheme  still  lacks 
the  capacity  to  reduce  poverty  due  to  its  low 
adequacy  (41%  of  the  poverty  threshold  vs  EU 
59%; 34% of the income of a low wage earner vs 
EU  47%)  and 
coverage.  Likewise, 
unemployment  benefits  do  not  provide  an 
adequate  safety  net  for  dismissed  workers,  who 
have very low social protection, together with self-
employed  and  temporary  workers.  Pensions  are 
low  compared  to  work  incomes;  the  aggregate 
replacement  ratio  is  38%  against  58%  in  the  EU. 
Following  the  repeal  of  pension  reforms  in  2019, 
special  pension  plans  continue  to  put  a  strain  on 
the  sustainability  of  the  pension  system  and  the 
support it provides to all pensioners. 

limited 

The  provision  of  affordable,  quality  social 
services,  especially  long-term  care  (LTC), 
falls  far  from  meeting  the  country’s  needs. 
Availability,  access  and  quality  of  social  services 
and  LTC  is  poor,  which  raises  particular  concerns 
given  Croatia’s  rapidly  ageing  population  and 
continued  workforce  emigration.  LTC  is  severely 
underfunded,  with  public  spending  among  the 
lowest in the EU (0.23% of GDP against 1.81% in 
the  EU  average  in  2020).  As  formal  LTC  workers 
are  scarce,;  the  number  of 
informal  carers 
(predominantly women) is significantly higher than 
the EU average, which negatively affects women’s 
employment.  Under  the  RRP,  the  newly  adopted 
Social  Welfare  Act  launches  a  reform  on  how 
community-based  services  are  developed,  as  well 
as  investments  in  social  services  and  LTC.  Both 
ESF+ and ERDF programmes substantially support 
LTC  and  deinstitutionalisation.  Tackling  these 
challenges  will  help  Croatia  achieve  the  national 
target for reducing the number of people at risk of 

58 

IndicatorsLatest dataTrend            (2015-2022)National target by 2030EU target by 203069.7(2022)26.9(2016)-24(2021)Poverty reduction2 (thousands)-298-15 000Employment (%)7578Adult learning1 (%)5560 
 
   
 
poverty  or  social  exclusion  by  298,000  by  2030 
(compared to 2019). 

59 

 
ANNEX 15: EDUCATION AND TRAINING 

This  Annex  outlines  the  main  challenges  for 
Croatia’s education and training system in light of 
the  EU-level 
targets  and  other  contextual 
indicators  under  the  European  Education  Area 
strategic framework, based on the 2022 Education 
and Training Monitor. 

A  limited  education  offer  in  less-developed 
areas  aggravates  the  population  decrease. 
According  to  the  2021  population  census,  Croatia 
lost  9.6%  of  its  population  in  the  last  10  years 
(19.1%  in  30  years)  due  to  emigration  and  a 
declining birth rate (92). The decrease is up to twice 
as high in less-developed areas, where also access 
to  education  is  weaker  at  all  levels  of  education. 
Regional  variations  are  even  stronger  with  regard 
to  the  pupil  population  (see  Graph  A15.1) (93). 
These  variations  further  increase  already  existing 
differences in  school  infrastructure  and  quality  of 
impact  on 
teaching  and  have  a  negative 
and 
educational 
Resilience  Plan  (RRP)  envisages  to  tackle  these 
issues  by  improving  access  to  early  childhood 
education  and  care  (ECEC)  and  school  education. 
This aims to revitalise less-developed and remote 
regions,  while 
account 
demographical projections. 

outcomes. 

Recovery 

taking 

also 

into 

The 

Croatia  aims  to  increase  participation  in 
ECEC.  Participation  of  children  in  ECEC  stands  at 
78.8% for children older than 3 years (EU: 93%); it 
is  even  lower  for  disadvantaged  groups.  At  35.7 
pps, the gap in participation between children who 
are  at  risk  of  poverty  or  social  exclusion  (AROPE) 
and their more affluent peers is the highest in the 
EU (94).  Existing  ECEC  facilities  were  mapped  to 
guide  RRP  investments,  linking  award  criteria  to 
needs. 
the  ECEC  Act  was 
amended (95).  Amendments  include  establishing  a 
national network of ECEC facilities and introducing 
a  legal  entitlement  for  a  place  in  ECEC  a  year 
before school entry, and an attendance certificate, 
which 
in  school. 
Primary schoolteachers can be  employed as ECEC 
teachers,  with  a  required  requalification  within  2 
years. 

is  obligatory  for  enrolment 

In  May  2022, 

(92)  https://dzs.gov.hr/vijesti/objavljeni-konacni-rezultati-popisa-

2021/1270 

(93)  Školski e-rudnik, vol. I, p. 4. 

(94)  Eurostat (EU-SILC), special extraction. 

(95)  https://narodne-

novine.nn.hr/clanci/sluzbeni/2022_05_57_805.html 

60 

National  exams  are  being  introduced  in 
primary  schools  to  improve  monitoring  and 
education outcomes.  Despite  the  share  of  early 
leavers from education and training in 2022 being 
the  lowest  in  the  EU  (2.3%  vs  EU  9.6%),  Croatia 
struggles with low education outcomes, especially 
in maths, where underachievement in Programme 
for 
International  Student  Assessment  2018 
(31.2%)  is  one  of the  highest  in the  EU.  Students 
were tested in a pilot project in 81 primary schools 
in eighth grade in May 2022, and in the fifth and 
fourth  grades  in  2022/2023.  Exams  in  the  eighth 
grade in all schools, which started in March 2023, 
will improve the monitoring of learning outcomes. 
Until  now,  the  only  national  exam  has  been  the 
State Matura at the end of secondary education. 

Graph A15.1: Changes in primary school pupils’ 
population in Croatia between 2013/2014 and 
2022/2023 (by region) 

Source: Školski e-rudnik, Vol. I, page 4. 

in 

funding 

supports 

digital  maturity 

significant 
EU 
improvements 
of 
education.  The  e-Schools  project,  which  is  at  its 
final  phase  of  implementation,  has  significantly 
helped  the  transition  to  online  education  brought 
about by COVID-19. Local computer networks have 
been  put  in  place  at  1,328  of  the  1,511  school 
locations,  and  e-services  put  in  place  to  enhance 
teaching  and  school  governance.  Evaluation  is 
planned before the end of the project, and schools 
are  being  enabled  for  self-evaluation  afterwards. 
In higher education (HE), a similar improvement is 
planned  in  the  RRP.  Currently  ongoing  analysis  of 
digital  readiness  and  digital  maturity  of  HE 
institutions,  supported 
the  European 
Commission’s  Technical  Support  Instrument,  will 
provide the basis for this reform and investment. 

through 

share  of  graduates 

The 
science, 
technology, engineering and maths (STEM) is 

in 

-30%-20%-10%0%10%20%City of Zagreb IstriaAverageBrod-PosavinaCounty Vukovar-Srijem County  
 
                                                 
  
 
Table A15.1: EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

Source: (1,.3,4,.5,7,.8,9,.10,11) = Eurostat; 2 = OECD (PISA); 6 = European Commission (Joint Research Centre).   Notes: Data is 
not yet available for the remaining EU-level targets under the European Education Area strategic framework, covering 
underachievement in digital skills and participation of adults in learning. The equity indicator shows the gap in the share of 
underachievement in reading, mathematics and science (combined) among 15-year-olds between the lowest and highest quarters 
of socio-economic status 

high and growing, but there is a shortage of 
maths and physics teachers. About one sixth of 
maths  and  physics  teachers  are  not  qualified  for 
the subjects they teach. To address this shortage, 
scholarships  for  STEM  teachers’  students  have 
been  introduced,  linked  to  a  work  obligation  of  a 
duration  equivalent  to  the  number  of  years  that 
beneficiaries received the scholarship. The amount 
awarded  is  EUR 600  per  month  (nine  times  a 
year), twice as high as that for non-teaching STEM 
scholarships (96), and nearly four times higher than 
earlier STEM scholarships (97). 

