COMMISSION STAFF WORKING DOCUMENT 2024 Country Report - Croatia Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Croatia
Date: 2024-06-19
Institutions: European Commission, Secretariat-General
Subjects: Croatia, budget policy, competitiveness, economic policy, economic recovery, economic reform, employment policy, fiscal policy, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 19.6.2024  SWD(2024) 611 final  COMMISSION STAFF WORKING DOCUMENT 2024 Country Report - Croatia Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Croatia {COM(2024) 611 final} - {SWD(2024) 600 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

Economic growth remains robust 

The  Croatian  economy  continues  to  grow 
at  a  solid  pace. (1)  Croatia’s  real  GDP  grew 
by  3.1%  in  2023,  down  from  7%  in  2022 
(Graph  1.1).  Despite  this  drop,  it  was  still  the 
second  highest  growth  rate  in  the  EU.  GDP 
growth  was  mainly  driven  by  domestic 
demand,  especially  household  consumption, 
which  was  supported  by  growing  employment 
and real wages. Investment intensified despite 
tighter  monetary  policy  and  higher  borrowing 
costs, underpinned by significant inflows of EU 
funds,  including  those  provided  under  the 
(RRP),  and 
recovery  and 
cohesion  policy  funding.  The  economy 
is 
expected  to  expand  at  similar  rates  this  year 
and  the  next,  continuing  to  catch  up  with  the 
average EU income levels. 

resilience  plan 

Graph 1.1: GDP growth and inflation 

Exports  of  goods  have  weakened  but 
exports  of  services  remain  strong.  In 
2023,  exports  of  goods  declined  by  nearly 
10% in real terms amid weak external demand 
dynamics,  but  the  drop  was  more  than  offset 
by lower imports. Conversely, services exports, 
mainly  consisting  of  travel  services,  grew  by 
4%  in  real  terms  following  Croatia’s  adoption 
of the euro and its accession to the Schengen 
area  in  2023.  The  trade  deficit  narrowed 
substantially,  largely  due  to  declining  energy 
prices,  and  lower  real  imports  of  goods.  Net 
lending  reached  nearly  4%  of  GDP,  strongly 
backed  by  capital  transfers  from  EU  funds. 
Goods exports are expected to resume growth 
as  external  demand  gradually  recovers,  while 
exports of services should continue expanding, 
albeit  at  lower  rates.  International  tourism 
continues  to  be  a  substantial  contributor  to 
economic  activity,  with 
tourism  exports 
amounting to around 19% of GDP in 2023 (2) 
and  is  expected  to  continue  expanding  in  real 
terms although at lower rates. 

(HICP) 

remains 
is  declining  but 
Inflation 
relatively  high.  In  2023,  the  harmonized 
index  of  consumer  price 
inflation 
decreased  from  10.7%  in  2022,  to  8.4%, 
compared  to  5.4%  in  the  euro  area.  The  drop 
was mainly driven by falling energy prices. The 
higher  inflation  with  respect  to  the  euro  area 
was partly due to comparatively large weights 
in 
of  food  and 
Croatia’s harmonised consumer price index, as 
these  prices  increased  by  more  than  the  rest 
of  the  index.  Inflation  excluding  energy  and 
food amounted to 8.8% in 2023, compared to 
5% in the euro area. 

tourism-related  services 

Inflation measured by the annual change in Harmonised 
Index of Consumer Prices (HICP). 
Source: AMECO. 

The  labour  market  is  tight  with  labour 
shortages 
several 
sectors and regions. In 2023, in a context of 
solid  economic  growth,  the  employment  rate 

reported 

across 

(1)  The cut-off date for the data used to prepare the 27 

Country Reports was 15 May 2024. 

(2)  Source: Eurostat, Balance of Payments data. 

2 

-10-505101513141516171819202122232425in %private consumptionpublic consumptioninvestmentchange in inventoriesnet exportsreal GDPinflation 
 
   
 
 
exceeded the 70% (20-64 age group) mark for 
the  first  time,  continuing  the  strong  increases 
over the last decade, but remaining below the 
EU  rate  of  75.3%.  However,  the  employment 
rate for women (66.8% in 2023)  remains low 
compared to that for men (74.6%) and the EU 
average  (70.2%).  The  unemployment  rate 
declined  to  6.1%  (15-74  age  group),  the 
lowest  in  decades.  The  tight  labour  market 
resulted  in  high  real  wage  increases,  which in 
turn boosted demand. In some sectors, mainly 
construction  and 
labour 
shortages are being increasingly addressed by 
inflows  of  workers  from  non-EU  countries, 
including 
the 
liberalisation  of 
legislative 
labour  market 
to  work, 
framework.  Allowing  pensioners 
including on a part-time basis, after retirement 
also  helped  supplement  the  labour  force  in 
some  economic  activities,  particularly  in  the 
administrative, retail and processing sectors. 

facilitated  by 

from  Asia, 

tourism, 

large 

Croatia’s output is estimated to be above 
its  potential.  Following  a  strong  recovery 
from  the  pandemic  slump,  actual  output  rose 
above  its  potential  in  2023,  but  the  positive 
gap  is  forecast  to  decline.  Potential  growth, 
estimated  at  4.1%  in  2023,  is  expected  to 
decrease to 3.2% in 2025.  

labour 

productivity 

Croatia’s 
is 
approaching  the  EU  average,  but  at  a 
slower  pace 
than  peers  and  with 
substantial  regional  disparities.  Between 
2015  and  2022,  Croatia’s  labour  productivity 
per worker grew faster than the EU aggregate 
but slower than its peers. As a result, Croatia’s 
labour  productivity  amounted  to  70%  of  the 
EU aggregate in 2023. Croatia's comparatively 
low  performance  in  productivity  drivers  such 
as R&D personnel, patent activity,  and human 
capital  contributed  to  widening  the  gap  with 
peers.  Productivity  in  the  manufacturing  and 
construction sector is particularly low, which is 
problematic considering the large investments 
made  in  infrastructure  building  in  the  RRP. 
Innovation  and  skills  shortages  (Annex  11,  14 
and  15),  limited  access  to  equity  (Annex  12 
and  18)  and  high  energy  costs  (Annex  7)  are 
to  firm 
identified  as  a  major  obstacle 
in 
(Box  1).  Further 
investment 
productivity  and  labour  supply  will  be  needed 
to improve competitiveness. 

increases 

The government deficit and debt 
remain contained 

The  general  government  deficit 
is 
expected  to  remain  below  3%  of  GDP  in 
the  coming  years  despite  the  fiscal 
stance  becoming  expansionary.  On  the 
revenue  side,  the  tax  reform  introduced  in 
January  2024  reduces  the  base  for  personal 
income  tax  and  pension  contribution.  On  the 
expenditure  side,  interest  spending  increased 
by  40%  between  2022  and  2023  due  to 
variable interest rate loans largely taken on by 
state-owned  enterprises.  The  new  law  on 
public  sector  wages  and  the  recent  spike  in 
inflation  are  set  to increase  wages  and  social 
expenditure significantly. The debt to GDP ratio 
is expected to fall to below 60%, mostly driven 
by  strong  GDP  growth.  Although  long-term 
estimates  suggest  that  public  debt  would 
remain  close  to  the  Treaty  reference  ratio, 
without  mitigating  measures  the  wage  bill 
increase  as  a  result  of  the  new  public  sector 
wage  law  carries  risks  of  more  persistent 
effects which could affect the sustainability of 
government finances. 

to  strengthen 

To  address  fiscal  challenges,  efforts 
could  be  made 
the 
independent  fiscal  institution  (IFI).  The 
Fiscal  Policy  Council  of  Croatia  is  still  in  its 
inception  phase  and  draws  on  technical  and 
administrative  support  services  from 
the 
parliament  and  the  government.  It  has  a 
narrow  mandate,  focused  on  monitoring 
rules 
compliance 
and 
with 
fiscal 
endorsing/assessing 
government’s 
the 
experiences 
forecast. 
macroeconomic 
difficulties  attracting  staff  and  has  yet  to 
develop  significant  outreach  activities.  Some 
interaction  with  the  parliament  has  taken 
place,  but  the  policy  dialogue  with  the 
government could be further developed. 

It 

Croatia’s tax mix is relatively favourable 
to  growth  and  competitiveness (3).  Labour 
taxes,  which  affect  cost  competitiveness,  are 
far below the EU level, mostly due to relatively 

(3)  Additional info in Annex 19. 

3 

 
 
high  tax  deductions.  Corporate  taxes  are  also 
below  the  EU  average,  being  more  conducive 
to  growth  and  investment.  The  bulk  of  the 
revenues come from consumption taxes, which 
are  well  above  the  EU  average,  with  Croatia 
having  one  of  the  top  three  highest  VAT 
standard rates. Croatia has reduced VAT rates 
for  some  essential  products  and  services, 
although  this  may  not  be  the  most  efficient 
redistributive tool (4). Capital taxation revenues 
are  around  half  the  EU  average,  and  some 
limited increase in  taxation  was  introduced  at 
the  beginning  of  2024.  Croatia  continues  to 
have  low  taxes  on  property  and  income  from 
rent,  which  in  turn  affects  the  supply  and 
prices  for  residential  households (5).  Overall, 
total  tax  revenues  are  slightly  below  the  EU 
average. 

Continued cost pressures could 
impair competitiveness 

Continued  cost  pressures  may  hamper 
investment  implementation  and  external 
competitiveness.  Consumer  prices  and 
wages  increased  considerably  in  2022  and 
2023,  amid  strong  demand  and  tight  labour 
markets.  This  may  significantly 
increase 
implementation  costs  of  major  investment 
projects, including those funded by the EU, on 
which  Croatia’s  future  competitiveness  relies 
strongly.  More  broadly,  as  wage  growth 
outpaced  labour  productivity  gains,  Croatia 
experienced  large  increases  in  unit  labour 
costs  (ULCs)  in  2022  and  2023  (Graph  1.2). 
While  so  far  the  cumulative  ULC  growth 
difference  with  euro  area  trade  partners  has 
been limited over the medium term (6), further 

(4)  OECD (2015) ‘The distributional effects of consumption 
taxes in OECD countries.’ (OECD Tax Policy Studies No 
22/2015), http://www.oecd.org/ctp/the-distributional-
effects-of-consumption-taxes-in-oecd-countries-
9789264224520-en.htm.  

(5)  Additional info in the 2019 and 2023 country reports 

for Croatia. 

(6)  Following a significant depreciation of 4.3% in 2021, 

the ULC-based real effective exchange rate (REER) has 
appreciated by 2.6% in 2022 and 3.5% in 2023, 
suggesting that the strong ULC increase may start 
eroding Croatia’s cost competitiveness vis-à-vis its 

increases 

ULC 
competitiveness if not absorbed by profits.  

could 

hurt 

external 

Graph 1.2: External competitiveness 

Change in labour productivity is shown with a negative 
sign. 
The values for compensation per employee, labour 
productivity and ULC for 2023 are based on quarterly 
data. 
Source: Eurostat and ECB. 

home 

subsidy 

House  prices  continued  growing  strongly 
in 2023, although at slower pace. Nominal 
house prices grew by 11.9% in 2023 (3.7% in 
real  terms),  driven  by  the  ample  excess 
liquidity  in  the  banking  system  after  the  euro 
accession,  purchases  by  foreigners,  and  the 
programme 
government 
(Annex 18).  At  the  same  time,  the  number  of 
transactions, 
including  by  non-residents, 
declined in 2023 and price growth decelerated 
mildly,  and  the  last  call  for  the  government 
subsidised  loans  was  published  in  March, 
marking  the  end  of  the  programme (7).  The 
European  Systemic  Risk  Board  (ESRB)  sees  a 
potential risk to financial stability coming from 
the  real  estate  market  (Annex  18).  Excess 
liquidity  could  be  addressed  by  widening  the 
scope  of  savings  instruments  available  to 
households,  including  facilitating  their  direct 

trade partners in the euro area. As for the HICP-based 
REER, it appreciated by 1.5% in 2022 and by 2.3% in 
2023. Comparison with 2019 still suggests that the 
external competitiveness has so far been broadly 
preserved. 

(7)  The loans were paid out mainly over the second quarter, 
and the programme expired at the end of 2023, as 
legislated. 

4 

-15-10-50510151314151617181920212223change in %labour productivityemployees' compensationunit labour costs (ULC)ULC-based REER (EA20)inflation 
 
 
   
 
Box 1: 

Croatia’s competitiveness in brief  

Croatia’s  competitiveness  is  gradually  improving,  facilitated  by  strong  public  investment 
and reform momentum from the RRP. Its tourism sector, representing 12% of GDP in 2019 (10), is 
particularly dynamic. Croatia has slightly increased its market share in world exports from 0.13% 
in 2018 to 0.14% in 2022. Over the last few years, trade integration into the single market has 
increased  and  is  now  around  the  EU  average.  The  adoption  of  the  euro  in  2023  has  further 
facilitated trade with euro area countries (see also Annex 12).     

However, competitiveness challenges remain:  

• 

• 

• 

Further  improvements  need  to  be  made  to  the  business  environment  by 
reducing  the  regulatory  burden,  removing  barriers  to  competition  in  services  and 
enhancing the public administration’s efficiency.  

Low levels of basic skills, research and innovation (R&I), and skills shortages 
are holding back productivity and slowing down the green and digital transition.  

Insufficient access to  diverse sources of financing  is restraining investment and 
the growth of young and innovative firms. 

•  Slow  roll-out  of  renewables,  especially  solar,  and  the  circular  economy 
transition  is  preventing  strategic  autonomy  and  increasing  vulnerability  to  climate-
related events, and may compromise future competitiveness.  

in  capital  markets, 

including 
participation 
government bonds, which represent a low-risk 
investment.  Meanwhile,  banks  could  use  the 
liquidity  at  their  disposal  to  support  the 
development  of  venture  capital  and  equity 
markets.  

Housing  affordability  remains  among the 
lowest in the EU. Strong tourism activity has 
been  contributing  to  persistently  low  housing 
limiting  or  reducing  the 
affordability,  by 
residential  housing (8). 
In 
availability  of 
addition, the home subsidy scheme introduced 
in  2017  to  help  people  acquire  their  first 
house  has  been  found  to  have  contributed  to 
the overall house price increases and to lower 
affordability,  especially  for  buyers  not  using 
the subsidy (9). Overall, housing affordability in 
2023 was slightly worse than in 2017 despite 
strong  increases  in  income.  Looking  forward, 
carefully  designed  measures  that  aim  to 

(8)  Mikulić, J., Vizek, M., Stojčić, N., Payne, J.E., Čeh Časni, A., 
and Barbić, T. (2021) “The effect of tourism activity on 
housing affordability”, Annals of Tourism Research 90  
103264. 

(9)  Kunovac, D. and Žilić, I. (2022) “The effect of housing 

loan subsidies on affordability: Evidence from Croatia”, 
Journal of Housing Economics 55 101808. 

increase  supply might  be more  appropriate  to 
address the issue of low housing affordability.  

The  risk  of  poverty 
is  higher  for 
vulnerable  groups  and  social  exclusion 
holds  back  labour  supply.  As  regards  the 
implementation  of  the  European  Pillar  of 
Social Rights, although the risk of poverty and 
social  exclusion  (AROPE)  has  been  relatively 
stable  since  2019  and  below  the  EU  average, 
older  people,  especially  women,  and  people 
with  a  disability  are  particularly  affected  by 
higher  poverty  risks  (Annex  14). Vulnerable 
face  persistent  barriers 
groups  also 
to 
labour  market  and  getting 
accessing  the 
labour 
constraining 
quality  employment, 
participation and productivity.  

(10)  Eurostat, Tourism Satellite Accounts in Europe – 2023 

edition. 

5 

 
 
 
 
 
Box 2: 

UN Sustainable Development Goals (SDGs) 

Croatia  is  making  progress  in  all  SDGs  related  to  competitiveness  and  productivity 
(SDGs 4,  8,  9).  However,  it  needs  to  step  up  efforts  to  close  the  gap  with  the  EU 
average  on  all  of  them.  SDG 9  related  to  innovation,  industry  and  resilient  infrastructure  is 
farther  behind  the  EU  average,  mostly  due  to  a  weak  R&I  performance,  a  low  share  of 
environmental goods and services, and quality of passenger transport infrastructure. Sustainable 
economic growth and employment indicators (SDG 8) are below the EU average despite catching 
up rapidly in recent years, with real GDP per capita around half of the EU average in 2022, while 
the employment rate is below EU average despite increased labour market tightness (Annex 1).  

Out  of  the  17  indicators,  11  SDGs  remain  below  the  EU  average.  Besides  those 
highlighted  above,  these  relate  to  environmental  stability  (SDGs  2,  6,  11,  12,  13),  fairness 
(SDGs 3 and 5) and macroeconomic stability (SDG 16). 

6 

 
 
IMPLEMENTATION OF KEY REFORMS AND 
INVESTMENTS USING EU INSTRUMENTS 

Funding from the Recovery and Resilience 
Facility  (RRF)  and  cohesion  policy  is 
mutually  reinforcing  Croatia’s  efforts  to 
boost  its  competitiveness  and  stimulate 
sustainable growth. Combined support from 
RRF and cohesion policy funding (in the periods 
up to 2026 and 2027, respectively) represents 
around 24.52% of 2023 GDP, compared to the 
EU  average  of  5.38%  of  GDP  (Annex  4).  The 
RRF alone accounts for 13.13% of 2023 GDP – 
the  second  highest  in  the  EU.  This  includes 
5.56%  of  GDP  through  loan  support  and 
7.57% of GDP through grants (Annex 3). 

Under  its  recovery  and  resilience  plan 
(RRP) Croatia has implemented important 
policy  reforms  that  have  improved  its 
competitiveness. This is particularly the case 
in the areas of healthcare, science and higher 
education,  research  and  innovation,  labour 
market,  pension  system,  as  well  as  waste 
management  and  renewable  energy  sources. 
Croatia  also  made  substantial  investments  in 
the  energy  renovation  of  buildings,  the  green 
and  digital  transition  of  tourism  and  reducing 
the administrative burden for businesses. 

Cohesion  policy  funding  helps  Croatia 
tackling  its  growth  and  competitiveness 
challenges  and  reducing  the  country’s 
territorial and social disparities. Under the 
2014-2020  cohesion  programming  period, 
support focused on areas of:  (i) research and 
innovation;  (ii)  small  and  medium  enterprises 
(SMEs);  (iii)  energy  efficiency;  (iv) the  circular 
economy  and  environment;  (v)  education;  (vi) 
employment;  and  (vii) social  inclusion.  For  the 
current  2021-2027  programming  period, 
support is focused on: (i) innovative and smart 
(ii) employment; 
economic 
(iii) education/skills; 
inclusion; 
(iv) 
(v) improving  energy  efficiency;  (vi) increasing 
the share of renewables in energy production; 
(vii) strengthening  the  circular  economy;  and 
(vii) supporting 
and 
climate 
biodiversity. The new programme aims to bring 
more  cooperation  and  partnership  with 
regional and local stakeholders. 

transformation; 

resilience 

social 

Removing regulatory barriers to 
improve business environment  

requires 

completion 

The implementation of Croatia’s recovery 
and resilience plan is underway, however 
timely 
further 
efforts.  Croatia  has  submitted  5  payment 
requests, corresponding to 120 milestones and 
targets in the plan  and  resulting  in  an  overall 
disbursement of EUR 3.7 billion as of 15 April 
2024  (see  Annex  3).  The  size  and  complexity 
of 
to 
absorption  capacity,  call  for  accelerating 
investments  and  addressing  risks  of  delays 
while  strengthening  administrative  capacities 
to  ensure  that  reforms  and  investments  can 
be  completed  on 
in 
particular, are highly concentrated towards the 
end  of  the  RRP  implementation  and  merit 
special attention. 

the  plan,  and  challenges 

Investments, 

linked 

time. 

and 

improving 

RRP  implementation  enabled  major  steps 
to  be  taken  in  reducing  the  regulatory 
burden 
business 
identifying  the  most 
environment.  After 
burdensome  requirements  together  with  the 
business community and analysing compliance 
costs, 
and 
digitalised  administrative  processes  through 
measures  set  out  in  three  action  plans.  Since 
July  2021,  it  has  reduced  the  administrative 
burden for the economy by approximately EUR 
100 million.  

government 

optimised 

the 

Croatia  carried  out  measures  to  improve 
the  regulatory  system  for  SMEs,  by 
streamlining the framework for assessing 
the impact of regulation on SMEs. In 2023, 

7 

 
 
as part of the RRF reform agenda, the Croatian 
government  adopted  the  ‘Strategy  for  the 
Evaluation  of 
the  Economic  Effects  of 
Regulation  on  the  SME  sector’,  with  an 
accompanying action plan. 