Several  new  laws  were  adopted  to  enable 
reforms in higher education supported by the 
RRP  and  to  strengthen  dual  education.  In 
2022,  tertiary  educational  attainment  was  below 
the  EU  average  (35.5%  vs  EU  42%)  and  showed 
significant  gaps  between  genders  (20.1  pps  in 
favour  of  women,  compared  to  the  11.1  pps  EU 

Act (98) 

introduces 

average)  and  foreign-  and  native-born  (8.8  pps 
compared  to  the  -6.4  pps  EU  average).  There  are 
also  big  differences  between  cities  (47.9%)  and 
rural  areas  (27.1%).  The  new  Science  and  Higher 
Education 
performance 
agreements  and  initial  accreditation  of  studies 
that  includes  criteria  on  labour  market  relevance. 
This  should 
improve  quality  and  reduce  the 
number of unfilled study places. The new laws on 
quality  assurance  in  HE (99)  and  recognition  of 
foreign  qualifications (100)  aim 
improve 
internationalisation  of  studies. 
In  vocational 
education,  low  incidence  of  work-based  learning 
in  access  will  be 
with  regional 
regulated by amendments to the act on vocational 
education and training. 

inequalities 

to 

(98)  https://narodne-

novine.nn.hr/clanci/sluzbeni/2022_10_119_1834.html 

(96)  https://mzo.gov.hr/istaknute-teme/odgoj-i-

(99)  https://narodne-

obrazovanje/visoko-obrazovanje/drzavne-stipendije/drzavne-
stipendije-za-studente-u-stem-podrucjima-znanosti/1562 

(97)  https://stem.mzo.hr/ 

novine.nn.hr/clanci/sluzbeni/2022_12_151_2330.html. 

(100) https://narodne-

novine.nn.hr/clanci/sluzbeni/2022_06_69_1023.html 

61 

96%69.5%91.9%78.8%202093.0%2020Reading< 15%19.9% 20.0%21.6%201822.5%2018Mathematics< 15%32.0% 22.3%31.2%201822.9%2018Science< 15%24.6% 21.1%25.4%201822.3%2018< 9 %2.8%u11.0%2.3%u9.6%Men3.5%u12.5%2.9%u11.1%Women2.0%u9.4%1.6%u8.0%Cities1.6%u9.6%:u8.6%Rural areas3.3%u12.2%3.2%u10.0%Native2.7%u10.0%2.3%u8.3%EU-born:u20.7%:u20.3%Non EU-born:u23.4%:u22.1%6Equity indicator (percentage points)::13.3201819.320187Exposure of VET graduates to work based learningTotal ≥ 60% (2025) : :40.0%60.1%45%30.8%36.5%35.5%42.0%Men23.5%31.2%25.5%36.5%Women38.3% 41.8%45.6%47.6%Cities43.1%46.2%47.9%52.2%Rural areas22.9%26.9%27.1%30.2%Native31.2%37.7%34.9%43.0%EU-born57.5%u32.7%48.3%u39.5%Non EU-born22.2%u27.0%41.7%u35.7%29.5% 38.3%30.2%202039.2%2020Tertiary educational attainment (age 25-34)8Total8By gender9By degree of urbanisation10By country of birth11Share of school teachers (ISCED 1-3) who are 50 years or over1Participation in early childhood education (age 3+)2Low achieving 15-year-olds in:Early leavers from education and training (age 18-24)3Total3By gender4By degree of urbanisation5By country of birth20152022IndicatorTargetCroatiaEU27CroatiaEU27 
                                                 
                                                 
 
  
 
ANNEX 16: HEALTH AND HEALTH SYSTEMS 

A  healthy  population  and  an  effective, 
accessible  and  resilient  health  system  are 
prerequisites  for  a sustainable  economy and 
society.  This  Annex  provides  a  snapshot  of 
in 
population  health  and  the  health  system 
Croatia.  

Life  expectancy 
in  Croatia  has  been 
improving steadily, but it is still below the EU 
average.  However,  it  has  deteriorated  in  recent 
years  mainly  due  to  COVID-19.  In  2019,  it  was 
78.6 years (EU average: 81.3) and in 2021, it was 
76.7  (EU  average:  80.1),  dropping  back  to  the 
2010  level.  Mortality  rates  from  preventable  and 
treatable  causes  in  Croatia  are  far  above  the  EU 
average.  This  is  due  in  part  to  smoking  and  poor 
nutrition,  and  to  shortcomings  in  providing  timely 
and effective care. 

Graph A16.1: Life expectancy at birth, years 

Source: Eurostat 

is 

Health  spending  relative  to  GDP  in  Croatia 
was  below  the  EU  average  in  2020.  In  this 
year, Croatia spent EUR 963 per inhabitant, whilst 
the  EU  average  was  more  than  three  times  as 
high. In 2020, total healthcare spending increased 
to  7.8%  of  GDP.  This  is  in  line  with  the  upward 
trend in all Member States in 2020. In Croatia, this 
increase 
largely  due  to  the  severe  GDP 
contraction (by 8.5%, compared to 5.7% in the EU 
overall). This is also corroborated by the fact that 
the  share  of  health  spending  in  total  public 
spending  decreased  from  13.9%  to  13.5%.  The 
public share of health spending is higher than the 
EU  average  (84.2%  vs  81.2%  in  2020).  Public 
spending on health is projected to increase by 0.7 
percentage  points 
(pps)  of  GDP  by  2070 
(compared to 0.9 pps for the EU overall). 

Graph A16.2: Projected increase in public 
expenditure healthcare over 2019-2070 

AWG reference scenario 
Source: European Commission / EPC (2021) 

(19.6%).  As 

Outpatient  curative  and  rehabilitative  care 
holds  the  biggest  share  of  total  current 
health expenditure. This makes up one fourth of 
health  expenditure,  followed  by  pharmaceuticals 
(just  over  20%)  and 
inpatient  curative  and 
in  other  EU 
rehabilitative  care 
countries,  between  2019  and  2020,  spending  on 
prevention increased, although at 6%, the increase 
is  markedly  lower  than  for  the  EU  overall  (26%). 
Across  the  EU,  this  increase  was  primarily  driven 
by  spending  on  disease  detection,  surveillance, 
control  and  response  programmes  as  part  of  the 
public  health  response  to  COVID-19.  Another 
action  to  safeguard  public  health  is  the  ongoing 
rationalisation of the use of antimicrobials, as part 
of  broader  efforts  to  foster  the  rational  use  of 
medicines.  With  16.2  daily  defined  doses  (EU 
average:  14.4)  Croatia  ranks  9th  for  consumption 
of antimicrobials. 

Historically,  Croatia  has  had  fewer  doctors 
and  nurses than many other  EU  countries.  In 
2021,  it  had  only  7  nurses  (EU  average:  8.3)  and 
3.6 doctors (EU average: 3.9) per 1,000 population. 
However, the ratios of both doctors and nurses to 
population  increased  between  2013  and  2021, 
despite  initial  concerns  about  the  effects  of 
Croatia’s  EU  accession  in  2013  and  potential 
emigration of health professionals.  

Historical levels of investment in healthcare, 
measured  as  gross  fixed  capital  formation, 
are  low.  Through  its  recovery  and  resilience  plan 
(RRP),  Croatia  plans  to  invest  EUR  353  million 
(5.6%  of  the  RRP’s  total  value)  in  healthcare. 
Croatia  is  proposing  five  reforms,  related  to: 
(i) efficiency, quality and accessibility of the health 
system;  (ii)  the  care  model  for  key  health 
challenges;  (iii)  strategic  management  of  human 
resources in health; (iv) the financial sustainability 

62 

78.278.078.278.677.876.780.980.981.081.380.480.1201620172018201920202021CroatiaEU6.65.90.90.702468EUCroatia% of GDP20192070increase 
 
      
      
 
Table A16.1: Key health indicators 

Note: The EU average is weighted for all indicators, except for (*) and (**), for which the EU simple average is used. The simple 
average for (*) uses data for 2020 or most recent year if former not available. Doctors' density data refer to practising doctors in 
all countries except EL, PT (licensed to practice) and SK (professionally active). Nurses' density data refer to practising nurses in all 
countries except FR, PT, SK (professionally active) and EL (nurses working in hospitals only). 
Source: Eurostat; except: ** ECDC 

of  the  health  system;  and  (v)  e-health.  A  total  of 
26  investments  are  proposed  (24  in  the  health 
component and 2 that are health-related but come 
from 
implemented 
successfully,  these  investments  could  be  very 
beneficial to the health system. 

components). 

other 

If 

The 

these 

required  framework  for 

In  recent  years,  Croatia  has  undertaken 
reforms in a range of areas, but progress in 
implementation 
national 
varies. 
development strategy for 2020–2030 may provide 
the 
reforms. 
Announced  reform  measures  include  setting  up 
excellence  centres,  making  hospital  accreditation 
and  payments  more  efficient,  and  introducing 
modern  management  and  procurement  practices. 
These  measures  can  change  the  operation  of 
hospitals, which receive financial support from the 
state  budget  to  settle  their  debts  every  year. 
Quality  monitoring  systems  are  underdeveloped, 
but available indicators on quality of care suggest 
much  scope  for  improvement  by  accelerating 
reforms  of  hospital  and  primary  care  and 
improving quality of care. 

63 

20172018201920202021EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)139.1133.1128.3130.8NA91.7 (2020)Cancer mortality per 100 000 population321.8323.9311.0303.9NA242.2 (2020)Current expenditure on health, % GDP 6.76.86.87.8NA10.9 (2020)Public share of health expenditure, % of current health expenditure82.582.081.984.2NA81.2 (2020)Spending on prevention, % of current health expenditure 3.13.13.03.1NA3.4 (2020)Acute care beds per 100 000 population351350354360NA387.4 (2019)Doctors per 1 000 population *3.43.43.53.53.63.9 (2020)Nurses per 1 000 population *6.66.76.96.97.08.3 (2020)Consumption of antibacterials for systemic use in the community, daily defined dose per 1 000 inhabitants per day (total consumption in CY and CZ) **16.817.016.914.016.214.5 (2021) 
 
 
 
   
 
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

showed  notable  differences  in  2021:  the  capital 
city  region  had  the  highest  productivity  with  86% 
of  the  EU  average,  while  Jadranska  Hrvatska  and 
Sjeverna  Hrvatska  were  at  68%  and  66%,  and 
Panonska  Hrvatska  came  last  with  56%.  Several 
factors  explain  the  differences,  including  human 
capital  and  specialisation 
in  high  technology 
sectors. 

Graph A17.2: Labour productivity (2000-2020) 

(1) Real GVA in millions of euro EUR (2015 prices) by 
employment in thousands of persons 
Source: Eurostat, DG REGIO elaboration 

Low  R&D  expenditure  at  national  level  goes 
hand in hand with considerable differences in 
regional  innovation  performance.  Total  R&D 
expenditure at national level was just a little more 
than  half  the  EU  average  in  2021  (1.24%  as 
against  2.26%;  both  lower  than  pre-pandemic 
levels).  It  ranged  from  just  0.3%  in  Panonska 
Hrvatska and 0.6% in Jadranska Hrvatska to 1% in 
Sjeverna  Hrvatska  and  up  to  2.4%  in  the  capital 
city  region.  All  these  factors  reflect  the  reduced 
capacity of the country as a whole and particularly 
of its less developed regions to generate growth in 
dynamic  and  advanced  sectors.  This  is  also  well 
reflected  in  the  regional  competitiveness  index, 
which stood at 80% of the EU average in 2022. 

This  Annex  showcases  the  economic  and  social 
regional  dynamics in  Croatia,  providing  an  update 
on economic, social  and territorial  cohesion in the 
Croatian regions compared with the EU as a whole 
and 
recovery 
challenges. 

regional  economic 

the  main 

Regional disparities in Croatia remained high 
between  2011  and  2020.  Croatia's  GDP  per 
capita 
(PPS) 
in  purchasing  power  standard 
increased from 60% to 70% of the EU-27 average 
between  2014  and  2021.  This  indicates  a  robust, 
ongoing process of convergence of the country as 
a whole on the EU average in spite of the drop in 
GDP per capita in 2020 (-7.4% in PPS terms).  

Graph A17.1: GDP per capita (2010) and GDP 
growth (2011-2020) 

(1) bubble size: population, 2019 
Source: DG REGIO calculations based on JRC (ARDECO) and 
Eurostat data 

Regional  disparities  are  persistently  high  in 
Croatia.  The  four  NUTS 2  regions  established  in 
2021  have  quite  diverse  levels  and  patterns  of 
development.  In  2021,  the  capital  region  of  Grad 
Zagreb  had  a  GDP  per  capita  (in  PPS)  that  was 
131%  of  the  EU  average,  twice  as  high  as 
Jadranska  Hrvatska  (65%),  2.5  times  higher  than 
Sjeverna  Hrvatska  (56%)  and  three  times  higher 
than  Panonska  Hrvatska  (44%).  Furthermore,  in 
the  period  2011-2020,  regional  growth  rates  of 
real  GDP  per  capita  varied  widely  from  the 
national  rate  (1.1%).  Namely,  at  2.1%  average 
growth,  the  northern,  second-least  developed 
region  (Sjeverna  Hrvatska),  has  been  converging 
on  both  the  EU  and  the  national  averages,  while 
the  coastal  region  (Jadranska  Hrvatska)  and  the 
poorest  region  in  the  east  (Panonska  Hrvatska) 
have been lagging behind (at 0.5%). 