Unlocking investments for the 
green and digital transitions 

and 

and 

policy 

cohesion 

competitiveness 

RRF 
funding 
supported  measures  aimed  at  boosting 
of 
start-ups 
innovative  SMEs.  A  new  equity  investment 
programme  was  launched  in  2023,  providing 
EUR  52  million  to  support  fast-growing  SMEs, 
small mid-caps and mid-caps established and 
operating in Croatia. The programme, launched 
in  cooperation  with  the  European  Investment 
Fund, is focused on green transformation and 
are 
innovation. 
complemented 
programme 
‘Competitiveness  and  Cohesion  2021-2027’, 
funded by the European Regional Development 
Fund (ERDF). This includes, for example, a new 
Risk  Capital  Fund  worth  EUR  80  million  that 
supports  innovative  Croatian  SMEs  with  high 
growth  potential  through  accelerators  and 
venture capital funds.  

RRF-funded 
by 

activities 

the 

The implementation of the RRP supported 
improvements  in  efficiency  of  the  public 
administration,  that  currently  weighs  on 
the  business  climate.  For  instance,  Croatia 
has carried out several measures to speed up 
judicial processes and is also digitalising public 
services  to  improve  the  speed  of  processing 
and efficiency for the public’s benefit. 

quality, 

attractiveness, 

Croatia  introduced  reforms  to  increase 
the 
and 
transparency  of  the  civil  service.  For 
instance, under the RRP, Croatia introduced an 
overarching 
framework, 
legislative 
harmonising and simplifying the wage system 
in  government  administration  and  the  public 
legislation  also  puts  a 
service.  The  new 
stronger  focus  on  skills  and  competencies 
when  considering  recruitment  and  promotion, 
aiming  to  attract  and  retain  high  quality 
employees.  

to 

investments 

the 
planning 

Croatia  is  improving  strategic  planning, 
infrastructure  and  the  skills  needed  for 
the  digital  transition.  Under  the  RRP,  the 
adoption  of  Croatia’s  2030  digital  strategy 
identified  priority 
in  digital 
transition  and  set  other  strategic  objectives, 
including measures for developing digital skills 
jobs.  The  Technical  Support 
and  digital 
Instrument (11) 
Croatian 
supported 
authorities 
and 
improve 
implementation of public ICT/digital projects in 
the 
Croatia, 
prioritisation  of  digital  investments.  Croatia 
has  taken  the  first  steps  in  constructing 
communications 
passive 
infrastructure  funded  by  the  RRP,  to  improve 
the availability of 5G networks throughout the 
country.  Building  on  these  measures,  further 
efforts  are  needed  to  boost  digital  skills, 
expand 
and 
accelerate the digitalisation of businesses and 
public  services 
(Annex  10  and  Digital 
Decade (12)). 

infrastructure, 

connectivity 

guidelines 

electronic 

including 

for 

Croatia  has  also  removed  administrative 
barriers  in  the  energy  sector  as  part  of 
the  RRP.  By  targeted  legislative  changes, 
Croatia  amended  procedures  that  constrained 
investments  in  renewable  energy  resources. 
The  new  rules  provide  self-consumers  with 
more  legal  certainty  and  should  facilitate  the 
installation 
in  multi-
apartment  buildings.  Croatia  also  removed 
severe  restrictions  on  establishing  energy 
communities, and in 2024 the first community 
was registered.  

photovoltaics 

of 

Making  effective  use  of  various  funding 
sources,  Croatia  has  taken  steps  to 
improve efficiency and productivity in the 

(11)  ‘Development of the coordination mechanism to 

support e-governance policy coherence', TSI21HR28. 

(12)  European Commission (2023): Report on the State of 

the Digital Decade 2023:  https://digital-
strategy.ec.europa.eu/en/library/2023-report-state-
digital-decade. 

8 

 
 
Box 3: 

Combined action for more impactful EU funds 

To  boost  economic  growth  and  maximise  the  impact  of  EU  funding,  Croatia's  RRP  includes 
reforms that support investments under other EU instruments, creating significant synergies and 
complementarities between the various funds. For example, to improve educational outcomes  of 
elementary  school  students  and  expand  access  to  extracurricular  education,  especially  among 
students  from  disadvantaged  backgrounds,  a  comprehensive  transformation  of  the  primary 
education sector is underway. Croatia is delivering RRP reforms enabling the transition to single-
shift  schools  and  preparing  for  the  introduction  of  the  whole-day  teaching.  These  reforms  are 
supported  by  investments  under  the  ERDF  and  RRF  in  school  infrastructure  and  equipment  as 
well  as  investments  under  the  European  Social  Fund  plus  (ESF+)  and  RRP  investments  and 
reforms to improve teaching and learning.  

in 

country 

sector, 

reducing 

utility 
regional 
disparities  in  service  provision.  Under  the 
RRP,  Croatia  introduced  legislative  changes  to 
improve  the  governance  of  the  water  sector, 
reducing  fragmentation  and  the  number  of 
water  companies  by  80%,  and  supporting  the 
rational  use  of  water  resources.  Croatia  also 
adopted  a  new  6-year  strategy  for  waste 
management 
(‘Waste 
the 
Management  Plan  2023-2028’),  with  specific 
targets  for  waste  recycling,  sorting, using  and 
repairing.  In  parallel  with  these  policy  efforts, 
infrastructure  upgrades  funded  by  cohesion 
policy  will  help  provide:  (i)  access  to  drinking 
water  services  to  98%  of  population;   and 
(ii) adequate  wastewater  services  for  86%  of 
the  Croatian  population.  Furthermore,  the 
construction  of  four  waste  management 
centres  will  help  reduce  landfilled  waste  by 
40%.  Thanks  to  complementary  investments 
from  the  EU’s  Modernisation  Fund,  Croatia 
received  EUR  80  million  of  support  to  public 
for 
water  and  waste  utility  companies 
photovoltaic  panels  and  energy  storage 
capacity.  

the 

railway 

Croatia  has  taken  significant  steps  to 
improve 
sector 
infrastructure,  helping 
increase  trade 
flows  and  the  integration  of  its  network 
into  European  transport  networks. 
In 
particular,  it  prepared  a  National  Plan  for 
Development  of  Railway 
Infrastructure  to 
increase the competitiveness and efficiency of 
the rail sector, identifying various projects and 
activities  to  improve,  modernise  and  green 
passenger and cargo transport in Croatia.  

Croatia 
resilience, 

continued 

improving 

sustainability 

the 
and 

9 

the  RRP,  Croatia  prepared 

competitiveness  of  its  tourism  sector. 
Under 
its 
Sustainable Tourism Strategy  for 2030, which 
was  followed  by  specific  calls  under  the  RRP 
for  grant  support  to  entrepreneurs  in  the 
tourism sector. For example, a green transition 
call of EUR 82 million was launched to support 
investments  in  installing  renewable  energy 
resources  and  other  measures  to  reduce 
energy  use,  water  use,  or  food  waste,  to 
improve  the  competitiveness  of  entrepreneurs 
in the tourism sector.  

Investing in people for economic 
growth and resilience  

inclusiveness. 

Under  the  RRP,  Croatia 
implemented 
reforms  and  investments  addressing  the 
skills  gap,  improving  productivity  and 
Croatia’s 
promoting 
innovative,  nation-wide  voucher  scheme  to 
provide training  in  skills  in  response  to labour 
market needs, particularly skills related to the 
green  and  digital  transition,  was  met  with 
further 
strong  demand  and  has  been 
developed 
ESF+ 
complementary 
investments.  In  addition,  a  national  plan  for 
developing  green  skills  in  the  building  sector 
was  prepared,  to  provide  skills  in  the  context 
of 
renovation,  post-
earthquake  reconstruction  and  application  of 
green infrastructure solutions. 

efficiency 

energy 

by 

RRF  reforms  are  supporting  the  shift  of 
innovation 
research  and 
the  public 
system  towards  a  performance-oriented 
approach.  The  new  Act  on  Higher  Education 

 
 
and  Scientific  Activity  adopted  under  the  RRP 
introduced  a  performance-based 
funding 
system  for  higher  education  institutions  and 
public  research  institutes.  This  encourages 
introducing 
higher-quality 
performance  agreements  based  on  ambitious 
strategic 
those 
incentivising  people  to  study  and  /  or  work 
abroad and increased cooperation between the 
academic and business sector. 

objectives, 

including 

research 

by 

increasing  participation 

Complementary action of EU instruments 
in  early 
is 
education.  This  is  done  by  ensuring  the 
availability  of  early  education  and  childcare 
(ECEC)  facilities.  Under  the  RRP,  Croatia 
adopted  a  new  model  for  financing  of  ECEC 
facilities,  to  ensure  their  availability  and  full 
use  across  the  country,  including  in  smaller 
municipalities  on  islands  or  in  mountainous 
areas. This, in turn, is also expected to support 
higher  labour  force  participation  of  parents, 
especially women.  

reducing 

in  modern  medical 
Investments 
infrastructure 
are 
equipment 
and 
improving the quality and accessibility of 
territorial 
healthcare  and 
differences. The RRP-supported digitalisation 
of  cardiology  services  focuses  on  improving 
primary care diagnostics in 40 locations across 
the  country,  for  patients  in  remote  and  rural 
areas. In addition, Croatia will be using around 
EUR 140 million from the ERDF to develop and 
renovate  health  infrastructure,  as  well  as 
invest  in  medical  equipment,  health  mobile 
assets, such as ambulance vehicles and boats, 
and digitalisation in healthcare. 

10 

 
FURTHER PRIORITIES AHEAD 

Steady  implementation  of  the  RRP  and 
cohesion  policy  programmes  remains  a 
priority as the financial envelope became 
larger.  Croatia  has  the  second  highest  share 
of  EU  funding  to  GDP  (24.5%  of  2023  GDP, 
Graph  3.1).  Implementation  of  the  RRP  is 
proceeding  according  to  schedule.  The  size  of 
the RRP allocation has nearly doubled with the 
amendment  adopted  at  the  end  of  2023  and 
all  remaining  and  new  investment  under  the 
plan need to be completed by 2026. While the 
absorption  of  the  2014-2020  cohesion  funds 
is likely to reach 100%, marking a remarkable 
improvement  with  respect  to  the  absorption 
rate  of  the  previous  programming  period, 
implementation of cohesion policy investments 
for 2021-2027 has been rather limited so far. 
Reforms  and 
these 
programmes  are  key  to  addressing  some  of 
competitiveness 
Croatia’s  most 
relevant 
to 
related 
challenges, 
education, 
environment 
(regulatory  burden,  barriers  to  competition  in 
services,  public  administration  efficiency),  and 
the green and digital transition. 

investments  under 

including 
the 

business 

those 

Graph 3.1: EU funding from the RRP and 
cohesion policy as % of GDP (2023) 

Source: ECFIN, Open Cohesion Data Portal, Eurostat. 

11 

faces  additional 

Besides  those  addressed  by  the  RRP, 
challenges 
Croatia 
related to innovation and skills, access to 
diverse  sources  of  financing,  the  green 
transition  and  social  inclusion.  Tackling 
these  challenges  will  help  increase  Croatia’s 
long-term  competitiveness  and  diversify  the 
economy  away 
therefore 
reducing  potential  distortions  (e.g.  inflation 
pressures, 
see 
Chapter 1: 
Employment 
Snapshot),  strengthening  economic  resilience. 
It will also help make further progress towards 
achieving the SDGs.  

low  house  affordability, 
Economic 

tourism, 

from 

and 

is 

important  that  the 

It 
identified 
challenges  are  addressed  both  at  the 
national  and  regional  level.  This  will  help 
reduce  regional  disparities  and  improve  the 
administrative  and  investment  capacity  in  a 
balanced way across the country.  

Strengthening research and 
innovation and addressing skills 
mismatches  

Despite  marked  improvements  in  recent 
years, Croatia trails behind on innovation. 
Croatia  is  an  emerging  innovator  with  a 
performance  of 
just  under  70%  of  EU 
average (13).  Significant  disparities  remain  in 
the  distribution  of  R&D  expenditure  among 
Croatian regions and the capital city of Zagreb. 
While  the  gap  to  the  EU  average  is  still 
significant,  there  has  been  continuous  growth 
since 2018. This has been driven, among other 
things,  by  increased  R&D  expenditure  levels, 

(13)  2023 European Innovation Scoreboard, Country profile: 

Croatia 
https://ec.europa.eu/assets/rtd/eis/2023/ec_rtd_eis-
country-profile-hr.pdf 

051015202530ELHRESROITPTPLBGLTHUSKLVCYSICZEEMTFRBEATDEFISENLDKIELURRPERDFESF+CFJTF 
 
   
 
increased  number  of  EU  funded 
and  an 
programmes  providing  support  for  academia-
industry  collaboration.  While  the  authorities 
have  set  up  a  comprehensive  plan  to  give 
technology 
to 
continuous  support 
transfer,  cooperation  and  to  improve  spin-off 
activities  and  patenting  through  RRF  and 
cohesion policy, it is important to continue with 
financing such activities beyond EU funds.  

foster 

the 

research  system, 

There  continues  to  be  a  high  level  of 
fragmentation  in  the  R&I  landscape.  This 
is  despite  recent  efforts  to  consolidate  the 
public 
institutional 
landscape of public research organisations and 
higher 
This 
fragmentation  has  resulted  in  coordination 
and  financial  inefficiencies,  directly  reducing 
the  potential  for  collaboration, 
innovation 
capacity  and 
the  effectiveness  of  R&D 
investment.  In  turn,  this  continues  to  hinder 
better R&I outputs. 

institutions. 

education 

strengthened 

in 
require 

improvements 
will 

R&I 
Further 
performance 
close 
collaboration between government actors 
and 
administrative 
its  Smart  Specialisation 
capacity.  With 
strategy  Croatia  has  successfully  streamlined 
R&I  governance.  However,  further  steps  are 
needed  to  ensure  consolidation  and  the 
seamless  operation  of  the  system  in the  long 
term.  The 
recently 
adopted  as  part  of  the  RRF  justifies  a  more 
active role for the Croatian Science Foundation 
in implementing policy measures and selecting 
projects  along  with  the  relevant  Ministries.  A 
timely 
Smart 
Specialisation  Strategy  2029  could  enable  a 
strong  and  balanced  industrial  transition  of 
disadvantaged regions. 

legislative  framework 

implementation 

the 

of 

and 

rate 

Skills mismatches continue to be a major 
determinant  of  labour  shortages,  low 
employment 
sluggish 
productivity  growth.  Low  levels  of  basic 
skills,  population  with  tertiary  education  and 
doctorate  graduates,  particularly  in  science, 
technology,  engineering  and  mathematics 
(STEM),  and  low  levels  of  life-long  learning 
exacerbate  skills  mismatches  and  point  to 
weaknesses in the education system. The lack 
of  available  skilled  staff  is  one  of  the  main 

barriers  to  business  investment  and  a  faster 
transition  to  a  circular  economy,  and  the 
reason behind labour shortages in key sectors 
of the economy, such as tourism, construction 
and industry. Labour demand in these sectors 
is 
in 
increasingly  being  met  by  bringing 
workers from non-EU countries. Lack of skilled 
workers  is  also  a  major  limiting  factor  in 
and 
services 
communication  technology,  health,  social  and 
long-term  care.  The  shortage  of  specialists  is 
in  particular  preventing  local  businesses  from 
adopting digital and green technologies (Annex 
10,  14)  and  productivity  and  sustainable 
growth 
from  accelerating.  Of  particular 
concern are the shortages of teachers in early 
childhood  and  care  and  of  STEM  teachers  in 
schools (Annex 15).  

information 

including 

A  stronger  education  system,  adapted  to 
labour  market  needs,  and  upskilling  and 
reskilling  policies  are  needed  to  address 
current  and  future  shortages.  The  high 
rate  of  pupils  underperforming  in  basic  skills, 
especially  mathematics,  leads  to  bottlenecks 
in  their  upskilling,  while  the  scope  of  adult 
learning  in  Croatia  needs  to  be  significantly 
improved. Looking ahead, the projected decline 
of  the  working-age  population  risks  further 
exacerbating labour shortages. Building on the 
RRP  and  European  Social  Fund  plus  (ESF+) 
investments,  further  education  and  upskilling 
and  reskilling  policies  are  needed.  Improving 
the  capacity  of  the  education  system  and 
labour  market  to  train  and  retain  more  ICT 
specialists  would  also  help  tackle  current  and 
prospective labour shortages. 

Focusing on active labour market policies 
remains  a  key  priority.  Targeting  active 
labour  market  policies  (ALMPs),  as  well  as 
upskilling  and  reskilling  measures  towards 
vulnerable  groups,  and  aligning  them  with 
social  policies  remains  crucial.  Reforms  and 
investments in ALMPs, including under the RRP, 
have 
increased  significantly  during  recent 
years,  but  Croatia  is  still  facing  challenges  in 
reaching  disadvantaged  groups.  ALMPs  are 
insufficiently  integrated  into  social  policies, 
adult 
training 
(Annex 14). 

learning  and 

vocational 

12 

 
to 

is  scope 

remove  barriers 

Capital  markets  remain  underdeveloped. 
There 
to 
development  and  growth  of  capital  markets, 
including  private  equity  and  venture  capital. 
The  readiness  of  small  and  medium-sized 
enterprises  and  other  firms  to  access  market 
financing could be encouraged by: (i) boosting 
collaboration  and  knowledge  transfer  through 
the 
cluster  policies;  and 
capacity-building measures in the RRP through 
accelerators 
to  provide  advisory  support 
throughout all stages of investment decisions. 
The  excess  liquidity  in  the  banking  system, 
released by new regulatory requirements after 
Croatia  adopted  the  euro,  could  represent  a 
source of funding for developing private equity 
and venture capital in the country.  

(ii) leveraging 

Croatia 

clearing 

established 

Further  integration  into  the  wider  EU 
capital  market  would  also  be  beneficial. 
central 
a 
While 
in  2022, 
counterparty 
addressing  barriers 
cross-border 
integration  could  improve  attractiveness  for 
investors  and  increase  liquidity  in  the  stock 
market,  in  line  with  the  objectives  of  the 
Capital Market Union. 

house 
its 

to 

investors.  While 

There 
is  scope  to  raise  the  overall 
attractiveness  of  the  stock  market  for 
issuers  and 
the  RRP 
includes  reforms  that  aim  to  diversify  capital 
markets  and  improve  access  to  alternative 
financing,  other  areas  remain  unaddressed. 
These include raising the level of liquidity and 
stock  market  by 
participation 
establishing  higher  standards  of  corporate 
governance  and  disclosure,  promoting  new 
issuances,  and 
through 
reducing 
digitalisation.  Improving  the  accessibility  and 
credibility  of  the  key  market  infrastructures 
can further widen the capital market.  

costs 

the 

in 

tax 

complex 

rules  may 
Overly 
disincentivise  equity 
investments  and 
hamper  the  liquidity  and  development  of 
capital  markets.  There  is  scope  to  tackle 
possible 
including  by 
simplifying  capital  income  tax  compliance 
procedures 
investors, 
especially  small  investors,  for  example,  via 

tax  disincentives, 

cross-border 

for 

Promoting access to diverse 
sources of financing 

is  well  below 
In 

Croatia’s  businesses  face  limited  access 
to  non-bank  finance  due  to  a  lack  of 
diverse  sources  of  financing.  Access  to 
the  EU  average 
equity 
(Annex 12). 
stock  market 
2022, 
capitalisation  was  only  at 27.3%  of  GDP,  less 
than  half  the  EU  average  of  65.6%.  The 
persistently  low  number  of  issuers  on  the 
Zagreb  Stock  Exchange  further  points  to  the 
lack  of  attractiveness  of  capital  market 
financing. At the same time, the breadth of the 
bond  market  was  much  lower  than  the  EU 
average (14).  Direct  participation  of 
retail 
investors  is  also  lower  than  the  EU  average 
(Graph 3.2). As a result, private savings tend to 
concentrate  and  add  pressure  on  real  estate 
markets.  Croatia  also  has  scope  to  develop 
more  private  equity  and  venture  capital 
market activities.  