Regional disparities in GDP per capita reflect 
territorial  disparities  in  labour  productivity. 
National  labour  productivity  measured  by  gross 
value added (GVA) per worker (in PPS) was 70% of 
the EU average in 2021. The four NUTS 2 regions 

64 

0.00.51.01.52.02.53.030405060708090100110120130Annual real GDP per head growth2011-2020 (average % change on the preceding year)GDP (PPS) per head in 2010 (EU = 100)Capital regionOther NUTS2 regionsNational averageEU275152535455565000102030405060708091011121314151617181920thousands of EUR per  personCapital regionOther NUTS2 regionsEU27National average 
 
  
  
 
 
Table A17.1: Selected indicators at regional level in Croatia 

rate 

surrounding  region  Sjeverna  Hrvatska  had  a 
positive  net  migration 
in  2020,  while 
Panonska Hrvatska declined the most. In the short 
term, depopulation trends can produce a shortage 
of resources in some economic activities especially 
in the least developed regions. In the longer term, 
protracted  population  decline  can  also  affect  the 
capacity of the whole country to grow and even to 
cope  with  the  challenges  posed  by  an  ageing 
population. 

Labour  market  conditions  differed  markedly 
between  Croatia's  more  developed  and  less 
developed  regions.  In  2021  Croatia  had  a  7.6% 
unemployment rate, close to the EU average (7%). 
However,  the  unemployment  rate  in  Jadranska 
Hrvatska  and  Panonska  Hrvatska  was  twice  as 
high  as  in  Sjeverna  Hrvatska  and  Grad  Zagreb 
(close to 10% in the first two as opposed to 4-5% 
in  the  last  two).  The  employment  rate  (for  the 
cohort  aged  20-64)  mirrored  the  territorial  and 
development  gaps,  ranging  from  values  relatively 
close  or  above  the  EU  average  in  Grad  Zagreb 
(76%) and Sjeverna Hrvatska (71%), to values 8 to 
10  percentage  points  below  the  EU  average  in 
Jadranska Hrvatska (66%) and Panonska Hrvatska 
(63%). 

Source: EUROSTAT, European Commission 

Map A17.1:  Regional Competitiveness in Croatia 
(2022) 

Demographic dynamics negatively affect the 
country,  with  marked  differences  between 
the  capital  region  and  the  others.  Croatia's 
overall  population  declined  markedly  between 
2011  and  2020,  with  an  average  annual  decline 
rate of 6.1 per thousand residents (as compared to 
an  EU  annual  growth  rate  of  1.7).  The  population 
of Panonska Hrvatska declined the most, while the 
population  of  the  capital  region  of  Grad  Zagreb 
remained  almost  constant.  At  the  national  level, 
net  migration  also  declined  at  an  annual  average 
rate of 2.7 per thousand residents in 2011-2021. 
The  capital  city  region  of  Grad  Zagreb  and  the 

65 

NUTS region nameGDP per head (PPS) (2021)Productivity (GVA (PPS) per person employed) (2021)GDP per head growth (2011-2020)Population growth (2011-2020)Unemployment rate (2021)R&D expenditure (2020)Regional Competitiveness Index (RCI) (2022)Index, EU27 = 100 Index, EU27 = 100Average % change on the preceding yearAverage annual change per 1000 residents% of active population% of GDPIndex - values range between 0 and 100European Union100.0100.00.61.77.02.3100.0Hrvatska (Croatia)70.070.01.1-6.17.61.280.6Panonska Hrvatska44.056.00.5-13.29.70.371.0Jadranska Hrvatska65.068.30.5-3.29.40.677.0Grad Zagreb131.085.71.3-0.65.42.490.0Sjeverna Hrvatska56.066.12.1-3.54.61.090.0 
 
 
 
 
 
 
  
 
MACROECONOMIC STABILITY 
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS 

Croatia  has  a  predominately  bank-based 
financial  sector,  with  banks  being  the  main 
financial  intermediaries.  Total  banking-sector 
assets accounted for 120.6% of GDP in Q3-2022. 
The  banking  sector  is  highly  concentrated  and 
predominantly  foreign-owned  (around  90%  of 
total  banking  assets  are  in  foreign-owned  banks). 
The  five  largest  banks  in  Croatia  account  for 
81.2% of total banking-sector assets.  

optimism  related  to  the  coming  adoption  of  the 
euro  in  2023,  as  well  as  by  borrowing  for  the 
production  and  distribution  of  energy.  Lending  to 
households  was  up  5.8%  year-on-year  in  Q3-
2022,  with  the  bulk  of  growth  coming  from 
mortgage loans.  

Graph A18.1: Evolution of credit activity 

sector 

resilient.  Banking 

remains 
The  Croatian  banking 
profitable  and 
sector 
profitability remained high in Q3-2022, with return 
on  equity  of  12.5%  (EU  average:  6.1%).  The 
banking solvency ratio was 21.9% in Q3-2022 (EU 
average:  18.6%),  signalling  the  robustness  of  the 
banking  sector.  Croatian  banks 
remain  well 
capitalised,  with  a  common  equity  tier  1  ratio 
(CET1)  of  21.2%  in  Q3-2022,  well  above  the  EU 
average (15.3%). There is a significant amount of 
liquidity  in  the  banking  system,  as  the  liquidity 
coverage ratio was 198.8% in Q3-2022. To further 
strengthen the resilience of credit institutions, the 
Croatian  central  bank 
(HNB)  announced  an 
increase  in  the  countercyclical  capital  buffer  rate 
applicable to the risk exposure of local banks from 
0.5%  to  1%  as  of  31 December 2023.  The 
accession to the euro area on 1 January 2023 will 
greatly  reduce  currency  risk  and  is  expected  to 
mitigate  the  possible  effects  of  increases  in 
interest rates due to growing inflation. 

Croatian  banks  continued  to  reduce  their 
non-performing  loans  (NPLs).  The  NPL  ratio 
decreased further to 3.2% in Q3-2022, the lowest 
level since 2015 (EU average: 1.8%). This was due 
to a reduction in NPLs, stronger credit growth, and 
the sale of NPL claims. Asset quality has improved 
for both corporates and households. Similarly, the 
NPL  coverage  ratio  remained  at  66.8%  in  Q3-
2022,  which  reflects  banks’  ability  to  absorb 
future  losses. However,  defaults  may  increase,  as 
the  rise  in  interest  rates  and  the  inflation  driven 
erosion  of  disposable 
to 
negatively  affect  the  debt-servicing  capacity  of 
borrowers.  

income  are 

likely 

There  was  a  rise  in  lending  activity  in  Q3-
2022.  In  the  12  months  to  Q3-2022,  lending  to 
non-financial  corporations  outpaced  lending  to 
households.  In  Q3-2022,  lending  to  non-financial 
corporations  had  increased  by  20.7%  year-on-
year.  This  growth  was  likely  boosted  by  market 

66 

Source: ECB. 

Household debt continued to rise moderately. 
According to the HNB, household debt increased by 
4.6%  in  2021,  ending  the  year  at  36.1%  of  GDP. 
The  increase  in  debt  was  moderate  in  historical 
terms,  and  mainly  composed  of  mortgage  loans, 
which  have  been  growing  strongly  for  several 
years  now,  due  to  the  implementation  of  the 
government’s  programme  to  subsidise  mortgage 
loans.  

The  Croatian  real  estate  poses  a  risk  to 
financial  stability  due  to  recent  sharp  price 
increases  and  growing  volumes  of  mortgage 
lending.  Although  house-price  growth  slowed 
from 7.7% in 2020 to 7.3% in 2021, house prices 
still  increased  more  quickly  than  income,  further 
reducing  the  already  low  affordability  of  housing. 
House-price  overvaluation 
can  partially  be 
explained by: (i) an increase in foreign buyers; (ii) a 
reduction in sales transactions as many homes for 
less  desirable  since  they  are  not 
sale  are 
earthquake-proof;  and  (iii)  favourable  financing 
conditions.  According  to  the  HNB,  the  number  of 
transactions  in  the  residential  real-estate  market 

-15-10-50510152025Total privateNFCHH% 
 
 
  
 
Table A18.1: Financial soundness indicators 

(1) Last data: Q3 2022. 
(2) Data is annualized. 
Source: ECB, Eurostat, S&P Global Capital IQ Pro. 

recovered  in  2021,  with  total  sales  volumes 
increasing by 9% compared with 2019 (101). 

in 

In  December  2021,  the  European  Systemic 
Risk  Board (102)  issued  a  warning  to  Croatia 
on  medium-term  vulnerabilities 
its 
residential  real-estate  market  as  being  a 
potential  risk  to  the  country’s  financial 
stability.  The  European  Systemic  Risk  Board 
considered the main  vulnerabilities to be: (i) signs 
of  house-price  overvaluation;  (ii)  elevated  house-
price growth; (iii) high rates of growth in mortgage 
credit;  and  (iv)  signs  of  a  loosening  in  lending 
standards. 

The  insurance  sector  is  relatively  small  and 
highly concentrated. In March 2022, there were 
15 insurance companies operating in the Croatian 
market. The total assets of all insurers account for 
9.0% of GDP, which is relatively low (EU average: 
59.5%). The sectoral solvency ratio was 220.8% in 
Q2-2022  (EU  average:  268.5%).  The  insurance 
sector has been characterised by a sharp decrease 
in  the  share  of  premium  revenues  accounted  for 
by  life  insurance  and  an  increase  in  the  share 
accounted  for  by  non-life  insurance  due  to  the 
introduction  of  mandatory  insurance  for  motor-
vehicle liability and property. 

(101) https://www.hnb.hr/documents/20182/4185341/e-fs-
23.pdf/e0281d12-1e83-5a4a-082a-7c8ea7408e3c 

(102)

https://www.esrb.europa.eu/news/pr/date/2022/html/es

rb.pr220211~9393d5e991.en.html 

Croatian  capital  markets  remain  less  well 
developed than  the  EU average, but  reforms 
are  underway.  Levels  of  financing  on  capital 
markets  remained  stable  in  2021  as  the  market-
funding  ratio  remained  at  54.2%  (EU  average: 
50.8%).  Stock  market  capitalisation  remained  at 
32.1%  of  GDP  (EU  average:  85.5%).  The  national 
recovery  and  resilience  plan  includes  reforms  to 
the 
diversify  capital  markets  and 
availability of alternative finance. 

improve 

Graph A18.2: Housing prices 

(1) 2015=100. 
Source: Eurostat. 

67 

020406080100120140160180201720182019202020212022EUMedianTotal assets of the banking sector (% of GDP)116.8114.1109.0127.2119.0120.6276.8207.9Share (total assets) of the five largest banks (%)72.879.479.880.581.2--68.7Share (total assets) of domestic credit institutions (%)19.29.48.98.98.910.5-60.2NFC credit growth (year-on-year % change)5.02.24.45.62.020.5-9.1HH credit growth (year-on-year % change)4.85.87.52.04.95.6-5.4Financial soundness indicators:1        - non-performing loans (% of total loans)8.87.35.25.34.23.21.81.8- capital adequacy ratio (%)21.421.122.523.224.421.918.619.8- return on equity (%)25.98.89.14.77.712.56.16.6Cost-to-income ratio (%)152.150.750.351.551.250.960.651.8Loan-to-deposit ratio (%)182.182.182.378.875.475.488.678.0Central bank liquidity as % of liabilities0.40.60.51.20.70.6-2.9Private sector debt (% of GDP)96.192.088.297.686.9--120.7Long-term interest rate spread versus Bund (basis points)245.0177.6154.0134.382.1155.4-93.3Market funding ratio (%)53.453.654.853.854.2-50.840.0Green bonds issued to all bonds (%)------3.92.31-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States. 
                                                 
 
  
 
   
 
ANNEX 19: TAXATION  

This  Annex  provides  an 
indicator-based 
overview  of  Croatia’s  tax  system.  It  includes 
information on the tax structure (the types of tax 
that Croatia derives most of its revenue from), the 
tax  burden  on  workers,  and  the  progressivity  and 
redistributive  effect  of  the  tax  system.  It  also 
provides 
tax  collection  and 
compliance. 

information  on 

below  the  EU  aggregate  (expressed  both  as  a 
share  of  GDP  and  of  total  taxation).  As  from  1 
October  2022,  the  VAT  rate  for  the  supply  of 
district  heating  and  firewood,  pellets,  briquettes 
and  wood  chips  was  temporarily  reduced  from 
13%  to  5%  until  31  March  2023.  The  application 
of 
the  above  measures  was  subsequently 
extended until 31 March 2024. 

The  labour  tax  wedge  is  similar  to  the  EU 
average  at  various  levels  of  earnings,  but 
the  redistributive  effect  of  the  tax-benefit 
system is limited. In 2022, the labour tax wedge 
was similar to the EU average for single people at 
various  income  levels  and  for  second  earners  at 
67%  of  the  average  wage,  whose  spouses  earn 
the  average  wage  (see  Graph  A19.2).  However, 
while  the  progressivity  of 
labour  taxes  was 
therefore  similar  to  the  EU  average,  the  tax-
benefit  system’s  ability 
income 
inequality  (as  measured  by  the  GINI  coefficient) 
was below the EU average in 2021.  

reduce 

to 

Croatia’s  tax  mix  is  relatively  conducive  to 
growth,  employment  and  environmental 
sustainability  but  there  is  further  potential 
to  strengthen  recurrent  property  taxation 
and resource and pollution taxes.  Table A19.1 
shows that Croatia’s tax revenues as a percentage 
of  GDP  were  below  the  EU  aggregate  in  2021. 
Revenues  from  labour  taxes  as  a  share  of  GDP 
were  significantly  below  the  EU  aggregate,  while 
revenues  from  consumption  taxes  are  among  the 
highest in the EU, both as a share of GDP and as a 
share  of  total  taxation  (see  also  Graph  A19.1). 
Environmental  taxes  are  also  higher  than  the  EU 
aggregate  due  to  the  contribution  of  energy  and 
transport  taxes.  However,  the  share  of  resource 
and  pollution  taxes  as  a  percentage  of  total 
taxation is  below  the  EU  average,  which  indicates 
that  the  ‘polluter  pays’  principle  can  be  better 
applied  in  some instances.  Moreover,  property  tax 
revenues,  including  recurrent  taxes  on  immovable 
property,  which  are  among  the  sources  of  tax 
revenue  least  detrimental  to  growth,  are  also 

Table A19.1: Taxation indicators 

(1) Forward-looking effective tax rate (OECD). 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average 
For more data on tax revenues as well as the methodology applied, see European Commission, Directorate-General for Taxation 
and Customs Union, Taxation trends in the European Union: data for the EU Member States, Iceland, Norway and United Kingdom: 
2021 edition, Publications Office of the European Union, 2021, https://data.europa.eu/doi/10.2778/843047 and the Data on 
Taxation webpage, https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en. 
For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in the 
EU: report 2022, Publications Office of the European Union, 2022, https://data.europa.eu/doi/10.2778/109823. 
Source: European Commission, OECD. 