Graph 3.2: Direct investments by households 
(2021) 

Sum of volumes of bonds and listed shares held by 
households relative to the sum of volumes of both and 
cash holdings and deposits. 
Source: Eurostat, DG FISMA. 

(14)https://finance.ec.europa.eu/document/download/05a314

2e-ab62-4528-ac86-
2e1ce64ca6ee_en?filename=230816-capital-markets-
union-indicators_en.pdf  

13 

051015202530354045SEDKHUFIBEMTITDEFREU27LUATEEROESIECZNLSIPLELSKCYBGLTLVHRPT 
  
 
investment  accounts  with  tax  incentives  for 
individuals (15).  

retail 

lessen 

direct 

pressures 

Fostering 
investor 
participation  would  help  the  domestic 
capital  market  grow.  Encouraging  financial 
literacy,  coupled  with  measures  mentioned 
above  that  improve  market  transparency  and 
provide  tax  incentives,  would  facilitate  small 
investors’  direct  participation  in  equity  and 
bond  markets  (including  retail  participation  in 
longer  duration (16)). 
government  bond  of 
Wider  retail  participation  could:  (i) mitigate 
price 
housing 
and 
affordability  concerns;  (ii)  reduce  the  excess 
liquidity  in  the  banking  system;  (iii)  contribute 
to capital market development more generally; 
and (iv) improve monetary policy transmission. 
A  well-designed  and  progressive  property 
taxation  would  also  lessen  the  pressures  on 
the 
real  estate  market  while  creating 
incentives  towards  other  forms  of  productive 
capital investment and additional revenues for 
local  governments.  Updating  and  integrating 
land and property values (or ‘cadastral values’) 
and  household  composition  data  will  be  an 
important 
consistent 
information  on  housing  affordability  and 
prices  and  pave  the  way  to  deliver  a  socially 
fair property taxation. 

achieve 

step 

to 

Accelerating the green transition 
with strengthened policies 

Croatia  is  not  fully  tapping  into  its 
potential  to  achieve  a  circular  economy. 
The  use  of  circular  material  stands  at  5.8%, 
significantly  below  the  EU  average  of  11.5% 
(Annex  9).  Strengthening  this  area  would 
strategic 
increase 

efficiency, 

resource 

(15)  CFA Society Croatia report. Basis for the Capital Markets 

Strategy in Croatia, 
https://www.cfacroatia.org/_files/ugd/449b16_0111b5f
5cc274d33931dd6bca55200ac.pdf  

(16)  In March 2023, for the first time, the Croatian 

government issued a 2-year bond directly to retail 
investors, which attracted great interest. Following this 
success, in November 2023, there was another primary 
issue of treasury bonds to small investors.   

autonomy,  and  the  creation  of  quality  jobs. 
Croatia  could  benefit  from  a  comprehensive 
circular  economy  strategy, 
in  addition  to 
actions carried out for individual sectors (such 
construction  and  demolition  waste). 
as 
Taxation  could  be  a  lever  to  accelerate  the 
circular  economy  transition  and  tap 
into 
Croatia’s full potential. 

the 

summer, 

impacting 
food  production  and 

The management of climate risks and the 
quality  and  availability  of  environmental 
infrastructure  need  improving.  Croatia  is 
already facing droughts and low water supply 
tourism 
during 
activities, 
energy 
generation  from  hydropower  plants.  Water 
management  and  infrastructure  need  to  be 
further  improved  and  made  more  sustainable 
optimise  water  use  and  address 
to 
from  water-related  climate 
vulnerabilities 
the 
includes  addressing 
risks.  This  also 
institutional  deficiencies.  Damages 
from 
improving 
floods  could  be  alleviated  by 
insurance 
availability  and  affordability  of 
policies  to  cover  climate  hazards  (Annex  6). 
improved  waste 
Despite 
management 
infrastructure 
and  water 
supported  by  the  cohesion  policy  and  RRF 
funds,  progress  has  been  slow.  Croatia  is  not 
on  track  to  meeting  EU  waste  management 
targets (17).  There 
is  room  to  strengthen 
policies in this area including by improving the 
local  authorities’  capacity 
implement 
investments 
in  separation,  collection  and 
treatment of waste. 

investments 

to 

in 

Despite the progress made, the uptake of 
solar energy remains low. Recent legislative 
changes  resulted  in  an  increase  in  solar 
capacity  between  July  2023  and  January 
2024.  However,  broad  energy 
support 
measures,  not  directly  targeted  to  vulnerable 
companies and households, discourage greater 
interest  in  solar  energy  and  reduce  the  price-
signalling  effect.  The  share  of  solar  is  still 
marginal  at  only  1%  of  generated  electricity 
solar  on 
(Annex  7).  The  uptake  of 
multiapartment  buildings 
is  almost  non-
existent,  due  to  obsolete  maintenance  and 
burdensome 
ownership 

legislation, 

and 

(17)  COM/2023/304 final. 

14 

 
 
 
to  improve  with  a  new  public  call  for  single 
family  homes  launched  in  2024 (19).  Since 
Croatia relies on grant-based funding schemes 
implemented 
for 
proposals  on  building  renovation,  increased 
transparency and timely information on future 
calls would help the potential beneficiaries and 
the construction sector (Annex 7). 

centralised 

calls 

via 

In  2022,  the  share  of  renewables  in 
transport in Croatia was the lowest in the 
EU  (2.4%  compared  to  the  EU  average  of 
9.6%,  Graph  3.3 (20).  GHG  emissions  from  the 
Croatian  transport  sector have  been  generally 
increasing  faster  over  the  past  15  years 
compared  to  the  general  EU  trend.  The  RRP 
includes reforms and investments that aim to 
promote  renewables  in  transport.  However, 
these  are  yet  to  gain  ground.  Electrification 
and  the  use  of  other  renewable  sources  in 
transport  modes  that  are  difficult  to  electrify 
are also being pursued under the RRP, though 
there  is  scope  for  further  action,  especially  in 
rail and maritime transport.  

The uptake of electric vehicles in Croatia 
remains  one  of  the  lowest  in  the  EU. 
Although it doubled between 2020 and 2021, 
the share of newly registered electric cars only 
slightly  increased  between  2021  and  2022, 
from 2.95% to 3.17% (21). The unpredictability 
incentive  schemes  discourages  interest 
of 
among potential future owners of electric cars 
in Croatia. Stronger links throughout the whole 
life  of  vehicle  between  vehicle 
taxation 
taxes  on  ownership)  and  CO2 
(namely 
emissions  could  be  used  to  accelerate  the 
transition to cleaner cars and other vehicles.  

(19)  Allocation of EUR 120 million under the public call is 

expected to cover energy efficiency measures, but also 
installation of heat pumps or solar photovoltaics 
separate from the energy efficiency measures, for 
around 6 000 single family homes. 

(20)  Statistics Eurostat (europa.eu)  

(21)  EEA, 2023, https://www.eea.europa.eu/data-and-
maps/figures/new-electric-vehicles-by-country-2  

connection rules  by the HEP ODS (Distribution 
System Operator). Increased uptake of solar in 
the residential sector and in businesses would 
help  decarbonise  heating  and  cooling.  While 
some  regulatory  barriers  have  been  removed 
and  relevant  aspects  have  been  clarified 
through  legislative  amendments  in  2023,  it 
would  be  important  to  review  the  relevant 
registration  procedures  concerning  energy 
communities, since only one of them has been 
registered  so  far  across  the  whole  country. 
Lighter  requirements  –  notably  for  simpler 
types of communities – could help in achieving 
the  EU’s  aim  of  having  by  end-2025  at  least 
one  energy  community  established  in  each 
municipality  with  more 
10,000 
inhabitants  (of  which  there  are  around  80  in 
Croatia). 

than 

in 

the 

the 

reduce 

Improvements 
regulatory 
framework are not translating in a higher 
number  of  large  renewable  installations. 
Although  Croatia  finalised 
legislative 
the  administrative 
to 
framework 
burden, there was no significant uptake of new 
wind  and  solar  installations,  and  the  planned 
premium-based  auction  for  the  support  of 
renewables  was  not  published  in  2023.  There 
is little visibility on the pipeline for projects as 
the  long-term  schedule  for  auctions  has  not 
been  published.  Furthermore,  the  national 
energy regulator (HERA) has not set connection 
fees,  which  is  hampering  the  competitiveness 
of the energy sector and the economy. Despite 
removing several barriers to providing permits 
thanks to its involvement in the Single Market 
Enforcement Taskforce, Croatia does not have 
a  plan  to  introduce  a  one-stop  shop  for 
renewable energy permits (Annex 12). 

renewables  and  bottlenecks 

Support for energy efficiency measures in 
businesses and the residential sector was 
not  sufficient  in  2023.  Limited  measures 
for  businesses,  combined with  the  low  uptake 
of 
the 
permitting  process,  hold  back 
the  cost 
competitiveness of Croatian companies on the 
back  of  some  of  the  highest  electricity  prices 
in the EU (18).  The uptake of energy efficiency 
measures for the residential sector is expected 

in 

(18)  Statistics | Eurostat (europa.eu) 

15 

 
 
 
life  expectancy 

in  Croatia 
inhabitant  and 
remain  below  the  EU  average,  the  latter 
stemming  partly  from  the  high  mortality  rate 
from preventable and treatable causes (Annex 
16).  The  uneven  geographical  distribution  of 
health facilities and workers poses challenges 
in access to healthcare. In 2022, more people 
reported unmet medical needs due to distance 
in Croatia than in any other EU Member State. 
Strengthening 
policies, 
encouraging healthy eating habits and physical 
activity, and restructuring the hospital system, 
building on its recent ownership reform, could 
help reduce risk factors and improve access to 
health services.  

anti-smoking 

in 

high 

is  fragmented, 
Long-term  care  (LTC) 
highly institutionalised, understaffed and 
lacks  coordination.  It  also  remains  severely 
underfunded,  with  government 
spending 
amongst  the  lowest  in  the  EU  (0.5%  of  GDP 
the  EU (22)).  This  puts 
against  1.7% 
particular  pressure  on  older  people  who  face 
challenges  related  to  low  pension  adequacy 
Successful 
and 
implementation 
changes 
supported by EU funds requires: (i) integrating 
social  LTC  with  health  LTC;  (ii)  a  coordinated 
control  mechanism  with  clear  responsibilities 
assigned  across  various  levels  of  governance; 
(iii) ensuring a qualified LTC workforce; and (iv) 
speeding up the deinstitutionalisation of these 
services.  Quantifiable  and  targeted  measures 
that  preserve  fiscal  sustainability  and  cost-
efficiency are also necessary (Annex 14).  

rates. 
structural 

poverty 
of 

Limited  availability  of  non-residential 
community-based  services  contributes  to 
social  exclusion.  Inadequate  development 
and  usage  of  community-  and  family-based 
services 
impedes  the  deinstitutionalisation 
process. Substantially decreasing occupancy in 
institutions  needs  to  go  hand-in-hand  with 
social  housing  units  and  a 
additional 
strengthened  infrastructure  capacity  of  social 
service providers (Annex 14).  

(22)  European Commission and Economic Policy Committee, 
2024, 2024 Ageing Report – Economic and budgetary 
projections for the 27 EU Member States (2019-2070), 
Publications Office of the European Union, Luxembourg. 

Graph 3.3: Share of energy from renewable 
sources in transport (2022) 

Source: Eurostat 

Better access to more efficient 
social and health services 

There  is  scope  to  improve  the  coverage 
and  adequacy  of  social  assistance.  The 
impact of social transfers (excluding pensions) 
on  poverty 
reduction  has  been  broadly 
decreasing  since  2020  and  was  20.9%  in 
2023,  among  the  lowest  in  the  EU  (in  2022 
the EU average was 35% compared to 20.4% 
in  Croatia)  due 
low  coverage  and 
inadequate  benefits.  Expenditure  on  social 
protection  continues  to  be  relatively  low  in 
Croatia  (22.2%  of GDP vs  29.9% in  the  EU  in 
2021) (Annex 14).  

to 

could 

real  estate 

More  effective  management  of  state-
increase 
owned 
affordable  housing.  The  transformation  of 
these  assets  into  affordable  housing  would 
also  help  tackle  the  challenges  of  energy 
poverty,  negative  demographic  trends,  labour 
mobility  and  social  inclusion  of  vulnerable 
groups.  A  thematic  expansion  of  the  existing 
integrated  territorial  investments  instrument 
could also help.  

preventive 

Strengthening 
care  and 
integrating health services across regions 
could 
improve  health,  well-being  and 
economic  outcomes.  Health  spending  per 

16 

051015202530SEFINLMTBEDKATITDEESEU…FRSKLUPTEEROSIHUBGCYCZLTPLIEELLVHR 
  
 
 
Box 4: 

The mid-term review of cohesion policy funds for Croatia 

The  mid-term  review  of  cohesion  policy  funds  is  an  opportunity  to  assess  cohesion 
policy  programmes  and  tackle  emerging  needs  and  challenges  in  EU  Member  States 
and their regions. Member States are reviewing each programme taking into account, among 
other things, the challenges identified in the European Semester, including in the 2024 country-
specific recommendations. This review forms the basis for a proposal by the Member State for 
the definitive allocation of 15% of EU funding included in each programme. 

Croatia has made progress in implementing cohesion policy programmes and the European Pillar 
of Social Rights, but challenges remain as outlined in this report, including in Annexes 14 and 17. 
In  particular,  Croatia  continues  to  be  characterised  by  significant  regional  disparities,  with 
substantial  gaps  in  labour  productivity,  investment  and  employment  persisting  between  the 
capital  region  and  other  regions.  Against  this  background,  it  remains  important  to  continue 
implementing  planned  priorities,  paying  particular  attention  to:  (i)  research  and  development 
activities  outside  of  the  capital  region,  focusing  on  the  capacity  of  businesses  to  innovate; 
(ii) administrative  capacity,  with  a  focus  on  strengthening  the  role  of  regional  and  local 
authorities, including through optimised use of existing territorial instruments and supporting new 
modes of territorial engagement, e.g. through pilot projects for regional and local administrations 
currently  not  implementing  territorial  instruments;  (iii)  territorial  just  transition  plans  and 
facilitating the transition to a climate-neutral economy, including through the phase-out of coal 
by  2033;  (vi)  energy  poverty  and  the  creation  of  energy  communities;  (v)  collection  and 
management of waste at national and local level; (vi) active labour market policies focusing on 
vulnerable and inactive groups; (vii) upskilling and reskilling through individual learning accounts; 
(viii) deinstitutionalisation and increasing the number of quality and affordable community-based 
social services, in particular long-term care, to boost social inclusion.  

Croatia  could  also  benefit  from  the  opportunities  provided  by  the  Strategic  Technologies  for 
Europe  Platform  (STEP) (23)  initiative  to  support  the  transformation  of  its  competitiveness 
foundations through investments in the areas of: (i) digital technologies and deep innovation; (ii) 
clean and resource-efficient technologies; and (iii) biotechnologies and medicinal production. 

reducing 

The  low  pension  adequacy  is  a  concern 
due  to  adverse  demographic  trends.  In 
2022,  the  aggregate  replacement  ratio  in 
Croatia  was  37%  against 58%  in  the  EU.  The 
recent  Pension 
Insurance  Act  amendment 
under  the  RRP  aims  to  improve  the  adequacy 
and  sustainability  of  the  pension  system  and 
provides  a  new  model  of  survivor’s  pension. 
The  capitalised  savings  system  was  improved 
by 
and 
administrative 
liberalising pension fund investments in 2024, 
which  should  have  a  positive  impact  on 
adequacy of pensions. However, there is scope 
to  further  improve  the  system’s  adequacy 
through  the  extension  and  equalisation  of 
working careers for men and women. Formerly 
that  addressed  earlier 
enacted 
country-specific  recommendations  related  to 
retirement  age,  early  retirement  age  and  the 
equalisation of the retirement age of men and 
revoked  after  2019  and 
women  were 
subsequent  measures  have  only  partial 
effects. In addition, special pension plans draw 

reforms 

costs 

resources  that  could  be  used  to  underpin  the 
adequacy  and  sustainability  of  the  general 
pension system.  

(23)  Regulation (EU) 2024/795 

17 

 
 
 
KEY FINDINGS 

resilience  plan 

With its wide policy scope and substantial 
financial  envelope,  Croatia’s  recovery 
and 
includes 
measures 
to  address  a  series  of 
structural  challenges,  in  synergy  with 
other  EU  funds,  including  cohesion  policy 
funds, by:  

(RRP) 

•  Accelerating  the  green  transition  and 
reducing dependence on fossil fuels by: 
(i) promoting  energy  efficiency  and  use  of 
(ii) boosting 
renewable  energy  sources; 
in 
building 
sustainable 
and 
sustainable water and waste management; 
and (iv) protecting biodiversity;  

renovation; 

transport, 

investing 

efficient 

(iii) 

•  Supporting  the  digital  transition  by: 
(i) investing  in  digitalisation  of  the  public 
administration,  educational  facilities  and 
the  digital 
businesses; 
disparities  between  urban  and  rural  areas; 
and (iii) investing in digital skills;  

reducing 

(ii) 

•  Improving  the  business  environment 
by: (i) reducing considerable regulatory and 
administrative  barriers;  (ii)  improving  the 
efficiency  of  public  administration,  the 
judiciary  and  the  management  of  state 
assets;  and 
incentivising  research, 
development and innovation activities;  

(iii) 

•  Developing  a  skilled  workforce  by:  (i) 
improving  infrastructure  and  educational 
outcomes of primary and secondary school 
students;  (ii)  investing  in  green  and  digital 
skills  to  match  current  and  future  labour 
market  demand;  and 
(iii) implementing 
active labour market policies;  

•  Improving 

social 

protection 

and 
inclusiveness  by: 
(i) strengthening  the 
quality,  efficiency  and  accessibility  of  the 
care  systems; 
long-term 
health  and 
(ii) developing 
family  and  community-
based  services  to  reduce  poverty  and  help 

18 

integrate  disadvantaged  groups;  and 
(iii) implementing  targeted  measures  to 
tackle  disparities  between  regions  and 
social groups. 

The  implementation  of  Croatia’s  RRP  is  well 
underway. Going forward, it is facing risks and 
challenges.  Further  efforts  are  key  for  a 
successful implementation of all the measures 
of Croatia’s RRP by August 2026. 

Beyond  the  reforms  and  investments  in 
the  RRP  and  cohesion  programmes, 
long-term 
Croatia  could  bolster 
competitiveness and productivity by:  

its 

– 

•  Strengthening  education  and  R&I 
performance,  and  adapting  education 
and  adult  learning  to  labour  market 
needs 
these  measures  would: 
(i) alleviate  skills  shortages  and  boost 
labour  supply; 
(ii)  encourage  business 
investment,  including  in  innovation;  and 
(iii) accelerate 
the  green  and  digital 
transitions;   

•  Promoting access to diverse sources of 
capital 
financing  and  developing 
markets  –  these  measures  would:  (i) 
support  productive  investment  in  and  the 
growth  of  Croatian  businesses,  especially 
SMEs  and  innovative  firms;  (ii)  reduce 
pressure  on  real  estate  prices;  and  (iii) 
improve  the  transmission  of  monetary 
policy  for  a  more  stable  and  resilient 
economy; 

•  Removing 

procedures, 

bottlenecks 

requirements 

and 
proportioning 
in 
thereby 
permitting 
increasing  the  share  of  renewables, 
particularly  from  solar  and  in  the 
enhancing 
sector, 
transport 
water/waste 
and 
to  a 
accelerating 

management 
transition 

the 

 
 
circular  economy  –  these  measures 
would:  (i)  decrease  reliance  on  fossil  fuels 
and  imports  of  essential  raw  materials; (ii) 
reduce  vulnerabilities  to  climate  risks;  and 
(iii) boost long-term productivity; 

•  Boosting  the  availability,  quality  and 
efficiency  of  social  and  healthcare 
services  with  a  focus  on  social  transfers, 
long-term  care/deinstitutionalisation  and 
preventive care – these measures would: (i) 
widen  the  labour  force  and  increase  its 
productivity;  and  (ii)  make  the  Croatian 
society more resilient and inclusive. 