68 

2010201920202021202220102019202020212022Total taxes (including compulsory actual social contributions) (% of GDP)35.637.336.635.637.939.940.040.6Labour taxes (as % of GDP)15.113.413.812.820.020.721.320.9Consumption taxes (as % of GDP)16.819.118.118.610.811.110.711.2Capital taxes (as % of GDP)3.74.84.74.37.18.18.08.5Total property taxes (as % of GDP)1.01.11.11.01.92.22.22.2Recurrent taxes on immovable property (as % of GDP)0.60.70.70.61.11.21.21.1Environmental taxes as % of GDP3.03.43.33.12.42.42.22.2Tax wedge at 50% of average wage (Single person) (*)31.331.331.331.333.932.331.932.131.7Tax wedge at 100% of average wage (Single person) (*)39.839.738.739.141.040.139.939.639.7Corporate income tax - effective average tax rates (1) (*)16.516.516.519.519.419.1Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)9.27.36.56.88.67.78.17.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)15.515.431.640.7VAT Gap (% of VAT total tax liability, VTTL)0.96.911.09.1CroatiaEU-27Tax structureProgressivity & fairnessTax administration & compliance 
 
 
 
     
 
 
 
 
 
 
 
 
 
 
 
Graph A19.1: Tax revenues from different tax types, % of total taxation 

Source: European Commission 

Graph A19.2: Tax wedge for single and second 
earners, % of total labour costs, 2022 

Second earner tax wedge assumes first earner at 100% of 
the average wage and no children. 
Source: European Commission 

Croatia  performs  relatively  well  on  tax 
tax  administration. (103) 
compliance  and 
Despite  the  COVID-19  pandemic,  tax  arrears 
remained  stable  at  15.4%  of  total  tax  revenue  in 
2020.  This  is  significantly  below  the  EU  average, 
which increased by 9.1 percentage points (pps) to 
40.7% due to tax deferrals, although this average 
is  distorted  by  large  values  in  a  few  Member 
States.  The  VAT  gap  (the  gap  between  revenues 
actually  collected  and  the  theoretical  tax  liability) 
has  remained  relatively  stable  since  2016 (104)  at 
6.9% in 2020, which is below the EU-wide gap of 
9.1%.  Croatia’s  RRP  includes  measures  to  further 
strengthen tax compliance and administration (e.g. 
by digitalising tax administration and expanding e-
invoicing to prevent and fight tax fraud). 

(103) Croatia ranked 49th out of 190 jurisdictions in the indicator 
‘paying taxes’ in 2020 (World Bank, Doing business report, 
https://www.worldbank.org/en/programs/business-enabling-
environment/doing-business-legacy). 

(104) The VAT gap for 2019 was estimated at 0.9%, which might 
be related to some inaccuracy in the underlying data for 
2019. European Commission, Directorate-General for 
Taxation and Customs Union, VAT gap in the EU: report 
2022, Publications Office of the European Union, 2022, 
https://data.europa.eu/doi/10.2778/109823. 

69 

31.335.039.142.540.520253035404550100150Tax wedge, % of total labour costsEarningsas % of the average wageSingle earner - HRSingle earner - EU averageSecond earner -  HRSecond earner -  EU average51.4327.5421.0135.9252.0712.01Tax revenue shares in 2021, Croatia (outer ring) and the EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital6.834.321.831.000.090.191.792.640.912.750246810Croatia -environmentaltaxationEU -environmentaltaxationCroatia - propertytaxationEU - propertytaxationEnvironmental and property taxation as % of total tax revenue, Croatia and the EUEnergy taxesTransport taxesResource/pollution taxesRecurrent property taxesOther property taxes 
 
     
 
 
                                                 
     
ANNEX 20: TABLE WITH ECONOMIC AND FINANCIAL INDICATORS 

Table A20.1: Key economic and financial indicators 

(1) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches. 
(2) Net international investment position (NIIP) excluding direct investment and portfolio equity shares.  
Source: Eurostat and ECB as of 2 May 2023, where available; European Commission for forecast figures (Spring forecast 2023). 

70 

2004-072008-122013-1920202021202220232024Real GDP (y-o-y)4.6-1.82.1-8.513.16.21.62.3Potential growth (y-o-y)3.10.21.22.52.43.23.43.0Private consumption (y-o-y)3.8-1.81.4-5.19.95.11.21.8Public consumption (y-o-y)4.60.41.34.33.03.23.12.5Gross fixed capital formation (y-o-y)4.8-5.83.7-5.04.75.82.93.7Exports of goods and services (y-o-y)6.2-1.76.3-23.336.425.43.03.7Imports of goods and services (y-o-y) 6.2-4.36.4-12.417.625.02.93.4Contribution to GDP growth:Domestic demand (y-o-y)4.5-2.41.8-3.17.64.81.92.3Inventories (y-o-y)0.6-0.60.40.0-1.11.6-0.3-0.1Net exports (y-o-y)-0.61.1-0.1-5.46.6-0.2-0.10.0Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.6-0.5-0.11.20.20.91.30.9Capital accumulation (y-o-y)1.70.90.50.50.60.70.80.8Total factor productivity (y-o-y)0.9-0.30.90.81.61.51.41.3Output gap3.5-0.4-1.1-8.60.93.81.91.2Unemployment rate11.911.812.97.57.67.06.66.1GDP deflator (y-o-y)3.72.50.90.72.08.27.53.2Harmonised index of consumer prices (HICP, y-o-y)2.82.90.80.02.710.76.92.2HICP excluding energy and unprocessed food (y-o-y)2.72.31.00.81.89.18.03.0Nominal compensation per employee (y-o-y)4.82.0-0.11.210.47.97.53.3Labour productivity (real, hours worked, y-o-y)2.50.31.4-7.211.73.70.40.6Unit labour costs (ULC, whole economy, y-o-y)2.11.8-0.99.4-1.24.06.92.2Real unit labour costs (y-o-y)-1.6-0.7-1.78.6-3.2-3.9-0.5-1.0Real effective exchange rate (ULC, y-o-y)1.4-0.9-1.93.3-1.40.40.9-1.5Real effective exchange rate (HICP, y-o-y)1.5-0.20.3-1.30.51.0..Net savings rate of households (net saving as percentage of net disposable income)-0.5-0.91.66.86.0...Private credit flow, consolidated (% of GDP)14.73.60.41.33.0...Private sector debt, consolidated (% of GDP)85.9117.0102.897.586.8...of which household debt, consolidated (% of GDP)32.240.236.137.834.1...of which non-financial corporate debt, consolidated (% of GDP)53.776.866.759.752.7...Gross non-performing debt (% of total debt instruments and total loans and advances) (1)..9.64.73.7...Corporations, net lending (+) or net borrowing (-) (% of GDP)-5.40.62.02.83.72.35.46.0Corporations, gross operating surplus (% of GDP)18.620.621.020.121.925.126.326.6Households, net lending (+) or net borrowing (-) (% of GDP)1.61.02.96.34.5-2.0-3.1-2.2Deflated house price index (y-o-y)9.8-4.91.07.14.83.6..Residential investment (% of GDP)3.73.52.73.13.03.1..Current account balance (% of GDP), balance of payments-7.4-4.81.9-0.51.8-1.6-2.2-1.7Trade balance (% of GDP), balance of payments-8.6-4.2-0.2-7.0-2.7-5.7..Terms of trade of goods and services (y-o-y)1.40.60.5-1.6-2.0-4.71.50.5Capital account balance (% of GDP)0.00.10.92.12.42.6..Net international investment position (% of GDP)-70.1-89.5-70.2-47.1-33.8-26.1..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2)-32.6-49.3-26.13.712.615.1..IIP liabilities excluding non-defaultable instruments (% of GDP) (2)75.294.081.865.465.360.0..Export performance vs. advanced countries (% change over 5 years)29.2-3.64.5-0.712.8...Export market share, goods and services (y-o-y)-0.1-5.83.8-16.119.120.70.3-0.1Net FDI flows (% of GDP)-4.8-2.9-2.6-1.4-4.8-5.6..General government balance (% of GDP)-3.2-5.8-2.1-7.3-2.50.4-0.5-1.3Structural budget balance (% of GDP)..-1.4-3.5-2.9-1.0-1.3-1.9General government gross debt (% of GDP)39.155.478.287.078.468.463.061.8forecast 
 
 
 
      
 
 
 
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS 

This  Annex  assesses  fiscal  sustainability 
risks for Croatia over the short, medium and 
long term. It follows the same multi-dimensional 
approach  as  the  European  Commission’s  2022 
Debt Sustainability Monitor, updated based on the 
Commission’s 2023 spring forecast. 

1  -  Short-term  risks  to  fiscal  sustainability 
low  overall.  The  Commission’s  early-
are 
detection  indicator  (S0)  does  not  signal  major 
short-term  fiscal  risks  (Table  A21.2). (105)  Gross 
financing needs are expected to remain moderate 
at around 11% of GDP in the short term (i.e. over 
2023-2024) and declining compared with the peak 
in  2020  (Table  1  of  Table  A21.1).  Financial 
markets’  perceptions  of  sovereign  risk  have 
improved  in  recent  years,  as  confirmed  by  the 
spread vis-à-vis the  bund,  which  has  stabilized  at 
relatively  low  levels  compared  to  Central  and 
Eastern  European  Countries  peer  countries. 
Croatia’s  credit  rating  is  deemed  as  investment 
grade,  with  a  stable  outlook  by  all  three  major 
rating agencies 

2 - Medium-term risks to fiscal sustainability 
are medium overall.  

The  DSA  for  Croatia  shows  that,  under  the 
baseline,  the  government  debt-to-GDP  ratio 
is  expected  to  broadly  stabilise  at  a  level 
slightly above 60% of GDP over the medium 
in  2033) 
term 
(Graph 1). (106), (107) 
structural 

(about  63%  of  GDP 

assumed 

The 

(105) The S0 is a composite indicator of short-term risk of fiscal 
stress. It is based on a wide range of macro-financial and 
fiscal variables that have proven to perform well in the past 
in detecting situations of upcoming fiscal stress.  

(106) The assumptions underlying the Commission’s ‘no-fiscal 
policy change’ baseline notably comprise: (i) a structural 
primary deficit, before ageing costs, of 0.7% of GDP as of 
2024; (ii) inflation converging linearly towards the 10-year 
forward inflation-linked swap rate 10 years ahead (which 
refers to the 10-year inflation expectations 10 years from 
now); (iii) the nominal short- and long-term interest rates on 
new and rolled over debt converging linearly from current 
values to market-based forward nominal rates by T+10; (iv) 
real GDP growth rates from the Commission 2023 spring 
forecast until 2024, followed by EPC/OGWG ‘T+10 
methodology projections between T+3 and T+10, i.e. for 
2025-2033 (on average 1.5%); (v) ageing costs in line with 
the 2021 Ageing Report (European Commission, Institutional 
Paper 142, November 2020). For information on the 
methodology, see the 2022 Debt Sustainability Monitor. 

(107) Table 1 shows the baseline debt projections and its 

breakdown into the primary balance, the snowball effect (the 
combined impact of interest payments and nominal GDP 
growth on the debt dynamics) and the stock-flow 
adjustment.  

primary balance (a deficit of 0.7% of GDP) seems 
relatively  ambitious  compared  to  past  fiscal 
performance.  At  the  same  time,  the  baseline 
projections  up  to  2033 benefit  from  a  favourable 
(although  diminishing)  snowball  effect,  notably 
of 
thanks 
NextGenerationEU, with real GDP growth at around 
1.5%  of  GDP  over  2025-2033.  Government  gross 
financing  needs  are  expected  to  slightly  increase 
over the projection period, reaching 13% of GDP in 
2033, above the level forecast for 2024 (by 1 pp. 
of GDP). 

favourable 

impact 

the 

to 

The  baseline  projection 
is  stress-tested 
against  four  alternative  scenarios  to  assess 
the  impact  of  changes  in  key  assumptions 
(Graph 1). For Croatia, all the stress test scenarios 
would  lead  to  worse  results  compared  to  the 
baseline,  with  particularly  adverse  developments 
under  the  two  following  scenarios:  A  permanent 
worsening of the macro-financial conditions (i.e. 1 
pp.  higher  than  the  baseline),  as  reflected  in 
‘adverse interest- growth rate differential’ scenario 
would  lead  to  higher  government  debt-to-GDP 
ratio (about 5 pps.) by 2033, as compared with the 
baseline.  Reducing  the  SPB  level  permanently  by 
half  of  the  cumulative  forecast  change,  as 
reflected  in  the  ‘lower  structural  primary  balance’ 
scenario  would  increase  the  government  debt-to-
GDP  ratio  by  around  5  pps.  of  GDP  by  2033  as 
compared  with  the  baseline.  Slightly  higher  debt 
ratios  (less  than  1  pp.),  as  compared  to  the 
baseline,  are  obtained  by  either  reverting  to 
historical 
‘historical 
structural primary balance (SPB)’ scenario (i.e. the 
SPB  gradually  converged  to  its  historical  15-year 
average) or by factoring in a temporary worsening 
of  financial  conditions  under  the  ‘financial  stress 
‘scenario (i.e. interest rates higher by 1 pp.). 

trajectories  under 

the 

Additionally,  stochastic  projections  show  a 
medium  sensitivity  of  these  projections 
against  plausible  unforeseen  events  (Graph 
2). (108)  These  stochastic  simulations  point  to  a 
28%  probability  of  the  debt  ratio  in  2027  being 
greater  than  in  2022,  entailing  low  risk  given  the 
initial  moderate  level  of  debt.  However,  such 
shocks  point  to  significant  uncertainty  (i.e.  the 
difference  between  the  10th  and  90th  debt 

(108) The stochastic projections show the joint impact on debt of 

2000 different shocks affecting the government’s budgetary 
position, economic growth, interest rates and exchange rates. 
The cone covers 80% of all the simulated debt paths, 
therefore excluding tail events. 