19 

 
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 – implementation 

A4.  Other EU instruments for recovery and growth 

A5.  Resilience 

Environmental sustainability 

A6.  European Green Deal 

A7.  Energy transition and competitiveness 

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 2019-2023 CSRs 
Key facts on the Croatian RRP 

23 

25 

25 

27 

31 

33 

36 

38 

38 

42 

48 

50 

50 

52 

55 

58 

63 

65 

65 

67 

69 

71 

74 

74 

76 

79 

80 

28 
31 

 
 
 
Support from EU instruments in Croatia 
Resilience indices across dimensions for Croatia and the EU-27 
Indicators tracking progress on the European Green Deal from a macroeconomic perspective 
Key Energy Indicators 
Key indicators for a fair transition in Croatia 
Circularity indicators 

A3.2.  Measures in Croatia's RRP 
A4.1. 
A5.1. 
A6.1. 
A7.1. 
A8.1. 
A9.1. 
A10.1.  Key Digital Decade targets monitored by the Digital Economy and Society Index indicators 
A11.1.  Key innovation indicators 
A12.1.  Single Market and Industry 
A13.1.  Public administration indicators 
A14.1.  Social scoreboard for Croatia 
A14.2.  Croatia's situation 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 
Croatia’s progress on the 2019-2023 CSRs (2024 European Semester) 
Total grants disbursed under the RRF 
Total loans disbursed under the RRF 
Distribution of cohesion policy funding across policy objectives in Croatia 
Distribution of RRF funding by pillar in Croatia 
Greenhouse gas emissions from the effort sharing sectors in Mt CO2eq, 2005-2022 
Changes in livestock density and organic farming 
Environmental investment gap, annual average 
Croatia's energy retail prices for households and industry & service 
Trends in electricity prices for non-household consumers (EU and foreign partners) 
Croatia's installed renewable capacity (left) and electricity generation mix (right) 
Fair transition challenges in Croatia 
Job vacancy rate in transforming sectors and mining and quarrying 
ETS emissions by sector since 2013 

A1.1. 
A2.1. 
A3.1. 
A3.2. 
A4.1. 
A4.2. 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2. 
A7.3. 
A8.1. 
A8.2. 
A9.1. 
A11.1.  Top 10% most-cited publications in relation to Public R&D expenditure, 2020 
A12.1.  Labour productivity per person employed (index 100 in 2015) 
A13.1.  Adult education: a) participation rate in job-related employer-sponsored education and training (left side); b) mean 
instruction hours spent by participants in education and training by sector (centre); c) share of women and men in 
management positions in the public administration (right side) 
A15.1.  Underachievement rates by field, PISA 2012, 2018 and 2022 
A16.1.  Life expectancy at birth, years 
A16.2.  Projected increase in public expenditure healthcare over 2024-2070 
A17.1.  GDP per capita (2012) and GDP growth (2013-2022), Croatia 
A19.1.  Tax wedge for single and second earners, % of total labour costs, 2023 
A19.2.  Tax revenues from different tax types, % of total revenue 

LIST OF MAPS 

A17.1.  Regional Competitiveness Index 2.0, 2022 edition - Basic sub-index - Croatia 

32 
35 
36 
41 
47 
49 
51 
54 
56 
62 
64 
65 
66 
68 
69 
72 
75 
76 
79 
82 
82 

25 
27 
32 
32 
34 
34 
38 
40 
40 
42 
42 
43 
48 
49 
50 
55 
58 

64 
67 
69 
69 
71 
77 
78 

72 

24 

 
 
 
 
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  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 the EU context. 

to 

related 

Croatia  is  improving  on  almost  all  the  SDG 
indicators 
environmental 
sustainability (SDGs 2, 6, 7, 9, 11, 12 13, 15) 
and,  while  moving  away  from  its  target,  is 
doing  relatively  well  on  SDG  14.  However,  it 
still  needs  to  make  additional  efforts  to  catch  up 
with  the  EU  average  in  some  of  them,  especially 

SDGs   2,  6,  9,  11,  12  and  13.  Although  moving 
away from the target Croatia performs better than 
the  EU  (70.3%  vs  47.4%)  on  SDG 14  (Life  below 
water)  and  on  SDG 15  (Life  on  land)  (70.7%  vs 
56.3%). This is partly 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  (Affordable  and 
the  share  of 
clean  energy),  especially  on 
renewable 
energy 
in  gross 
energy 
consumption (up from 27.3% in 2017 to 29.4% in 
2022;  above  the  EU  average  of  23%).  Croatia’s 
recovery  and 
includes 
resilience  plan 
measures  to  further  improve  on  energy-related 
challenges,  namely  the  energy  renovation  of 
buildings,  increasing  overall  energy  efficiency  and 
advancing  the  decarbonisation  of  the  energy 
sector.  The  country  is  lagging  significantly  the  EU 
innovation  and 
average  on  SDG 9 
infrastructure) due to its low performance on 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 

(Energy, 

(RRP) 

final 

Graph A1.1: Progress towards the SDGs in Croatia 

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). 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 25 April 2024. Data refer mainly to the period 2017-2022 or 2018-2023. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

25 

 
 
 
 
 
 
 
improve 

rate  and 

development. Croatia needs to catch up on SDG 11 
(Sustainable  cities  and  communities),  where  it  is 
struggling  with  waste  recycling  and  wastewater 
indicators.  Croatia  is  also  lagging  the  EU  average 
on  SDG 2  (Zero  hunger).  This  is  mainly  due  to 
lower  sustainable 
higher  obesity 
indicators.  The  RRP 
agricultural  production 
envisages  measures 
these 
to 
shortcomings,  with  a  dedicated  component  to 
improve  waste  management  and  recycling,  and 
investments to boost the green transition and the 
circular  economy.  Croatia  needs  to  catch  up  on 
SDG 12 (Responsible consumption and production). 
This  is  in  particular  due  to  a  decrease  in  gross 
value  added  in  the  environmental  goods  and 
services  sector  (1.5%  in  2020;  EU  average  for 
2020:  2.5%)  simultaneously  with  increases  in 
passenger  car  CO2  emissions  and  material 
footprint in tonnes per inhabitant.    

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,  8,  4  and  5.  Significant 
improvements  were  made  on  poverty  indicators 
(SDG 1)  such  as  the  severe  material  and  social 
deprivation  rate  and  the  at-risk-of-poverty  rate 
(See  Annex  14). Croatia is  performing  well  on  the 
share  of  the  population  unable  to  keep  their 
homes  adequately  warm  (SDG 7;  from  7.4%  in 
2017 to 7% in 2022, and above the EU average of 
improving  on  SDG 10 
9.3%).  Croatia  is  also 
(Reduced  inequalities),  although  the  urban-rural 
gap for risk of poverty or social exclusion remains 
well above the EU average (HR 11% vs EU 0.4% in 
2022),  meaning  that  social  transfers  could  be 
better  targeted.  Although  Croatia  has  made 
improvements,  it  is  still  performing  below  the  EU 
average  on  SDG 3  (Good  health  and  well-being), 
SDG 8 (Decent work and economic growth), SDG 4 
(Quality  education)  and  SDG 5  (Gender  equality). 
This  is  particularly  the  case  for  healthy  life 
in  2021;  EU 
expectancy  (SDG 3;  58.6  years 
in  early 
average:  63.6  years),  participation 
childhood  education  (SDG 4;  77.8%  of  children 
aged 3 and over in 2021; EU average: 92.5%) and 
adult  participation 
(6.4%  of  the 
population aged 25-64 in 2023 vs EU average of 
12.7%).  The  RRP  envisages  measures  to  tackle 
these  issues  through  dedicated  components  on 
health  and  education.  These  include  actions  such 
as  the  2021-2027  national  health  development 
plan adopted in 2021; the revised legal framework 
for  adult  learning  adopted  in  2021,  amendments 
to  the  Act  on  early  childhood  education  and  care 

learning 

in 

(ECEC)  adopted  in  2022;  investments  in  the 
construction  and  reconstruction  of  ECEC  facilities; 
and  a  model  for  state  co-financing  of  ECEC 
facilities. 

Croatia  is  improving on  all the  SDGs related 
to  productivity  but  still  needs  to  catch  up 
with  the  EU  average  in  all  of  them  (SDGs 4, 
8,  9).  Although  Croatia  scores  above  the  EU 
average on adults with at least basic digital  skills 
(SDG 4; 59% of individuals aged 16-74 in 2023 vs 
an  EU  average  of  55.5%),  it  is  lagging  behind  on 
the share of households with a high-speed internet 
connection (SDG 9; 61.5% of households in 2022; 
EU  average:  73.4%).  This is  a  long-standing issue 
in  Croatia  due  to  its  extensive  coastal  areas. 
Taking  this  into  account,  the  RRP  has  measures 
dedicated  to  increasing  broadband  access  for 
households.  Employment 
indicators  for  SDG 8 
(Decent  work  and  economic  growth),  which 
improved in the recent years, are still below the EU 
average;  11.8  %  of  young  people  aged  15-29 
were  not  in  education,  employment  or  training  in 
2022  (EU  average:  11.2%);  the  employment  rate 
for the population aged 20-64 was 70.7% in 2022 
(EU average: 75.3%). 

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.  One  of  the  indicators 
linked to sustainable  economic growth for SDG   8 
(Decent work and economic growth), real GDP per 
capita, showed improvement in recent years but is 
still  below  EU  average.  Croatia  has  made  strong 
improvements  on  its  long-term  unemployment 
rate (SDG 8; from 3.4% of the active population in 
2018 to 2.0% in 2023, similar to the EU average). 
Access  to  justice  and  the  corruption  perception 
indices  (SDG  16)  are  below  the  EU  average  and 
point to structural issues linked to these areas. The 
Commission  is  monitoring  this  through  different 
channels  including  the  Rule  of  Law  Report.  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  63.0%  of  GDP  in  2023, 
below the EU average of 81.7%. The debt-to-GDP 
ratio  is  expected  to  drop  further  in  the  medium 
term, driven by a strong nominal growth that also 
supports government revenues. 

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

26 

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

The Commission has assessed the 2019-2023 
country-specific  recommendations  (CSRs) (24) 
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 (25)  and the 
commitments  in  its  RRP (26).  At  its  stage  of  RRP 
implementation,  50%  of  the  CSRs  focusing  on 
structural  issues  from  2019-2023  have  recorded 
at  least  ‘some  progress’,  while  46%  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. 

Graph A2.1: Croatia’s progress on the 2019-2023 
CSRs (2024 European Semester) 

Source: European Commission 

(24)  2023 CSRs : EUR-Lex - 32023H0901(11) - EN - EUR-Lex 

(europa.eu) 
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) 

(25)  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). 

(26)  Member States were asked to effectively address in their 
RRPs all or a significant subset of the relevant country-
specific recommendations issued by the Council. 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. 

27 

No progress4%Limited progress46%Some progress33%Substantial progress6%Full implementation11% 
 
 
 
 
  
 
 
 
Table A2.1:  Summary table on 2019-2023 CSRs 

(Continued on the next page) 

28 

CroatiaAssessment in May 2024*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, 2022, 2023 and planned as of 2025SDG 8, 16Reducetheterritorialfragmentationofthepublicadministrationandstreamline the functional distribution of competencies.Limited ProgressRelevant RRP measures being implemented as of 2022, 2023 and planned as of 2025SDG 10, 11, 162019 CSR 2Some 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, 2022 and planned as of 2025 and 2026SDG 4, 5Consolidate social benefits and improve their capacity to reduce poverty. Limited ProgressRelevant RRP measures being implemented as of 2021, 2023 and planned as of 2024 and 2025SDG 1, 2, 10Strengthen labour market measures and institutions and their coordination with social services. Some ProgressRelevant RRP measures being implemented as of 2022, 2023 and planned as of 2024, 2025 and 2026SDG 8In consultation with the social partners, introduce harmonised wage-setting frameworks across the public administration and public services.Full ImplementationRelevant RRP measures being implemented as of 2023 and planned as of 2024SDG 82019 CSR 3Limited ProgressFocus investment-related economic policy on research and innovation, Some ProgressRelevant RRP measures being implemented as of 2022 and planned as of 2024, 2025 and 2026SDG 9, 10, 11sustainable urban and railway transport, Limited ProgressRelevant RRP measures being implemented as of 2021, 2022 and planned as of 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, 2022, 2023 and planned as of 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, 2022, 2023 and planned as of 2025SDG 162019 CSR 4Some 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. Substantial ProgressRelevant RRP measures being implemented as of 2021, 2022 and planned as of 2024, 2025 and 2026SDG 16Reducethedurationofcourtproceedingsandimproveelectroniccommunication in courts. Limited ProgressRelevant RRP measures being implemented as of 2022 and planned as of 2023, 2024 and 2026SDG 16Reduce the most burdensome parafiscal chargesSubstantial ProgressRelevant RRP measures being implemented as of 2022 and planned as of 2023 and 2024 SDG 8, 9 and excessive product and services market regulation.Some ProgressRelevant RRP measures being implemented as of 2022 and planned as of 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, 2022, 2023 and planned as of 2024, 2025 and 2026SDG 32020 CSR 2Some ProgressStrengthen labour market measures and institutionsSome ProgressRelevant RRP measures being implemented as of 2022, 2023 and planned as of 2024, 2025 and 2026SDG 8and improve the adequacy of unemployment benefits and minimum income schemes.Limited ProgressRelevant RRP measures being implemented as of 2021, 2023 and planned as of 2024 and 2025SDG 1, 2, 10Increase access to digital infrastructure and services.Some ProgressRelevant RRP measures being implemented as of 2022 and planned as of 2023, 2024, 2025 and 2026SDG 9Promote the acquisition of skills.Some ProgressRelevant RRP measures being implemented as of 2021, 2022, 2023 and planned as of 2026SDG 42020 CSR 3Some ProgressMaintain measures to provide liquidity to small and medium-sized enterprises and the self-employed.Full ImplementationRelevant RRP measures being implemented as of 2022 and planned as of 2025 and 2026SDG 8, 9Further reduce parafiscal charges andSubstantial ProgressRelevant RRP measures being implemented as of 2022 and planned as of 2023 and 2024 SDG 8, 9restrictions in goods and services market regulation.Some ProgressRelevant RRP measures being implemented as of 2022 and planned as of 2023 and 2024 SDG 9Front-load mature public investment projectsSome ProgressRelevant RRP measures being implemented as of 2021 and 2022SDG 8, 16and promote private investment to foster the economic recovery.Some ProgressRelevant RRP measures being implemented as of 2022 and planned as of 2024, 2025 and 2026SDG 8, 9Focusinvestmentonthegreenanddigitaltransition,inparticularonenvironmental infrastructure, Limited ProgressRelevant RRP measures being implemented as of 2021, 2022 and planned as of 2023, 2024, 2025 and 2026SDG 6, 12, 15sustainable urban and rail transport,Limited ProgressRelevant RRP measures being implemented as of 2021, 2022 and planned as of 2024, 2025 and 2026SDG 11clean and efficient production and use of energyLimited ProgressRelevant RRP measures being implemented as of 2021, 2022 and planned as of 2023, 2024, 2025 and 2026SDG 7, 9, 13and highspeed broadband.Some ProgressRelevant RRP measures planned as of 2023 and 2026SDG 9 
 
 
  
 
Table (continued) 

(Continued on the next page) 

29 

2020 CSR 4Limited ProgressReinforcethecapacityandefficiencyofthepublicadministrationtodesignandimplementpublicprojectsandpoliciesatcentralandlocal levels.Some ProgressRelevant RRP measures being implemented as of 2021, 2022 and planned as of 2023 and 2025SDG 16Improve the efficiency of the judicial system.Limited ProgressRelevant RRP measures being implemented as of 2022 and planned as of 2023, 2024 and 2026SDG 162021 CSR 1Not relevant anymoreIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilienceFacility,andpreservenationallyfinancedinvestment.Keepthegrowthofnationallyfinanced current expenditure under control.Not relevant anymoreNot applicableSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.Not relevant anymoreNot applicableSDG 8, 16At the same time, enhance investment to boost growth potential Payparticularattentiontothecompositionofpublicfinances,bothontherevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasures,toensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,notably supporting the green and digital transition.Not relevant anymoreNot applicableSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,includingbystrengtheningthecoverage,adequacy,andsustainabilityofhealthandsocialprotection systems for all.Not relevant anymoreNot applicableSDG 8, 162022 CSR 1Substantial ProgressIn2023,ensurethatthegrowthofnationallyfinancedprimarycurrentexpenditureisinlinewithanoverallneutralpolicystance,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadytoadjustcurrentspendingtotheevolving situation.No ProgressNot applicableSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandother Union funds.Full ImplementationNot applicableSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachieving prudent medium-term fiscal positions.Not relevant anymoreNot applicableSDG 8, 162022 CSR 2Proceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestonesandtargetsincludedintheCouncilImplementing Decision of 20 July 2021.SwiftlyfinalisethenegotiationswiththeCommissionon2021-2027cohesionpolicyprogrammingdocumentswithaviewtostartingtheirimplementation.2022 CSR 3Limited ProgressDiversifyfossil-fuelimportsandreduceoverallrelianceonfossilfuels.Limited ProgressRelevant RRP measures being implemented as of 2022 and 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 implemented as of 2022 and planned as of 2024, 2025 and 2026SDG 7and transport sectors.Limited ProgressRelevant RRP measures being planned as of  2024, 2025 and 2026SDG 112023 CSR 1Substantial ProgressWinddowntheenergysupportmeasuresinforcebytheendof2023,usingtherelatedsavingstoreducethegovernmentdeficit.Shouldrenewedenergypriceincreasesnecessitatesupportmeasures,ensurethatthesearetargetedatprotectingvulnerablehouseholdsandfirms,fiscallyaffordable,andpreserveincentivesforenergy savings.Some ProgressNot applicableSDG 8, 16Ensureprudentfiscalpolicy,inparticularbylimitingthenominalincreaseinnationallyfinancednetprimaryexpenditurein2024tonotmore than 5.1%.No ProgressNot applicableSDG 8, 16PreservenationallyfinancedpublicinvestmentandensuretheeffectiveabsorptionofRRFgrantsandotherEUfunds,inparticularto foster the green and digital transitions.Full ImplementationNot applicableSDG 8, 16Fortheperiodbeyond2024,continuetopursueamedium-termfiscalstrategyofgradualandsustainableconsolidation,combinedwithinvestmentsandreformsconducivetohighersustainablegrowth, to achieve a prudent medium-term fiscal position.Full ImplementationNot applicableSDG 8, 16RRP 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. 
 
 
  
 
Table (continued) 

Note:            
* See footnote (26). 
** 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 

30 

2023 CSR 2ContinuethesteadyimplementationofitsrecoveryandresilienceplanandswiftlyfinalisetheREPowerEUchapterwithaviewtorapidlystartingitsimplementation.Proceedwiththespeedyimplementationofcohesionpolicyprogrammes,inclosecomplementarity and synergy with the recovery and resilience plan.2023 CSR 3Limited ProgressReduce overall reliance on fossil fuelsLimited ProgressRelevant RRP measures being implemented as of 2022 and planned as of 2023,  2024, 2025, and 2026SDG 7, 9, 13byacceleratingthedeploymentofrenewables,inparticularwind,solar,andgeothermalsources,finalisingtheincompletelegislativeframework,streamliningadministrativeproceduresforpermitting,simplifyingtheproceduresforinstallingrenewableenergysources(i.e.solarphotovoltaicfacilities)inmulti-apartmentbuildingsandproviding more legal certainty.Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of  2024, 2025 and 2026SDG 7, 8, 9, 13Support small-scale renewable energy generation capacity.Some ProgressRelevant RRP measures being planned as of  2024, 2025 and 2026 SDG 7, 9, 13Furtherupgradeelectricitytransmissionanddistributiongrids,inparticularbyimprovingthetransmissionlinksbetweenthenorthandsouth of the country, and advancing the roll-out of smart meters.Some ProgressRelevant RRP measures being planned as of  2024 and 2026SDG 7, 9, 13Acceleratetheimplementationofenergyefficiencymeasures,including the installation of heat pumps.Limited ProgressRelevant RRP measures being planned as of  2024, 2025 and 2026 SDG 7, 9, 13Reducedependenceonfossilfuelsinthetransportsectorbypromotingsustainablesolutions,inparticularrailandtheelectrification of road transport.Limited ProgressRelevant RRP measures being planned as of  2024, 2025 and 2026SDG 7, 11Stepuppolicyeffortsaimedattheprovisionandacquisitionoftheskills needed for the green transition.Limited ProgressRelevant RRP measures being implemented as of 2022 and planned as of 2025, 2026SDG 4RRP implementation is monitored through the assessment of RRP payment requests and analysis of the bi-annual reporting on the achievement of the milestones and targets, to be reflected in the country reports. Progress with the cohesion policy is monitored in the context of the Cohesion Policy of the European Union. 
 
  
 
ANNEX 3: RECOVERY AND RESILIENCE PLAN – IMPLEMENTATION 

This  Annex  provides  a  snapshot  of  Croatia’s 
implementation of its recovery and resilience 
plan  (RRP),  past  the  mid-way  point  of  the 
Recovery  and  Resilience  Facility’s 
(RRF) 
lifetime.  The  RRF  has  proven  central  to  the  EU’s 
recovery  from  the  COVID-19  pandemic,  helping 
speed  up  the  twin  green  and  digital  transition, 
while  adapting  to  geopolitical  and  economic 
resilience 
developments, 
against  future  shocks.  The  RRF  is  also  helping 
implement the UN Sustainable Development Goals 
and 
country-specific 
recommendations (see Annex 2). 

strengthening 

address 

and 

the 

The  RRP  paves  the  way  for  disbursing  up  to 
EUR 5.8 billion in grants and EUR 4.25 billion 
in  loans  under  the  RRF  over  the  2021-2026 
period,  representing  13.1%  of  Croatia’s 
GDP (27). As of 15 May 2024, EUR 3.7 billion have 
the  RRF, 
been  disbursed 
comprising  EUR  3.1  billion  in  grants  and  EUR  0.5 
billion in loans. 

to  Croatia  under 

Croatia  still  has  EUR  6.4  billion  available  in 
grants  and  loans  from  the  RRF.  This  will  be 
disbursed  after  the  assessment  of  the  future 
fulfilment  of  the  remaining  316  milestones  and 
targets (28)  included  in  the  Council  Implementing 
Decision (29)  (CID),  ahead  of  the  2026  deadline 
established for the RRF. 

Croatia’s progress in implementing its plan is 
recorded  in  the  Recovery  and  Resilience 
Scoreboard (30).  The 
scoreboard  gives  an 
overview  of  the  progress  made  in  implementing 
the  RRF  as  a  whole.  Graphs  A3.1  and  A3.2  show 
the  current  state  of  play  as  reflected  in  the 
scoreboard. 

Croatia’s  RRP  includes  a  REPowerEU  chapter 
to  phase  out  its  dependency  from  Russian 
fossil fuels, diversify its energy supplies, and 

(27)  GDP information is based on 2023 data. Source: 

https://ec.europa.eu/economy_finance/recovery-and-
resilience-scoreboard/index.html?lang=en    

(28)  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. 

(29)  https://data.consilium.europa.eu/doc/document/ST-10687-

2021-ADD-1/en/pdf 

produce  more  clean  energy  in  the  coming 
years.  To  kick-start  the  REPowerEU  chapter’s 
implementation, EUR 585.1 million were disbursed 
as  pre-financing  on  25  January  2024,  fostering 
the  launch  of  the  relevant  reform  which  aims  at 
increasing  green  skills  and  competences  in  the 
construction sector for non-EU workers.  

The  plan  has  a  strong  focus  on  the  green 
transition,  dedicating  39%  of  the  available 
funds  to  measures  that  support  climate 
objectives and 20% of its total allocation to 
support  the  digital  transition.  It  also  retains  a 
strong  social  dimension  with  social  protection 
measures,  especially  related  to  active  labour 
market policies and early childhood education and 
care. 

Table A3.1:  Key facts on the Croatian RRP 

Source: RRF Scoreboard. 

its  RRP 

implementation  of 
timely 

With  four  payment  requests  completed, 
Croatia’s 
is 
completion 
underway.  However, 
requires  increased  efforts.  The  Commission 
gave  a  positive  assessment  of  Croatia’s  first, 
second,  and  third  payment  requests,  taking  into 
account the opinion of the Economic and Financial 
Committee,  leading  to  EUR  700  million  being 
disbursed  in  financial  support  on  28  June  2022 
and  EUR  700  million  on  16  December  2022,  and 
another  EUR  700  million  on  30  November 
2023 (31).  The related 104 milestones and targets 
in  areas  such  as  public 
covered 

reforms 

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

resilience-scoreboard/country_overview.html 

(31)  When requested payments are disbursed, the pre-financing 
is cleared proportionally. The net amounts are quoted here. 

31 

Initial plan CID adoption date28 July 2021Scope Revised plan with REPowerEU chapterLast major revision8 December 2023Total allocation EUR 5.8 billion in grants and EUR 4.3 billion in loans (13.1% of 2023 GDP)Investments and reforms 157 investments and 78 reforms Total number of milestones and targets436Fulfilled milestones and targets120 (27.5% of total) 
 
 
 
 
  
 
 
 
administration,  anti-corruption,  fiscal,  anti-money-
science  and  higher 
laundering,  healthcare, 
education, research and innovation, labour market, 
renewable  energy 
waste  management  and 
sources,  as  well  as 
in  energy 
renovation of buildings, green and digital transition 
of tourism and reducing the administrative burden 
for businesses.   

investments 

Graph A3.1: Total grants disbursed under the RRF 

Commission  is  expected  within  two  months 
from  the  submission,  as  prescribed  by  the 
RRF  regulation.  Table  A3.2  highlights  some 
relevant measures achieved so far, and some that 
will be implemented before 2026 to keep making 
Croatia’s economy greener, more digital, inclusive, 
and resilient. 

Table A3.2:  Measures in Croatia's RRP 

Source: FENIX. 

Note: This graph displays the amount of grants, including pre-
financing, 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. 

The  fourth  payment  request,  which  the 
Commission  assessed  positively  on  29 
February  2024,  led  to  the  disbursement  of 
EUR  162.5  million  on  15  April  2024.  The 
disbursement reflected the positive assessment of 
9  milestones  and  7  targets  covering  measure 
related  to  public  administration,  the  judiciary, 
public procurement, early childhood education and 
care, as well as investments in the decarbonisation 
of  the  energy  sector,  electronic  communications, 
research and innovation, and health. 

Graph A3.2: Total loans disbursed under the RRF 

Source: RRF Scoreboard. 

fifth  payment 

Croatia’s 
request  was 
submitted on 15 April 2024, and the adoption 
the 
of  a  preliminary  assessment  by 

32 

EUR 3.14billion (54.3%)Total allocation: EUR 5.787billionEUR 0.53billion (12.5%)Total allocation: EUR 4.254billionReforms and investments implemented• Improving business environment and continuing administrative and fiscal burden relief• Reform of the wage system in public administration• Reform and strengthening of the research and development capacities of the public research sectorUpcoming reforms and investments• New water supply projects• Construction, upgrading, reconstruction and equipping of primary schools for single shift full-day teaching• Fostering energy efficiency, heat and renewable energy to decarbonise the energy sector 
 
   
 
   
 
   
 
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

EU funding instruments provide considerable 
resources for recovery and growth to the EU 
Member  States.  In  addition  to  the  EUR 10.0 
billion  of  Recovery  and  Resilience  Facility  (RRF) 
funding  described  in  Annex  3,  EU  cohesion  policy 
funds (32) provide EUR 8.7 billion to Croatia for the 
2021-2027 period (33).  Support  from  these  two 
instruments  combined  represents  around  24.52% 
of  the  country’s  2023  GDP,  well  above  the  EU 
average  of  5.38%  of  GDP (34).  Cohesion  policy 
supports  regional  development,  economic,  social 
and  territorial  convergence  and  competitiveness 
through  long-term  investment  in  line  with  EU 
priorities  and  in  accordance  with  national  and 
regional strategies. 

During  the  2014-2020  programming  period, 
cohesion  policy  funds  boosted  Croatia’s 
competitiveness, with  tangible achievements 
notably  in  research  and  innovation,  energy 
efficiency,  circular  economy,  education, 
employment  and  social  inclusion.  Over  the 
whole  period,  which  financed  investments  until 
December  2023,  cohesion  policy  funds (35)  had 
made  EUR 9.1  billion  available  to  Croatia (36),  of 
which  EUR 6  billion  has  been  disbursed  since 
March  2020,  when  the  COVID-19  pandemic 
began (37).  The  achievements  of  cohesion  policy 
funds  over  the  programming  period 
included 
support  to  R&D 
infrastructure  and  research 
projects  in  SMEs.  It  is  estimated  that  cohesion 
policy  funding  helped  create  over  11 000  new 
jobs.  Cohesion  policy  programmes  also  helped 
make the Croatian economy more energy efficient 
(with an estimated 85 million kWh energy savings) 

(32)  In 2021-2027, cohesion policy funds include the Cohesion 
Fund, the European Regional Development Fund, the 
European Social Fund Plus and the Just Transition Fund. 

(33)  European territorial cooperation (ETC) programmes are 
excluded from the figure. In 2021-2027, the total 
investment, including national financing, amounts to 
EUR 10.2 billion.  

(34)  RRF funding includes both grants and loans, where 

applicable. The EU average is calculated for cohesion policy 
funds excluding ETC programmes. GDP figures are based on 
Eurostat data for 2022. 

(35)  In 2014-2020, cohesion policy funds included the Cohesion 

Fund, the European Regional Development Fund, the 
European Social Fund and the Youth Employment Initiative. 
REACT-EU allocations are included but ETC programmes are 
excluded. 

(36)  In 2014-2020, the total investment, including national 

financing, amounted to EUR 10.6 billion.  

(37) Cut-off date: 14 May 2024. 

and  boost  the  circular  economy  (for  example, 
closing  or  remediating  29  landfills,  remediating 
56.74  ha  of  land  and  providing  an  additional 
263 000  people  with 
improved  water  supply 
systems).  Cohesion  policy  also  has  increased 
employment and reduced the number of people at 
risk  of  poverty  or  exclusion  by  225 000  (meeting 
already by 2016 the national target to reduce the 
number of people at risk of poverty or exclusion by 
150 000).  Cohesion  policy  significantly  improved 
educational  facilities  in  Croatia,  providing  over 
180 000  students  and  nearly  60 000  teachers 
with  upgraded  ICT  equipment  and  infrastructure, 
and over 9 000 beds in new or renovated student 
dormitories, 
for 
students.  Over  the  same  period,  over  more  than 
under 
received 
900 000 
employment,  upskilling,  education  and  social 
inclusion measures funded by the European Social 
Fund  in  Croatia.  During  the  COVID-19  pandemic, 
the ESF helped maintain at least 353 000 jobs in 
the economy. 

conditions 

improving 

support 

people 

living 

In  the  current  programming  period,  cohesion 
policy  will  provide  a  further  boost  to 
Croatia’s  competitiveness,  to  the  green 
transition  and  to  social  cohesion,  improving 
the living and working conditions of Croatia’s 
people.  In  2021-2027,  significant  investments 
will  be  made  to  improve  the  energy  performance 
of 300 dwellings, ensure access to drinking water 
to  around  98%  of  the  population  and  to  provide 
proper  wastewater  treatment  to  around  86%  of 
the  population. 
It  will  help  achieve  a  40% 
reduction  in  the  volume  of  landfilled  waste  by 
creating four new operational waste management 
centres.  The European Social Fund Plus (ESF+) will 
provide  crucial  investment  in  people  and  reforms 
spread 
relatively  evenly  across  employment, 
education/skills and social inclusion areas.  

Croatia  has  allocated  EUR 0.6  billion  to 
support  education  and skills.  This  funding  will, 
for  example,  boost  green  and  digital  skills  by 
supporting  action  to  adapt  vocational  education 
and training to labour market demand. It will also 
support  self-employment  and  upskilling  in  the 
green  and  digital  economy,  with  a  focus  on 
vulnerable  groups.  The  ESF+  also  supports  social 
protection  and  social  inclusion  measures  (EUR 0.6 
billion), including action to deinstitutionalise social 
services  and  to  develop  quality  long-term  care. 
With  this  work,  cohesion  policy  substantially 
contributes  to  achieving  the  UN  Sustainable 
Development Goals (SDGs) in Croatia, in particular 

33 

 
 
 
 
 
funding  ensures  an  effective  and  comprehensive 
reform of the primary education sector in Croatia. 
The  contribution  of  cohesion  policy  and  RRP 
funding by different policy objectives is illustrated 
by Graphs A4.1 and A4.2. 

The Technical Support Instrument (TSI) helps 
Croatia  invest  in  its  public  administration 
and create a better enabling environment for 
EU  and  national  investment.  The  TSI  has 
funded  projects  Croatia  to  design  and  implement 
growth-enhancing 
reforms  since  2017.  The 
support  provided  to  Croatia  in  2023  included 
action 
property 
management,  reform  the  civil  status  registries  by 
using  advanced 
technological  solutions  and 
advance  the  strategic  framework  to  promote 
private  investment.  The  TSI  also  helps  Croatia  to 
implement  specific 
investments 
included in its RRP, for instance to implement the 
water  management  reform  that  aims  to  reduce 
the excessive losses from water supply systems.  

reforms  and 

state-owned 

optimise 

to 

Graph A4.2: Distribution of RRF funding by pillar in 
Croatia 

(1) Each RRP measure helps achieve the aims of two of the 
six policy pillars of the RRF. The primary contribution is shown 
in the outer circle while the secondary contribution is shown in 
the inner circle. Each contribution represents 100% of the RRF 
funds. Therefore, the total contribution to all pillars displayed 
on this chart amounts to 200% of the RRF funds allocated to 
Croatia. 
Source: European Commission 

Croatia  also  receives  funding  from  several  other 
EU  instruments,  including  those  listed  in  Table 
A4.1. 

SDG 9 (Industry, innovation, infrastructure), SDG 8 
(Decent  work  and  economic  growth)  and  SDG  4 
(Quality education). 

Through combined action, cohesion policy and 
the recovery and resilience plan (RRP) have a 
mutually  reinforcing  impact  in  Croatia.  For 
instance,  under  the  RRP,  Croatia  has  brought  in 
performance-based funding for universities, which 
institutional  funding  for  public 
should  boost 
research 
institutions  and  higher  education 
institutions going forward. It is also a first step to 
tackling issues linked to the fragmentation of R&I 
institutions  and  potentially  to 
improving  the 
efficiency of funding. The RRP contains substantial 
investment  programmes 
support  young 
researchers  and  science-business  collaboration. 
Cohesion  policy  funding  will  focus  partially  on 
completing  R&D  infrastructure  and  on  boosting 
cooperation  between  public  research  and  SMEs, 
enhancing  technology  transfer  and  rendering 
research more market-relevant. Croatia's RRP also 
brings  in  a  reform  to  set  up  single-shift  schools 
with the future plan to lead to full-day teaching in 
primary  schools.  The  first  phase  involves  building 
the infrastructure needed to increase the share of 
students  attending  primary  single-shift  schools 
from 40% to 70% (38). The following phase should 
increase the share from 70% to 100%.  

to 

Graph A4.1: Distribution of cohesion policy funding 
across policy objectives in Croatia 

Source: European Commission 

In  parallel,  cohesion  policy  funds  finance 
projects  to  modernise  institutions  providing 
primary  education.  In  particular,  investments  in 
infrastructure  and  equipment  will  enable  schools 
that  currently  operate  in  one  shift  to  move  to  a 
whole-day  school  model.  This  complementary 
approach  between  RRP  and  cohesion  policy 

(38)  It will be 100% once the addendum is adopted. 

34 

PO1 Smarter EuropePO2 Greener EuropePO3 Connected EuropePO4 Social EuropePO5 Europe closer to citizensPO8 JTF specific objectiveGreen transitionDigital transformationSmart, sustainable and inclusivegrowthSocial & territorial cohesionHealth & resilienceNext generation 
   
 
   
Table A4.1:  Support from EU instruments in Croatia 

(1) RRF implementation period is 2021-2026. 
(2) The public sector loan facility’s programming period is 2021-2025 and the amount reflects the national share in its grant 
component reserved until the end of the period.   
(3) Common agricultural policy programming periods are 2014-2022 and 2023-2027.   
(4) EMFF – European Maritime and Fisheries Fund, EMFAF – European Maritime, Fisheries and Aquaculture Fund. 
(5) Data on the Connecting Europe Facility covers transport and energy and has a cut-off date of 15 May 2024. 
(6) Data on Horizon Europe (2021-2027) has a cut-off date of 13 May 2024. 
(7) 2021-2027 data on the LIFE programme has a cut-off date of 15 May 2024. 
(8) The amount of the EU guarantee signed under the EFSI Infrastructure and Innovation Window was derived based on the 
signed amount of the operations and the average internal multiplier, as reported by the EIB (cut-off date is 31 December 2023). 
(9) The amount of the EU guarantee and of the volume of operations signed under InvestEU includes the EU compartment as well 
as the Member State compartments (cut-off date is 31 December 2023).   
(10) SURE - European instrument for temporary support to mitigate unemployment risks in an emergency. 
Source: European Commission 

35 

Amount 2021-2027 (EUR million)Cohesion policy8 706.6RRF grants (1)5 786.5Public sector loan facility (grant component) (2)14.1Common agricultural policy (3)3 385.0EMFF/EMFAF (4)243.7Connecting Europe Facility (5) 287.5Horizon 2020 / Horizon Europe (6) 92.7LIFE programme (7) 29.2Volume of operations (EUR million)European Fund for Strategic Investment 2015-2020 (8) 405.8InvestEU 2021-2027 (9) 125.4PeriodTotal amount available (EUR million)Disbursed amount (EUR million)SURE (10)2020-20221 570.61 570.6RRF 2021-20264 254 529.94 200.0 101.8 38.5EU loans252.6 574.0 138.2 15.7EU guaranteesEU Guarantee (EUR million)EU grantsAmount 2014-2020 (EUR million)  9 114.9-- 
  
 
  
 
ANNEX 5: RESILIENCE 

Table A5.1:  Resilience indices across dimensions for Croatia and the EU-27 

(1) The synthetic indices aggregate the relative resilience situation of countries across all considered indicators. For an indicator, 
each country’s relative situation in the latest available year is compared with the collection of values of that indicator for all 
Member States and all years in the reference period. 
Source: Resilience Dashboards - version spring 2024, data up to 2022 

This  Annex  uses  the  Commission’s  resilience 
(RDB) (39)  to  show  Croatia’s 
dashboards 
relative 
and 
resilience 
vulnerabilities (40)  that  may  be  of  relevance 
for  societal,  economic,  digital,  and  green 
transformations, and for dealing with future 
shocks and geopolitical challenges (41). 

capacities 

and 

somewhat 

According  to  the  RDB’s  set  of  resilience 
indicators,  Croatia  has  similar  overall 
vulnerabilities 
lower 
capacities  than  the  EU  average,  with  both 
medium vulnerabilities and capacities.  This is 
reflected  in  the  distribution  of  indicators  across 
different resilience categories, with around 30% of 
the  country’s  capacity  indicators  falling  into  the 
low  or  medium-low  category.  Around  30%  of  its 
vulnerability  indicators  are  medium-high  or  high. 