71 

 
 
                                                 
                                                 
 
 
high  in  comparative  terms  with  other  EU  Member 
liability  risks 
States.  Nevertheless,  contingent 
linked to the banking sector appear limited in view 
of the high capitalization and provisioning. On the 
other-hand,  risk-mitigating  factors  include  most 
notably  the  country’s  accession  to  the  euro  area 
and financial backstops, which effectively removed 
the  bulk  of  the  exchange  rate  risk  and  pushed 
borrowing  costs  down.  Moreover, 
the  debt 
maturities  have  been  lengthening  in  recent  years, 
while financing sources have been relatively stable 
and  were  further  diversified  with  the  introduction 
of a retail bond this year. In addition, the structural 
reforms under the NGEU/RRF, if fully implemented, 
could  have  a  further  positive  impact  on  GDP 
growth in the coming years, and therefore help to 
mitigate debt sustainability risks. 

distribution 
government debt baseline projections.  

percentiles) 

surrounding 

the 

3  -  Long-term  risks  to  fiscal  sustainability 
are low overall. (109)  

The S2 indicator (at 0.6 pp. of GDP) points to 
low  fiscal  sustainability  risks.  The  indicator 
shows that, relative to the baseline, the SPB would 
not  need  to 
improve  much  to  ensure  debt 
stabilisation  over  the  long  term.  This  result  is 
underpinned by the unfavourable initial budgetary 
position (contribution of 1.2 pps. of GDP), which is 
partly offset by the projected decrease in ageing-
related  costs  (contribution  of  -0.6  pp.  of  GDP). 
Ageing costs’ developments are primarily driven by 
the  projected  decline  in  public  pension  spending 
(contribution  of  -1.1  pps.  of  GDP)  and  the 
projected  increase  in  health  and  long-term  care 
spending  over 
(joint 
contribution of 0.6 pp. of GDP) (Table 2).  

the  projection  period 

Combined  with  low  debt  vulnerabilities,  as 
highlighted by the S1 indicator, overall long-
term risks are assessed as low. Indeed, the S1 
sustainability  gap  indicator  signals  that  a  small 
consolidation  effort  of  0.6  pp.  of  GDP  would  be 
needed  to  reduce  debt  to  60%  of  GDP  by  2070. 
This  result  is  mainly  driven  by  the  unfavourable 
initial budgetary position (0.9 pp. of GDP), which is 
partially  offset  by  the  projected  decrease  of  the 
ageing-related public expenditure (contribution of -
0.3 pp. of GDP) (Table 2). 

Finally,  several  additional  risk  factors  need 
to  be  considered  in  the  assessment.  On  the 
one  hand,  risk-increasing  factors  relate  to  the 
recent increase in interest rates and factor such as 
Croatia’s  relatively  low  pension  adequacy.  The 
share  of  non-performing  loans  has  gone  down 
substantially in recent years, but remains relatively 

(109) The S2 fiscal sustainability gap indicator measures the 

permanent fiscal effort (SPB adjustment) in 2024 that would 
be required to stabilise public debt over the long term. It is 
complemented by the S1 fiscal sustainability gap indicator, 
which measures the permanent fiscal effort required in 2024 
to bring the debt-to-GDP ratio to 60% in the long term (by 
2070). For both the S1 and S2 indicators, the risk 
assessment depends on the amount of fiscal consolidation 
needed: ‘high risk’ if the required effort exceeds 6 pps. of 
GDP, ‘medium risk’ if it lies between 2 pps. and 6 pps. of 
GDP, and ‘low risk’ if the effort is negative or below 2 pps. of 
GDP. The overall long-term risk classification brings together 
the risk categories derived from S1 and S2. S1 may notch up 
the risk category derived from S2 when it signals a higher 
risk than S2. See the 2022 Debt Sustainability Monitor for 
further details. 

72 

 
                                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A21.1: Debt sustainability analysis - Croatia 

Source: Commission services. 

Table A21.2: Heat map of fiscal sustainability risks - Croatia 

Source: Commission services (for further details on the Commission's multidimensional approach, see the 2022 Debt 
Sustainability Monitor). 

73 

Table 1. Baseline debt projections20202021202220232024202520262027202820292030203120322033Gross debt ratio (% of GDP)87.078.468.463.061.860.559.859.759.860.060.561.262.062.9Changes in the ratio15.9-8.6-10.0-5.4-1.1-1.4-0.7-0.10.00.20.50.70.80.9of whichPrimary deficit5.30.9-1.8-0.70.20.40.70.90.91.00.90.90.90.9Snowball effect8.1-10.1-8.8-4.6-2.1-1.8-1.4-1.0-0.9-0.7-0.5-0.2-0.10.0Stock-flow adjustments2.50.50.6-0.10.80.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)21.413.110.910.311.711.211.511.812.012.212.412.713.013.2S1S2Overall index  (pps. of GDP)0.60.6of which Initial budgetary position0.91.2Debt requirement0.0Ageing costs-0.3-0.6of which    Pensions-0.6-1.1     Health care0.40.5     Long-term care0.10.1    Others-0.2-0.1Table 2. Breakdown of the S1 and S2 sustainability gap indicators3040506070809020202021202220232024202520262027202820292030203120322033Graph 1. Deterministic debt projections Historical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioBaseline% of GDPp10p20p40p60p80p903040506070809020202021202220232024202520262027% of GDPGraph 2. Stochastic debt projections 2023-2027MedianBaselineBaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallMEDIUMMEDIUMMEDIUMMEDIUMMEDIUMMEDIUMDebt level (2033), % GDP62.963.468.068.163.3Debt peak year20222022202220222022Fiscal consolidation space41%42%46%41%41%Probability of debt ratio exceeding in 2027 its 2022 level28%Difference between 90th and 10th percentiles (pps. GDP)32.6(1)Debtlevelin2033.Green:below60%ofGDP.Yellow:between60%and90%.Red:above90%.(2)Thedebtpeakyearindicateswhetherdebtisprojectedtoincreaseoveralloverthenextdecade.Green:debtpeaksearly.Yellow:peaktowardsthemiddleoftheprojectionperiod.Red:latepeak.(3)Fiscalconsolidtationspacemeasurestheshareofpastfiscalpositionsinthecountrythatweremorestringentthantheoneassumedinthebaseline.Green:highvalue,i.e.theassumedfiscalpositionisplausiblebyhistoricalstandardsandleavesroomforcorrectivemeasuresifneeded.Yellow:intermediate.Red:low.(4)Probabilityofdebtratioexceedingin2027its2022level.Green:lowprobability.Yellow:intermediate.Red:high(alsoreflectingtheinitialdebtlevel).(5)thedifference between the 90th and 10th percentiles measures uncertainty, based on the debt distribution under 2000 different shocks. Green, yellow and red cells indicate increasing uncertainty.Short termMedium term - Debt sustainability analysis (DSA)Long termOverall                               (S0)Overall Deterministic scenariosStochastic projectionsS2S1Overall(S1 + S2)LOWMEDIUMLOWLOWLOW