(39)  Https://ec.europa.eu/info/strategy/strategic-

planning/strategic-foresight/2020-strategic-foresight-
report/resilience-dashboards_en. Resilience is defined as the 
ability not only to withstand and cope with challenges but 
also to undergo transitions, in a sustainable, fair, and 
democratic manner. 2020 Strategic Foresight Report: 
Charting the course towards a more resilient Europe 
(COM(2020) 493). 

(40)  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, 
while capacities refer to enablers or abilities to cope with 
crises and structural changes and to manage transitions. 

(41)  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. 

The  level  of  overall  capacities  has  deteriorated 
compared to the 2023 RDB.  

Compared  to  the  2023  RDB,  Croatia’s  social 
and  economic  capacities  and  vulnerabilities, 
the 
at  medium,  remained  stable.  Among 
country’s  key  challenges  are  the  low  impact  of 
social transfers on poverty reduction, the relatively 
low  participation  of  adults  in  learning  and  the 
medium-low Programme for International Student 
Assessment  (PISA)  performance  of  students.  As 
that  of  other  EU  countries  has,  post-Covid, 
Croatia’s  household  savings 
rate  has  fallen 
significantly. 

increased 

In  the  green  dimension,  capacities  (medium-
high)  remain  the  same  as  in  the  2023  RDB 
(medium). 
while  vulnerabilities 
Croatia  performs  above  the  EU  average  in  terms 
of  its  vulnerability  indicators,  particularly  with 
respect  to  its  lower  greenhouse  gas  emissions  as 
well as its lower water exploitation index. Its green 
dimension  capacities  are  medium-high,  but  some 
of  its  capacity  indicators  are  among  the  worst 
compared  to  the  EU  average,  such  as  urban 
wastewater  treatment,  environmental  patents  per 
capita  (although  their  number  has  significantly 
increased), 
in 
added 
gross 
environmental goods and the services sector. 

value 

and 

In the digital dimension, Croatia has medium-
high  vulnerabilities,  higher  than  the  EU 
average,  and  medium-high  capacities,  on  a 
par  with  the  EU  average.  Some  of  its  most 
pressing  challenges  are  inadequate  information 
and communication (ICT) training for teachers and 

36 

HRHREU-272023 RDB2024 RDB2024 RDBHighMedium-highMediumMedium-lowLowHighMedium-highMediumMedium-lowLowDimensionDistribution of indicators by vulnerabilities and capacitiesOverall resilienceVulnerabilities0.530.470.50Capacities0.610.560.67VulnerabilitiesSocial and economicVulnerabilities0.430.500.47Capacities0.490.420.670.650.610.65GreenVulnerabilities0.710.590.44Capacities0.650.630.70CapacitiesGeopoliticalVulnerabilities0.620.480.41Capacities0.610.630.65DigitalVulnerabilities0.370.320.52Capacities0%20%40%60%80%100%Vulnerabilities(57 indicators)Capacities(64 indicators) 
 
 
 
   
 
 
the lack of online public services for businesses. It 
also  has  medium-high  vulnerabilities  with  respect 
to  access  to  public  digital  services  and  the  urban 
versus  rural  broadband  access  gap.  On  the  other 
hand,  with  medium-high  capacities,  Croatia  is 
doing better than most of the EU, in terms of the 
research and development of businesses in the ICT 
sector  and  adults’  and  young  people’s  advanced 
digital competences. 

has  medium-high 

Croatia 
geopolitical 
capacities  and  medium  vulnerabilities  that 
are  on  par  with  the  EU  average.  It  has  the 
least  concentrated  value  chain  partners  of  all  EU 
countries,  but  at  the  same  time  some  persisting 
low  capacities  in  terms  of  backward  participation 
in  global  value  chains,  and  low  extra-EU  trade 
openness.  

37 

 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 6: EUROPEAN GREEN DEAL 

Croatia  has  made  progress  in  the  green 
transition,  with  more  action  needed 
in 
several  areas,  including  tackling  potential 
losses  from  climate  hazards,  on  sustainable 
water  management,  on  the 
institutional 
framework on climate adaptation, and on the 
circular  economy.  This  Annex  provides  a 
snapshot  of  climate,  energy,  and  environmental 
aspects of the transition in Croatia (42). 

Croatia’s  draft  updated  national  energy  and 
climate  plan 
(NECP)  has  only  partial 
information  on  the  investment  needs  to 
achieve its 2030 climate and energy targets. 
It  is  therefore  not  possible  to  estimate  the 
investment  gap.  The  plan  outlines  the  main 
funding  sources  for  most  measures  except  in  the 
area  of  research,  innovation,  competitiveness  and 
skills. The sources include EU funding programmes, 
national,  regional,  and  municipal  financing,  funds 
from development banks (EIB, EBRD, World Bank), 
and private-sector funding. However, the plan does 
not explain their contributions and the descriptions 
given  are  mostly  qualitative.  It  does  not  indicate 
the contribution from the Recovery and Resilience 
Facility either (43). 

the 

planned 

Croatia is projected to reach its 2030 effort 
it  adopts  and 
sharing  target,  provided 
additional 
implements 
measures (44). In 2022, Croatia’s greenhouse gas 
emissions from these sectors are expected to have 
been  6.1%  below  2005  levels.  Additional  policies 
planned  in  Croatia’s  draft  updated  NECP  are 
projected  to  reduce  these  emissions  by  17.1% 
from 2005 levels. This results in a reduction of 0.4 

percentage  points  beyond  Croatia’s  effort  sharing 
target  to  reduce  by  17.1%.  Current  policies  are 
projected to reduce its effort sharing emissions by 
10.3%  from  2005  levels  by  2030 (45).  Hence  the 
target 
the 
implementation of all the policies and measures in 
the draft updated NECP. 

attained  without 

cannot 

be 

Graph A6.1: Greenhouse gas emissions from the 
effort sharing sectors in Mt CO2eq, 2005-2022 

Source: European Environment Agency 

is  scope  for 

There 
increasing  Croatia’s 
targets in its final updated NECP (46). Croatia’s 
renewable  energy  contribution  set  in  its  draft 
updated  NECP,  42.5%  by  2030,  is  slightly  below 
the  required  contribution  of  44%.  Its  energy 
efficiency  contribution  of  8.14  Mtoe  in  primary 
energy consumption and 6.55 Mtoe in final energy 
consumption  for  2030  set  in  the  draft  NECP  are 
significantly  less  ambitious  than  the  contribution 
required under the Energy Efficiency Directive. The 
plan  does  not  provide  a  clear  explanation  or 
details  explaining  why  Croatia  has  barely 

(42)  This Annex is complemented by Annex 7 on energy transition 

and competitiveness, Annex 8 on the fair transition to 
climate neutrality, Annex 9 on resource efficiency, circularity, 
and productivity, and relevant topics in other annexes to this 
country report. 

(43)  See the Commission’s (2023) assessment of the draft 

national energy and climate plan of Croatia. 

(44)  The national greenhouse gas emission reduction target is 
laid down in Regulation (EU) 2023/857 (the Effort Sharing 
Regulation). The aim is to align action in the sectors 
concerned with the objective to reach the EU-level economy-
wide target of greenhouse gas reductions of at least 55% 
compared to 1990 levels. The target also applies to the 
sectors outside the current EU Emissions Trading System, 
notably buildings (heating and cooling), road transport, 
agriculture, waste, and small industry (known as the effort 
sharing sectors). 

(45)  The effort sharing emissions for 2022 are based on 
approximated inventory data. The final data will be 
established in 2027 after a comprehensive review. 
Projections on the impact of current policies (‘with existing 
measures’, WEM) and additional policies (‘with additional 
measures’, WAM) as per Czechia’s draft updated NECP. 

(46)  The EU target set out in the revised Renewable Energy 

Directive is to have 42.5% of gross final energy consumption 
coming from renewable energy sources by 2030, with the 
aspiration to reach 45%. The formula in Annex I to Directive 
(EU) 2023/1791 sets the indicative national contribution for 
Croatia at 6.83 Mtoe for primary energy consumption. The 
Commission communicated a corrected national contribution 
of 5.88 Mtoe in final energy consumption for 2030 in 
accordance with Article 4(5) of the Energy Efficiency 
Directive to increase the contribution towards the Union’s 
binding energy efficiency target. See the Commission 
Recommendation of 18.12.2023 to Croatia. 

38 

0246810121416182020052022MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
 
 
 
      
 
 
 
increased  its  national  contribution  to  the  EU’s 
2030 energy efficiency targets. 

The  transition  to  sustainable  transport  has 
yet  to  gain traction in Croatia (47).  At  0.2%  in 
2022, battery electric cars so far only account for 
a marginal  share of Croatia’s passenger car fleet. 
With  1 280  publicly  accessible  charging  points  in 
2023, there is one for every four e-vehicles. 88% 
of distances travelled are by passenger cars, with 
rail used for only a very low share, at 2%. 62% of 
freight  is  transported  by  road  in  Croatia.  The 
country has a higher share of pipeline transport at 
11% than the EU average of 4%. Only 38% of the 
rail network is electrified. 

Fires and ageing forests are growing risks to 
the  carbon  removal  capacity  of  Croatia’s 
land  use,  land-use  change  and  forestry 
(LULUCF)  sector.  Forests  play  the  main  role  in 
Croatia  in  removing  carbon  through  land  use.  To 
reach  the  2030  LULUCF  target,  additional  carbon 
removals  of  593 kt CO2eq  are  needed (48)  to 
remove  5 527 kt CO2eq  in  total.  By  the  latest 
projections  for  2030,  Croatia  is  expected  to 
undershoot the target (49). 

Croatia’s  climate  adaptation  challenges 
include  a  high  climate  protection  gap (50), 
risks to water management, and institutional 
deficiencies.  Croatia  is  vulnerable  to  floods, 
drought, sea-level  rise and heatwaves. Agriculture 
and  water  management  are  the  sectors  affected 
most but hydro and thermal power production also 
face  risks.  Floods  are  a  risk  both  in  terms  of 
expected  annual  damage  and  in  the  population 
exposed. Over the past decades, only 5% of losses 
caused  by  climate-related  events  were  insured. 
Given  the  increasing  frequency  of  floods,  action 
taken so far is insufficient to limit the damage and 
safeguard  the  free  flow  of  rivers  and  aquatic 
ecosystems.  Green 
infrastructure  and  nature-
based  solutions  are  key  to  mitigating  these 
climate-related  events.  Croatia  has  a  wide 

(47)  Unless otherwise indicated, data in this section refer to 
2021. See European Commission, 2023, EU transport in 
figures, transport.ec.europa.eu. 

(48)  National LULUCF targets of the Member States in line with 

Regulation (EU) 2023/839. 

(49)  Projections submitted in Croatia’s draft updated national 

energy and climate plan, 2023. 

(50)  On the climate protection gap, see the annotations to Table 

A6.1. 

protection gap for floods and the gap for wildfires 
requires close monitoring. Putting in place the right 
is 
institutional  settings 
climate 
to 
crucial 
adaptation.  On 
lacks  a 
front,  Croatia 
this 
governance  structure  and  systems  to  support 
systematic  and  regular  planning,  monitoring  and 
evaluation  of  policies, 
including  appropriate 
coordination between sectors of government (51). 

to 

improve  water 
Croatia  has  scope 
productivity, 
status  of 
the  ecological 
freshwater  resources  and  to  protect  nature. 
In  2021,  Croatia’s  economy  generated  EUR 204 
per cubic meter of water abstracted, below the EU 
average.  According  to  data  in  the  2nd  river  basin 
management  plan,  42%  of  all  surface  water 
bodies  achieved  at  least  a  good  ecological  status 
and  92%  achieved  a  good  chemical  status. 
Croatia's  marine  waters  are  not  yet  all  in  a  good 
environmental status as tracked by the descriptors 
used  in  the  Marine  Strategy  Framework  Directive 
and  based  on  the  latest  data  reported  for  its 
marine 
yet 
Croatia 
communicated  its  programme  of  measures  under 
the  Directive,  due  in  May  2022.  By  the  end  of 
2021,  Croatia  had  protected  almost  38%  of  its 
land, already meeting the EU target for 2030, and 
9.5%  of  its  marine  areas.  To  date,  nature  and 
biodiversity protection objectives are insufficiently 
integrated 
flood  protection  measures, 
hydropower development and inland navigation. 

strategy. 

into 

has 

not 

Air  quality  in  Croatia  still  gives  cause  for 
concern.  The  latest  available  annual  estimates 
(2021) indicate that 921 years of life are lost for 
every  100 000 inhabitants  due  to  fine  particulate 
matter exposure (PM2.5) and 91 years to nitrogen 
dioxide  (NO2),  both  above  the  EU  average.  The 
smog-precursor  emission  intensity  fell  by  47% 
between  2008  and  2021  and  reached  1.41 
tonnes/EUR 10 in 2021, above the EU average. 

Intensive  agriculture 
is  one  of  main 
pressures  in  Croatia  on  nature  and  water 
pollution. The latest figures for the gross nitrogen 
balance on agricultural land in Croatia indicate an 
average surplus of 53.4 kg of nitrogen per hectare 
per year in 2019, lower than in the previous year. 
1.5%  of  groundwater  monitoring  stations  indicate 
levels  above  the  maximum  50  mg  nitrates/l.  The 

(51)  See the Commission’s 2023 assessment and 

recommendation on Croatia’s progress on climate 
adaptation. 

39 

 
 
 
Graph A6.3: Environmental investment gap, annual 
average 

is 

gross phosphorus balance was 1.6 kg/ha in 2019. 
less 
The  chemical  status  of  waterbodies 
affected by pesticide pollution in Croatia than the 
EU  average.  In  2021,  4.7%  of  monitoring  sites 
were  reported  to  have  pesticide  levels  exceeding 
the  thresholds  set  by  the  Water  Framework 
Directive.  The  livestock  density decreased in most 
of  the  EU  countries  between  2010  and  2020.  In 
Croatia, the livestock density index decreased from 
0.75% to 0.61%, below the EU average. 

Graph A6.2: Changes in livestock density and 
organic farming 

The numbers are computed by the European Commission 
based on the latest internal reports, Eurostat, EIB and national 
data sources. 
Source: European Commission 

Livestock unit (LSU)/ha of UAA: it measures the stock of 
animals (cattle, sheep, goats, equidae, pigs, poultry and 
rabbits) converted in LSUs per hectare of UAA. 
Source: Eurostat 

Croatia  would  benefit  from  investing  in 
sustainable  water  management,  waste 
management,  the  circular  economy  and 
biodiversity.  Between  2014  and  2020,  the 
environmental  investment  gap  was  estimated  at 
EUR 921  million  per  year,  equivalent  to  1.9%  of 
GDP,  above  the  EU  average  of  0.8%.  The  gap  is 
estimated to increase slightly over the 2021-2027 
period  at  EUR 1  billion  per  year  (1.5%  of  GDP). 
There  remains  an  opportunity  to  increase  funding 
for  sustainable  water  management  (EUR  325 
million), and for biodiversity and ecosystems (EUR 
294  million).  Croatia  would  also  benefit  from 
investing more  in  pollution  prevention  and  control 
and in circular economy and waste.  

40 

01202468101220162020% LSU per hectare% of total utilised agricultural areaLivestock density index Croatia (% LSU per ha)Livestock density index EU-27 (% LSU per ha)Organic farming Croatia (% of total utilised agricultural area)Organic farming EU-27 (% of total utilised agricultural area)19361735852583251182940100200300400500600700Pollution prevention &controlWater managementCircular economy andwasteBiodiversity andecosystemsmillion EUR2014-20202021-2027 
        
        
 
Table A6.1:  Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

Sources:  (1)  Member  States’  emission  data  for  2019  and  2020  are  in  global  warming  potential  (GWP)  values  from  the  4th 
Assessment Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC). Member States’ 2005 base year emissions 
under  Regulation  (EU)  2018/842,  emissions  data  for  2021  and  2022,  and  2030  projections  are  in  GWP  values  from  the  5th 
Assessment Report (AR5) of the IPCC. 2021 data are based on the final inventory reports, 2022 data are based on approximated 
inventory reports and European Environmental Agency’s calculation of effort sharing emissions. The final data for 2021 and 2022 
will  be  established  after  a  comprehensive  review  in  2027.  The  2030  target  is  in  percentage  change  of  the  2005  base  year 
emissions. Distance to target is the gap between the 2030 target and projected effort sharing emissions with existing measures 
(WEM) and with additional measures (WAM), in percentage change from the 2005 base year emissions. The measures included 
for  the  2030  emission  projections  reflect  the  state  of  play  as  reported  in  Member  States'  draft  updated  national  energy  and 
climate plans or, if unavailable, as reported by 15 March 2023 as per Regulation 2018/1999. (2) Net removals are expressed in 
negative figures, net emissions in positive figures. Reported data are from the 2024 greenhouse gas inventory submission. 2030 
value  of  net  greenhouse  gas  removals  as  in  Regulation  (EU)  2023/839  –  Annex  IIa.  (3)  The  2030  national  objectives  for 
renewable  energy  and  energy  efficiency  are  indicative  national  contributions,  in  line  with  Regulation  (EU)  2018/1999  (the 
Governance  Regulation),  the  EU-level  2030  renewable  energy  target  set  out  in  Directive  EU/2018/2001  amended  by  Directive 
EU/2023/2413 (the revised Renewable Energy Directive) – 42.5% of gross final energy consumption with the aspiration to reach 
45% –, and the formula in Annex I to Directive (EU) 2023/1791 (the Energy Efficiency Directive). (4) Passenger battery electric 
vehicles (BEV) and fuel cell electric vehicles (FCEV). (5) The climate protection gap refers to the share of non-insured economic 
losses caused by climate-related disasters, based on modelling of the risk from floods, wildfires, windstorms, and the insurance 
penetration rate. Scale: 0 (no protection gap) –4 (very high gap) (European Insurance and Occupational Pensions Authority, 2022). 
(6) Total water consumption in renewable freshwater resources available for a territory and period. (7) Material extractions  for 
consumption and investment. (8) Years of potential life lost through premature death due to exposure to particulate matter with a 
diameter  of  less  than  2.5  micrometres.  (9)  Share  of  habitats  in  good  conservation  status  according  to  the  records  submitted 
under Art. 17 of Council Directive 92/43/EEC (the Habitats Directive) for 2013-2018. (10) Multi-species index measuring changes 
in population abundances of farmland bird species. (11) Source: annex 12 of the Commission’s proposal for a soil monitoring law, 
SWD (2023) 417 final. (12) Estimates of organic carbon content in arable land. 

41 

Target200520192020202120222030WEMWAMProgress to climate and energy policy targetsGreenhouse gas emission reductions in effort sharing sectors (1)Mt CO2eq, %, pp18 056.3-8%-5%-3%-6%-17%-60Net greenhouse gas removals from LULUCF (2)Kt CO2eq-8 003-5 726-5 659 -5 764-4 867-5 527n/an/aShare of energy from renewable sources (1) (3)%24%28%31%31%29%44%--Energy efficiency: primary energy consumption (3)Mtoe9.18.27.88.38.36.8Energy efficiency: final energy consumption (3)Mtoe7.26.96.57.06.95.9Projected20182019202020212022202120222030Green transition: mobility         Greenhouse gas emissions: road transportMt CO2e---6.25.9769.0786.65.8Share of zero-emission vehicles in new registrations (4)% 0.10.21.533912.1n/aNumber of publicly accessible AC/DC charging points --4987951116299178446956n/aShare of electrified railways%37.3%37.1%37.1%38.0%-56.1%-n/aGreen transition: buildings         Greenhouse gas emissions: buildingsMt CO2e---3.43.4537.0486.73.0Final energy consumption in buildings2015=10098.1%96.3%95.0%103.0%96.9%104.0%97.2% Climate adaptation         Climate protection gap (5)score 1-4--2.42.12.01.51.5n/a20182019202020212022202020212022State of the environmentWater | Water exploitation index (WEI+) (1) (6)% of renewable freshwater0.20.2---3.6--Circular economy | Material footprint (7)tonnes per person13.914.213.213.615.014.214.814.9Pollution | Years of life lost due to air pollution by PM2.5 (8)per 100.000 inhabitants1 183893996921-545584-Biodiversity | Habitats in good conservation status (9)%39.214.7                       Common farmland bird index (10)2000=100-----78--Green transition: agri-food sectorOrganic farming% of total utilised agricultural area6.947.197.218.26-9.1--Nitrates in groundwatermg NO3/litre18.5218.2918.51--20.42--Food waste per capitaKg per capita7171-130131-Share of soil in poor health (11)%941Soil organic matter in agricultural land (12)Mt per ha58----7 904--DistanceEU-27 
 
       
 
ANNEX 7: ENERGY TRANSITION AND COMPETITIVENESS 

This  Annex (52)  sets  out  Croatia’s  progress 
and  challenges  in  accelerating  the  net-zero 
energy  transition  while  bolstering  the  EU’s 
competitiveness 
energy 
sector (53). It considers measures and targets put 
forward in the draft updated National Energy and 
Climate Plans (NECP) for 2030 (54). 

clean 

the 

in 

Graph A7.1: Croatia's energy retail prices for 
households and industry & service 

trend  in  the  first  half  of  2023,  then  declined  by 
20% in the second half, which, while narrowing the 
gap with the EU average, remained 16% higher. 

On  the  other  hand,  average  gas  industry 
prices  followed  EU  trends,  decreasing  by 
21%  and  3%  respectively  in  the  first  and 
second halves of 2023. By the second semester, 
average gas industry prices were closing in on the 
EU average though remaining 9% lower. In relative 
terms,  electricity  prices 
for  non-household 
consumers  have  increased  significantly  compared 
to  the  US  and  Japan  until  the  first  semester  of 
2023,  thus  potentially  affecting  the  international 
competitiveness  of  energy-intensive  industries  in 
Croatia. 

Graph A7.2: Trends in electricity prices for non-
household consumers (EU and foreign partners) 

(1) For industry, consumption bands are I3 for gas and IC for 
electricity, which refer to medium-sized consumers and 
provide an insight into affordability 
(2) For households, the consumption bands are D2 for gas 
and DC for electricity 
(3) Industry prices are shown without VAT and other 
recoverable taxes/levies/fees as non-household consumers 
are usually able to recover VAT and some other taxes 
Source: Eurostat 

Unlike the prevailing trends witnessed across 
the  EU, throughout 2023,  electricity  and  gas 
household  prices  in  Croatia  were  close  to 
their  2018-2020 
levels  and  among  the 
lowest  in  the  EU.  For  industry  and  services, 
average  electricity  prices  maintained  an  upward 

(52)  It is complemented by Annex 6, as the European Green Deal 
focuses on the clean energy transition, and by Annex 8 on 
the action taken to protect the most vulnerable groups, 
complementing ongoing efforts under the European Green 
Deal, REPowerEU and the European Green Deal Industrial 
Plan. 

(53)  In line with the Green Deal Industrial Plan and the Net-Zero 

Industry Act 

(54)  Croatia submitted its draft updated NECP in December 2023. 
The Commission issued an assessment and country-specific 
recommendations on 18 December 2023. Commission 
Recommendation, Assessment (SWD) and Factsheet of the 
draft updated National Energy and Climate Plan of Croatia - 
European Commission (europa.eu) 

(1) For Eurostat data (EU and HR), the band consumption is ID 
referring to large-sized consumers with an annual 
consumption of between 2 000 MWh and 20 000 MWh, such 
as in electricity intensive manufacturing sectors, and gives an 
insight into international competitiveness 
(2) JP = Japan 
Source: Eurostat, IEA 

The  increased  energy  prices  in  2021-2023 
negatively  affected  household  budgets,  but 
less than the estimated EU-level effects. The 
measures  adopted  to  mitigate  the  economic  and 
social  impact  of  the  increase  in  energy  prices, 
although  initially  planned  to  be  abolished  at  the 
end  of  March  2024,  have  been  extended  until  30 
September 2024 at least. 

Consumer  empowerment  in  the  electricity 
and  gas markets  still  needs  to be  lifted.  The 
setting  up  of  energy  communities  is  still  facing 
implementation  challenges.  Concerning 
some 
consumer  empowerment  rules  and  tools,  in  2022 
Croatia  had  a  very  high  percentage  of  almost 
100%  of  fixed-price  contracts  held  by  household 
consumers in both electricity and gas, with a very 

42 

0.000.050.100.150.200.250.300.35€/KWhGas (industry & service) - HRGas (industry & service) - EUGas (households) - HRGas (households) - EUElectricity (industry & service) - HRElectricity (industry & service) - EUElectricity (households) - HRElectricity (households) - EU050100150200250300Index ( 2018 S2 = 100)JPUKUSHREU 
 
     
 
  
 
low number of offers. Switching rates in electricity 
were  very  low  (below  2%)  and  consumers  cannot 
choose the date  on which to switch. 19% of final 
household  consumers  had  smart  meters  in  2022 
(EU average 80%).  

Fossil  fuels  still  play  an  important  role  in 
Croatian  energy  mix,  as  they  accounted  for 
72% of gross available energy in 2022.  This 
share  is  expected  to  marginally  decrease  to  65% 
by  2030 (55).  Overall,  Croatia  has  a  high  energy 
import  dependency  on  non-EU  countries,  which 
increased from 47% in 2013 to 60% in 2022. As 
regards  the  electricity  sector,  Croatia  aims  to 
increase  gas  and  electricity  storage  capacities, 
protect  critical  infrastructure,  and  mitigate  risks 
related to cyber security.  

Croatia  has  quickly  reduced  its  dependency 
on  imported  Russian  gas  by  increasing  its 
own  production,  stepping  up  the  use  of  an 
existing  LNG  terminal. 
In  2022,  Croatia 
expanded  the  capacity  of  the  Krk  LNG  terminal 
from  2.6  to  2.9  billion  cubic  meters  per  year.  A 
final  investment  decision  has  been  made  to 
further  increase  the  terminal’s  import  capacity  to 
6.1  billion  cubic  meters  by  2025.  To  enable 
the 
efficient  dispatch  of  natural  gas  from 
expanded  Krk  terminal  within  the  region,  Croatia 
also plans (in its recovery and resilience plan, RRP) 
to upgrade its internal  transmission infrastructure 
and  interconnection  points  with  Slovenia  and 
Hungary by 2026.  

Croatia  is  also  a  natural  gas  producer,  with 
expectations  of  increasing  production  from 
less than 800 million cubic meters in 2023 to 
over 900 million cubic meters in 2030. Croatia 
managed  to  reduce  its  gas  demand  between 
August  2022  and  December  2023  by  17%  in 
comparison  with  the  average  of  the  previous  five 
years.  Croatia  has  one  underground  gas  storage 
facility  with  a  capacity  of  0.44  bcm,  representing 
almost  18%  of  its  annual  gas  consumption  in 
2022.  Croatia  fulfilled  its  gas  storage  obligations 
last  winter,  reaching  97%  by  1  November  2023, 
and ended the winter season with a storage filled 
at 35.79% by 1 April 2024. 

Croatia did not properly address the planned 
coal phase-out in its draft updated NECP (56), 
in  contrast  to  the  commitment  made  in  its 
territorial  just  transition  plan  (TJTP).  The 
draft updated NECP does not mention the political 
commitment made in  2021,  in  the  context  of  the 
UN  Climate  Change  Conference 
in  Glasgow 
(COP26), to phase out coal  by 2033 at the latest. 
The  commitment  relates  to  Plomin  2  coal  power 
plant  in  Istria,  the  only  coal-fired  power  plant  in 
Croatia. 

Croatia  overachieved  its  renewable  energy 
target  mostly  thanks  to  a  large  hydropower 
capacity (57),  combined  with  a  high  use  of 
wood  biomass (58),  while  the  capacity  from 
other  sources  still  plays  a  limited  role. 
However, 
increasingly  frequent  droughts  and 
forest  fires  can  lower  hydropower  output  and 
reduce  wood  biomass  availability,  affecting 
Croatia’s competitiveness and security of supply.  

Installed  renewable  capacity  increased  by 
11%  in  2023 (59).  The  total  wind  capacity  in 
Croatia in 2023 increased by 15.8% (60) to reach a 
share  of  15%  in  the  electricity  mix,  although 
Croatia has no offshore wind installed. 

Graph A7.3: Croatia's installed renewable capacity 
(left) and electricity generation mix (right) 

(1) "Other" includes renewable municipal waste, solid biofuels, 
liquid biofuels, and biogas. 
Source: IRENA, Ember 

(56)  See the Commission’s assessment of the draft updated 

NECP.  

(57)  46.5% of total electricity generation in 2023 – Annual 

electricity data, Ember. 

(58)  65% of all renewables in the heating sector in 2021. 

(59)  The total renewable energy capacity in Croatia in 2022 stood 

at 3 980 MW - IRENA report 2024. 

(60)  The total installed capacity of wind in 2023 was 1143 MW- 

(55)  According to the Croatian draft updated NECP. 

IRENA report 2024. 

43 

 
 
 
 
Solar  deployment  in  2023 (61)  represented  a 
increase  of  107%  compared 
significant 
2022,  but  still  represents  only  a  marginal 
share  of  1%  of  the  country’s  electricity 
generation  capacity.  Croatia  has  plentiful  and 
largely untapped solar generation potential (62).   

to 

related 

legislative 

framework 

Croatia made some progress in implementing 
reforms  to  accelerate  the  deployment  of 
renewables.  Following  the  adoption  of  the 
legislative 
the 
implementation  of  renewable  energy  sources  in 
2021, in 2022 and 2023 Croatia adopted by-laws 
that reduce barriers and administrative procedures 
that  restrain  higher  uptake  of  renewables,  has 
created  a 
launch 
renewable  energy  auctions  and  will  establish  a 
new  system  for  self-consumption (63)  (Annex  12). 
Although no auctions were launched in 2023, one 
was  published  in  April  2024.  Nevertheless,  the 
visibility  of  the  project  pipeline  for  renewable 
energy projects in Croatia is not clear, as it has not 
published  its  long-term  schedule  for  auctions  for 
the next 5 or 3 years and the details are not clear 
about the timing, frequency of auction procedures, 
expected  capacity  and  budget  and  eligible 
technologies.  

framework 

to 

in 

the  draft  NECP  appear 

Croatia’s relatively high share of renewables 
in  heating  and  cooling  (37.2%  in  2022)  is 
mainly  related  to  biomass  use,  with  heat 
pumps covering a marginal share. The targets 
stated 
rather 
unambitious,  with  a  very  limited  growth  in  heat 
pumps,  but  also  solar  thermal  deployment  and  a 
continued  reliance  on  biomass  as  the  first 
contributor  to  renewable  heat.  However,  it  is 
expected that the future use of geothermal energy 
will  provide  a  significant  additional  boost  of 
renewable  energy  in  heating  and  cooling  sector, 
based  on  the  exploration  measures  supported  by 

(61)  The total installed capacity in 2023 of solar was 461 MW. In 
the IRENA report ‘Renewable Energy Statistics 2024’, the 
data might differ from the Eurostat data because a different 
methodology is used to calculate the capacity in AC and DC. 

(62)  Solar energy can easily be deployed in roof-top installations. 
In addition, the deployment of solar can help alleviate the 
impacts of droughts, namely by further installing PVs in 
water reservoirs and canals to reduce water evaporation. 

(63)  To ensure equal treatment on access to the distribution 
network and network fees and to redesign the way of 
calculating the remuneration for the electricity fed into the 
grid by self-consumers. 

the  Recover  and  Resilience  Fund  and  projects 
and 
from 
supported 
Development Fund. 

European 

Regional 

Croatia projects an acceleration from current 
levels  of  biogas  production,  amounting  to 
0.11  bcm  (2021).  Biogases  make  up  4.1%  of 
Croatia’s natural gas supply. 0.11 bcm of biogases 
are  used  to  produce  electricity  (99%).  In  2021 
there  were  no  records  of  biomethane  production, 
injection  into  the  natural  gas  grid  or  use  in  the 
transport sector but Croatia aims to progressively 
replace consumption of fossil fuels by biomethane. 
Croatia  has 
the 
for 
development of biogas and bio-methane (64). 

specified  measures 

its  RRP 

is  well 

interconnection 

interconnected  with  the 
Croatia 
neighbouring  countries  which  is  reflected  in 
an  electricity 
level  well 
above  the  15%  target  for  2030.  Croatia  is 
to 
investment  under 
carrying  out 
strengthen  the  grid,  though  further  investment  in 
grid  development  projects  would  facilitate  the 
integration  of  renewables,  making  the  energy 
system more efficient and avoiding energy losses, 
namely  by  rewiring  existing  lines.  The  process  of 
upgrading  550  km  of  the  country’s  high  voltage 
network (220/110 kV) and the underground cables 
that  connect  the  six  islands  to  the  mainland 
network is progressing.  

completed,  namely 

Two  Projects  of  Common  Interest  (PCI)  have 
recently  been 
the 
Slovenia-Croatia-Hungary electricity line and 
the  smart  electricity  grid  project  Sincro. 
Improved  grid  connection  between  Croatia  and 
Slovenia  will  increase  interconnectivity  in  the 
region  and  allow  for  more  efficient  integration  of 
renewable energy sources. The implementation of 
the  priorities  defined  in  the  recently  endorsed 
CESEC  Electricity  and  Renewable  Energy  Action 
Plan (65)  will 
accelerated 
infrastructure 
and  market 
integration. 

be 
crucial 
development 

for 

Energy  efficiency  gains  slowed  in  Croatia, 
despite  its  untapped  potential  to  deliver 
more  in  this  field.  In  2022,  Croatia  had  an 
increase  in  primary  energy  consumption  of  0.3% 
compared  to  2021,  and  1.4%  compared  to  2012. 

(64)  Draft updated National Energy and Climate Plan 

(65)  CESEC Electricity and Renewable Energy Action Plan (2024) 

44 

 
 
 
It had a decrease in the final energy consumption 
of  1.1%  compared  to  2021,  and  a  3.6%  increase 
compared to 2012.  In 2022, the best results came 
from the residential sector, which reduced its final 
energy consumption by 3.6%, and the worst from 
the  transport  sector,  which  increased  its  final 
energy consumption by 7.8%. 

Croatia  has  already 
implemented  and 
committed  investment  in  a  series  of  energy 
efficiency  measures,  with  the  support  of 
several  EU  funds (66).  However,  most  of  the 
schemes are targeted at buildings (primarily public 
buildings  and  to  a 
lesser  extent  residential 
buildings),  while  schemes  supporting  energy 
efficiency in businesses are rather limited.   

Most  of  the  financing  schemes  on  energy 
efficiency are still grant-based as the use of 
financial  instruments  for  energy  efficiency 
remains  very  limited.  In  terms  of  existing 
funding  schemes  addressing  mobilisation  of 
investment  in  energy  efficiency,  in  particular  for 
building  renovations,  Croatia  mainly  relies  on 
grant-based  funding  schemes  implemented  via 
centralised  calls  for  proposals.  While  to  mobilise 
private investments in energy efficiency it is key to 
reduce  regulatory  barriers  and  scale-up  financial 
instruments, 
low-aid 
intensity will help to address unfavourable market 
conditions  (unaffordable 
investment  costs  for 
renovation  prompted  by  2020's  earthquake), 
market failures and ensure access to finance from 
financial  institutions.  Croatia  has  planned  the 
development  of  a  financial  instrument  for  energy 
in  the 
efficiency 
2021-2027  Programme  Competitiveness  and 
Cohesion 
for 
Reconstruction and Development (HBOR) has been 
tasked with developing the loan programme.  

in  multiapartment  buildings 

financial  support  with 

Croatian  Bank 

(PCC). 

The 

Croatia  needs  to  step  up  its  efforts  in  the 
residential sector to achieve its 2030 energy 
consumption target for buildings. Final energy 
consumption in the residential sector increased by 
around 5% between 2017 and 2022. Heating and 
cooling  represent  almost  80%  of  the  country’s 

(66)  Under 2014-2020 Cohesion Policy, over 10 % of the overall 
funding allocated to Croatia was dedicated to investment in 
energy efficiency renovation of buildings, mainly public 
buildings. For 2021-2027, more than EUR 500 million 
coming from Cohesion policy has been committed to 
measures in energy efficiency renovation of public and 
residential buildings. 

45 

residential final energy consumption and only 37% 
of this comes from renewables (mainly biomass).  

Heat  pumps  represent  only  a  minor  share  in 
total delivered energy in households and the 
large majority of heating systems are based 
on gas boilers. Electricity in Croatia is over three 
times more expensive than gas, resulting in energy 
savings for end users but increased costs for those 
who  opt  for  a  heat  pump  for  heating.  Croatia 
would  benefit  from  addressing  taxation  and 
network  charges  and 
levies  to  support  the 
decarbonisation of heating supply, in particular via 
electrification.  This  would  encourage  the  use  of 
heat  pumps,  including  in  conjunction  with  smart 
digital solutions to maximise self-consumption and 
The 
participation 
modernisation  of  district  heating  systems  and 
networks in Croatia represents as well an existing 
national  resource  and  an  opportunity  to  cost-
to 
decarbonise  heating 
effectively 
buildings,  including  via  the  deployment  of  large-
scale  HPs  solution  in  densely  populated  areas, 
leveraging the country’s potential from large scale 
sources of renewable energy generation. 

communities. 

energy 

supply 

in 

Croatia  expects  to  have  a  capacity 
in 
electrolysers  of  at  least  10  MW  by  2026.  In 
terms  of  hydrogen,  Croatia  plans  to  establish 
hydrogen  corridors  with  Slovenia,  Austria  and 
Hungary,  to  enable  exports  of  locally  produced 
hydrogen  to  these  neighbouring  countries,  with 
indicative  completion  dates  after  2040.  However, 
the  first  PCI/PMI  list  under  the  revised  TEN-E 
Regulation does not contain any projects involving 
Croatia. The implementation of the priorities set in 
the CESEC Action Plan on Gases (67) will be crucial 
for  accelerated  infrastructure  development  and 
market integration.  

Croatia  is  in  the  top  10  concerning  jobs  in 
clean  energy  value  chains  but  more  than 
66%  of  the  jobs  in  the  renewable  energy 
sector  are  in  solid  biomass (68).  An  evaluation 
of workforce requirements in clean technologies as 
well  as  of  re-skilling  and  upskilling  is  needed,  to 
ensure  that  citizens  can  benefit  from  the  energy 
transition and support it.  

(67)  CESEC Action Plan on Gases (2024) 

(68)  https://www.irena.org/Renewable-Energy-Employment  

 
 
 
Further  to  this,  Croatia  needs  to  secure  a 
trained  workforce  in  the  construction  and 
integrated  renovation  services, 
including 
installers  of  heating  appliances.  Croatia 
maintains  low  investment  levels  in  research  and 
innovation  (R&I),  both  in  terms  of  public  and 
private  funding,  which  is  considered  to  be  one  of 
the  main  relative  weaknesses  affecting  Croatia’s 
overall performance (see Annex 11) (69).  

Venture  capital  investment  in  climate  tech 
start-ups totalled 690 M EUR in 2022, all of 
it  in  the  area  of  low  carbon  mobility.  The 
number of patent families filed in 2020 for clean 
technologies  were 
in  sustainable 
transport  and  one  in  efficient  systems.  This 
represents  less  than  0.5 patent  family  per  million 
inhabitants,  or  forty  times  less  than  the  EU 
average. 

two:  one 

in 

has 

some 

footprint 

the 
Croatia 
manufacturing  of  PV  modules,  as  well  as 
battery  manufacturing,  where  an  increase  is 
expected  in  the  coming  years.  Croatia  has  a 
module  manufacturing  capacity  of  approximately 
one  million  modules  a  year,  which  translates  into 
roughly 330 MW, operated by a Croatian producer 
is  some  battery 
based 
manufacturing  taking  place  domestically,  such  as 
in Križevci. Also, battery management systems are 
designed  and  produced  by  a  local  automotive 
manufacturer,  which  also  has  plans  to  launch  a 
new  division  dedicated  to  stationary  energy 
storage  systems  (ESS),  with  mass  production  set 
to  start  in  2025.  Croatia  remains  fully  dependent 
on imports for wind rotor components.   

in  Varaždin.  There 

(69)  https://research-and-

innovation.ec.europa.eu/statistics/performance-
indicators/european-innovation-scoreboard_en#european-
innovation-scoreboard-2023  

46 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A7.1:  Key Energy Indicators 

(1)  The ranking of the main suppliers is based on the latest available figures (for 2022)  
(2) Venture Capital investment includes Venture Capital deals (all stages), Small M&A deals and Private Equity (PE) growth deals 
(for companies that have previously been part of the portfolio of a VC investment firm or have received Angel or Seed funding). 
Source: Eurostat, Gas Infrastructure Europe, JRC elaboration based on PitchBook data (03/2024), JRC SETIS (2024) 

47 

20192020202120222019202020212022Import Dependency [%] 56.2%53.6%54.5%60.3%60.5%57.5%55.5%62.5%of Solid fossil fuels 107.3%106.0%100.7%100.9%43.3%35.8%37.3%45.8%of Oil and petroleum products 76.3%73.7%78.4%86.8%96.7%96.8%91.7%97.7%of Natural Gas 66.4%68.8%74.5%77.5%89.7%83.6%83.6%97.6%Dependency from Russian Fossil Fuels [%]of Natural Gas 0.0%0.0%0.0%0.0%39.7%41.3%41.1%21.0%of Crude Oil11.9%14.7%8.1%17.5%28.8%26.7%26.4%19.5%of Hard Coal89.8%76.0%78.7%53.1%43.5%49.1%47.4%21.5%2016201720182019202020212022Gas Consumption (in bcm)2.6                        3.0                        2.8                   2.9                 3.0                 2.9                 2.5                 Gas Consumption year-on-year change [%]3.7%15.2%-7.9%5.0%4.6%-4.4%-12.9%Gas Imports - by type (in bcm)1.3                        1.8                        1.6                   2.0                 2.1                 2.3                 3.0                 Gas imports - pipeline1.3                        1.8                        1.6                   2.0                 2.1                 0.6                 0.5                 Gas imports - LNG0.00.00.00.00.01.72.5                 Gas Imports - by main source supplier (in bcm) (1)United States-                        -                        -                   -                 -                 1.0                 2.1                 Egypt-                        -                        -                   -                 -                 0.1                 0.3                 Slovenia0.1                        0.2                        0.3                   0.5                 0.6                 0.2                 0.4                 Qatar-                        -                        -                   -                 -                 0.2                 0.1                 20192020202120222023LNG Terminals - storage capacity m3 LNGNumber of LNG Terminals001                      1                    1                    LNG Storage capacity (m3 LNG)00140 000          140 000        140 000        Underground StorageNumber of storage facilities1                           1                           1                      1                    1.0                 Technical Capacity (bcm)0.5                        0.5                        0.5                   0.5                 0.4                 20162017201820192020202120222023Gross Electricity Production (GWh) (2)12 820                 11 984                 13 632            12 760           13 385           15 210           14 221           -                 Combustible Fuels4 682                5 193                4 435           5 185         5 665         5 681         6 284         -                 Nuclear0000000-                 Hydro7 058                5 508                7 785           5 933         5 810         7 229         5 574         -                 Wind1 014                1 204                1 335           1 467         1 721         2 062         2 138         -                 Solar66                      79                      75                 83               96               149             152             -                 Geothermal002                   92               94               90               73               -                 Other Sources00-                        0                   0-                 0-                 0-                 0                 -                 Gross Electricity Production [%]Combustible Fuels36.5%43.3%32.5%40.6%42.3%37.4%44.2%-                 Nuclear0.0%0.0%0.0%0.0%0.0%0.0%0.0%-                 Hydro55.1%46.0%57.1%46.5%43.4%47.5%39.2%-                 Wind7.9%10.0%9.8%11.5%12.9%13.6%15.0%-                 Solar0.5%0.7%0.5%0.7%0.7%1.0%1.1%-                 Geothermal0.0%0.0%0.0%0.7%0.7%0.6%0.5%-                 Other Sources0.0%0.0%0.0%0.0%0.0%0.0%0.0%-                 Net Imports of Electricity (GWh)5 531                   6 954                   5 388              6 133             4 639             3 961             4 695             -                 As a % of electricity available for final consumption 35.2%42.3%32.4%37.0%29.8%23.5%28.3%-                 Electricity Interconnection [%]52.0%53.2%50.0%52.0%45.6%60.0%29.5%Share of renewable energy consumption - by sector [%]Electricity46.7%46.4%48.1%49.8%53.8%53.5%55.5%-                 Heating/cooling37.6%36.6%36.7%36.8%36.9%38.0%37.2%-                 Transport1.2%1.2%2.6%5.9%6.6%7.0%2.4%-                 Overall28.3%27.3%28.0%28.5%31.0%31.3%29.4%-                 20192020202120222023VC investments in climate tech start-ups and scale-ups (EUR Mln)80.00                0.05                  140.00         690.00          -                 as a % of total VC investment (3) in Croatia start-ups and scale-ups92.4%0.1%71.7%94.3%0.0%Research & Innovation spending in Energy Union R&i prioritesPublic R&I (EUR mln)-                        -                        -                   -                 -                 Public R&I (% GDP)-                        -                        -                   -                 -                 Private R&I (EUR mln)19.9                  2.8                    -                   -                 -                 Private R&I (% GDP)0.04%0.01%-                   -                 -                 ELECTRICITY/ENERGYCLEAN ENERGYCroatiaEUENERGY DEPENDNCEDIVERSIFICATION OF GAS SUPPLIES 
 
  
 
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY 

This  Annex  monitors  Croatia’s  progress  in 
ensuring  a  fair  transition  towards  climate 
neutrality  and  environmental  sustainability, 
particularly  for  workers  and  households  in 
vulnerable  situations.  Croatia’s  green  economy 
is  slowly  expanding.  Between  2015  and  2020, 
total jobs in the environmental goods and services 
sector  grew  by  13.2%  (to  around  41700)  (EU: 
18.2%),  reaching  2.5%  of  total  employment  (EU: 
2.7%).  Also,  between  2015  and  2022,  the 
greenhouse  gas  emission  intensity  of  Croatia’s 
workforce  (see  Graph  A8.1  and  Table  A8.1) 
declined from 12 to 10.4 tonnes per worker, below 
the  EU  average  (14.3  tonnes  per  worker  in 
2022) (70), indicating  a positive  trend in  the  green 
transition. While upskilling and reskilling actions in 
line with the Council Recommendation on ensuring 
a  fair  transition  towards  climate  neutrality (71) 
support  the  implementation  of  the  REPowerEU 
plan, green skills shortages remain a challenge. 

Croatia’s 

energy-intensive 

Employment  in  energy-intensive  industries 
increased in recent years. In 2023, employment 
industries 
in 
represented  2.4%  of  total  employment  (3.5%  in 
the EU), increasing from 2% in 2015. Employment 
in  mining  and  quarrying  has  fallen  by  16%  since 
2015.  Two  counties,  Sisak–Moslavina  and  Istria, 
were  identified,  based  on  their  greenhouse  gas 
emission  intensity,  as  priorities  for  support  from 
the  Just  Transition  Fund (72).  Croatia  has  also 
the  Alliance  for  Coal-Free  Electricity 
joined 
Production.  According  to  Croatia’s  territorial  just 
transition plan, its one remaining coal power plant 
is set to cease production by 2033. However, this 
commitment  is  not  yet  set  in  the  draft  updated 
national  energy  and  climate  plan (73).  The  job 

(70)  Workforce-related calculations are based on the EU Labour 
Force Survey. Note, in the 2023 country report for Croatia, 
such indicators were calculated based on employment 
statistics in the national accounts. This may result in limited 
comparability across the two reports. 

(71)  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. 

(72)  In these counties, some of the Emissions Trading System 
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.   

(73)  https://commission.europa.eu/publications/croatia-draft-

updated-necp-2021-2030_en  

48 

vacancy  rate  in  construction  (see  Graph  A8.2),  a 
key  sector  for  the  green  transition,  is  lower  than 
the  EU  average  (1.9%  vs  3.6%  in  EU  in  2023). 
Nevertheless,  96%  of  small  and  medium-sized 
enterprises (SMEs) in the sector reported that skills 
shortages  are  holding  them  back  in  general 
business activities (74). 

Graph A8.1: Fair transition challenges in Croatia 

Source: Eurostat, EU Labour Force Survey, EMPL-JRC GD-
AMEDI/AMEDI+ and DISCO(H) projects (see Table A8.1). 

Upskilling  and  reskilling  in  energy-intensive 
industries  needs  to  be  strengthened. 
In 
energy-intensive  industries,  workers’  participation 
in  education  and  training  stood  at  3.1%  in  2023, 
well  below  the  EU  average  (10.9%).  In  Croatia, 
50%  of  SMEs  think  that  the  skills  required  for 
greening  business  activities  are  becoming  more 
important  (EU:  42%) (74).  If  Croatia  matches  its 
projected contribution to the EU’s 2030 renewable 
energy  target,  between  200  and  1200  additional 
skilled workers will be needed for the deployment 
of  wind  and  solar  energy (75). As  part  of  the 
initiative on renovating buildings, the recovery and 
resilience plan (RRP) envisages the publication of a 
revised  national  skills  development  plan,  which 
would encourage people to acquire green skills as 
part  of  Croatia’s  energy  efficiency  and  renovation 
plans.  To  address  these  challenges,  investments 
are planned under the RRP and the Just Transition 
Mechanism.  The  RRP  aims  to  address  upskilling 
and  acquisition  of  skills  related  to  the  green  and 
digital transitions by introducing new active labour 
market policies for the long-term unemployed and 
less  employable  people  from  disadvantaged 
groups, and by using the voucher system for adult 
education.  In  Croatia,  2.6%  of  European  Social 

(74)  Eurobarometer on skills shortages, recruitment, and retention 

strategies in small and medium-sized enterprises. 

(75)  EMPL-JRC AMEDI+ project. 

0.00.20.40.60.81.01.2Greenhouse gasemissions per workerEmployment inEnergy-IntensiveIndustriesEducation & trainingin Energy-IntensiveIndsutriesEnergy povertyTransport poverty(proxy)Carbon inequalityHR Latest vs EU LatestEU LatestHR 2015 vs EU Latest 
 
 
  
 
 
Fund  Plus  funding  contributes  to  green  skills  and 
jobs,  adding  to  RRP  investment  and  aligning 
vocational  education  and  training  to  the  labour 
market needs of the green transition. 

the green transition.  

Graph A8.2: Job vacancy rate in transforming 
sectors and mining and quarrying 

to 

needs 

households 

Overall  energy  poverty  has  decreased  in 
recent  years  in  Croatia,  but  the  situation  of 
vulnerable 
be 
monitored. The share of the population unable to 
keep  their  homes  adequately  warm  decreased 
from  9.9%  in  2015  to  5.7%  in  2021  before 
increasing  again  to  7.0%  in  2022,  below  the  EU 
average  (9.3%) (76),  on  the  back  of  energy  price 
increases due to supply constraints caused by the 
COVID-19  pandemic  and  Russia’s  war  of 
aggression against Ukraine, despite the emergency 
measures  implemented  in  Croatia.  In  particular, 
21.9% of the population at risk of poverty (AROP) 
(EU:  20.1%)  and  5.8%  of  lower  middle-income 
households  (in  deciles  4-5)  in  2022  (EU:  11.6%) 
were  affected.  In  January  2023,  32.5%  of  the 
population at risk of poverty  spent a considerable 
proportion  of  their  budget  (more  than  6%)  on 
private transport fuels (EU: 37.1%) (77).  

Croatia  started  to  implement  policies  for  a 
fair  transition  towards  climate  neutrality, 
although  the  green  transition  is  not  yet 
viewed as a strategic issue. Croatia has a wide 
range of measures and services in place that could 
indirectly  contribute  to  achieving  a  fair  transition. 
Because  of  labour  shortages  resulting  from  the 
green  transition,  more  targeted  upskilling  and 
reskilling  measures  should  be  promoted.  Future 
measures in the field of social policies should also 
target  people  and  households  most  affected  by 

B - Mining and quarrying 
C - Manufacturing 
D - Electricity, gas, steam and air conditioning supply 
E - Water supply; sewerage, waste management and 
remediation activities 
F - Construction 
H - Transportation and storage 
Source: Eurostat jvs_a_rate_r2. 

 Air pollution remains a critical issue leading 
to  environmental  inequalities  in  Croatia.  The 
average levels of air pollution in 2021 stood above 
the EU average (14.6 vs 11.4 µg/m3 PM2.5), with 
88% of the population living in regions exposed to 
critical levels of air pollution (78). This has led to a 
significant impact on health and an estimate of at 
least  3800  premature  deaths  annually (79) (80).  In 
2021,  the  consumption  footprint  for  20%  of  the 
population with the highest income was 1.3 times 
higher  than  the  footprint  of  the  poorest  20% (81) 
(EU:  1.8).  For  both  groups,  the  consumption 
footprint is highest for food and housing.  

Table A8.1:  Key indicators for a fair transition in Croatia 

Source: Eurostat (env_ac_ainah_r2, lfsa_egan2d, ilc_mdes01), EU Labour Force Survey (break in time series in 2021), EMPL-JRC 
GD-AMEDI/AMEDI+ and DISCO(H) projects. 

(76)  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. 

(77)  Affordability of private transport fuels is one key dimension 

of transport poverty. The indicator has been developed in the 
context of the EMPL-JRC GD-AMEDI/AMEDI+ projects. 
Methodology explained in Economic and distributional 
effects of higher energy prices on households in the EU. 

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

Quality Guidelines (annual exposure of 5µg/m3). 

(79)  EEA - Air Quality Health Risk Assessment 

(80)  Croatia – air pollution country fact sheet – European 

Environment Agency (europa.eu) 

(81)  Developed in the context of the EMPL-JRC DISCO(H) project 

(distributive impacts of consumption footprint in EU 
households). 

49 

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%BCDEFHEU 2023HR 2023HR 2015IndicatorDescriptionHR 2015HREUGHG per workerGreenhouse gas emissions per worker – CO2 equivalent tonnes12.010.4 (2022)14.3 (2022)Employment EIIEmployment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20), minerals (C23), metals (C24) and automotive (C29)2.0%2.4% (2023)3.5% (2023)Education & training EIIAdult participation in education and training (last 4 weeks) in energy-intensive industries3.2% (2020)3.1% (2023)10.9% (2023)Energy povertyShare of the total population living in a household unable to keep its home adequately warm9.9%7.0% (2022)9.3% (2022)Transport poverty (proxy)Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport26.4%32.5% (2023)37.1% (2023)Carbon inequalityRatio between the consumption footprint of the top 20% vs bottom 20% of the income distribution1.31.3 (2021)2.7 (2021) 
 
       
 
 
  
 
PRODUCTIVITY 
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY 

The green transition of industry and the built 
environment,  in  particular  decarbonisation, 
resource  efficiency  and 
is 
Croatia’s 
essential 
competitiveness (82). In this regard, priorities for 
Croatia  are  waste  management  and  the  use  of 
circular materials in industry and construction. 

circularity, 

boost 

to 

Croatia  is  not  on  track  to  achieve  the  EU 
Circular Economy Action Plan goals, also due 
unsustainable  waste  management. 
to 
Croatia’s material footprint is slightly above the EU 
average  and  increased  to 15  tonnes  per  capita  in 
2022.  Total  waste  generated  has  increased  over 
the  last  decade  and  measured  1.5  tonnes  per 
capita  in  2020.  This  is,  however,  still  well  below 
the EU average of 4.8 tonnes.  

Graph A9.1: ETS emissions by sector since 2013 

Source: European Commission 

In  2023,  the  sectors  covered  by  the  EU 
emissions trading system (ETS) in Croatia (83) 
emitted  13%  less  greenhouse  gases  than  in 
2019.  In  2023,  about  47%  of  the  greenhouse 
gases emitted by Croatia’s ETS installations came 
from  power  generation,  less  than  the  EU  average 
(57%).  Of  the  total  emissions  from  all  industry 
sectors, slightly more than half came from cement 
and 
lime  production,  about  one  fifth  from 
refineries,  10%  from  the  chemical  industry,  only 
1% from the metals industry, and 16% from other 
industries.  Between  2013  and  2019,  the  power 
sector  achieved  reductions  of  24% (84),  whereas 

(82)  See also Annexes 6, 7 and 12. 

(83)  This analysis excludes air travel. For more details and the 
data sources, see Weitzel, M; van der Vorst, C. (2024), 
Uneven progress in reducing emissions in the EU ETS, JRC 
Science for policy brief, JRC138215, Joint Research Centre. 

(84)  This includes a decrease of around 33% until 2018, and a 

emissions in the industry sectors only declined by 
8%.  Between  2019  and  2023,  greenhouse  gas 
emissions  from  the  power  sector  have  increased 
by 14%in the industry sectors, they have declined 
by 28% (85).  From 2013 to 2023, greenhouse gas 
emissions  declined  by  14%  in  power  generation 
and  by  33%  in  the  industry  sectors.  This  resulted 
in  a  25%  greenhouse  gas  emissions  reduction  in 
the ETS sectors in this period.  

There is still room to make better use of the 
potential  of  the  circular  economy  transition 
to 
the 
improve  efficiency  and  drive 
decarbonisation  of  the  Croatian  industry. 
Croatia’s  circularity  rate  is  increasing more  slowly 
than  the  EU  average.  In  2022,  it  measured  only 
5.8%,  while  resource  productivity  stood  at  2.12 
purchasing  power  standards  per  kg.  Improving 
resource  productivity  can  help  minimise  negative 
environmental impacts and reduce dependence on 
raw  material  imports.  Croatia  was  dependent  on 
imports  for  36.3%  of  materials  used  in  2022, 
compared  with  an  EU  average  of  22.4%,  making 
the  country  comparatively  more  vulnerable  to 
supply chain disruptions.  

a 

show 

Industry’s impacts on  the  environment could 
be  further  limited.  Particulate matter  emissions 
from  industry  are  higher  than  the  EU  average.  In 
2021,  the  PM2.5  grams  emitted  per  economic 
output  (EUR’10) (86)  decreased  from  0.21  in  2017 
to  0.17,  versus  an  EU  average  of  0.06.  PM10 
emissions 
trend,  with 
0.28 grams/EUR’10  in  2017  and  0.23  in  2021, 
versus  an  EU  average  of  0.09 grams/EUR’10  in 
2020.  Between  2010  and  2021,  the  industrial 
sector  decreased  its emissions  of CO2, NOx,  PM10 
and  SOx,  but  emissions  of  non-methane  volatile 
organic  compounds 
increased  by  9%,  and 
emissions  of  heavy  metals  (cadmium,  lead  and 
mercury)  rose  by  119%.  Pollutant  emissions  into 
water decreased except for heavy metals. 

similar 

Croatia is not on track to meet the EU waste 
management targets. Croatia recycled 34.2% of 
municipal  waste  in  2022.  The  country  missed  the 

(85)  Between 2018 and 2022, Croatia saw a 71%  increase in 

greenhouse gas emissions in metal processing, but this had 
a negligible impact overall due to the small size of the 
sector. 

gradual rebound from 2018. 

(86)  In 2010 prices. 

50 

00.20.40.60.81012345678920132014201520162017201820192020202120222023Emissions relative to 2013Mt CO2eCement & LimeChemicalsMetalsRefineriesPower generationOtherCroatia (both axes) 
 
 
  
 
 
 
2020  municipal  waste  recycling  target  and  risks 
missing the 2025 targets for municipal waste and 
packaging.  The  plastic  packaging  recycling  rate 
stood at 34.2% in 2021, below the EU average of 
40.7%. Croatia is still highly reliant on landfills and 
is not on track to achieve the target of a maximum 
of 10% of landfilling by 2035. Under its amended 
recovery  and  resilience  plan,  Croatia  committed 
itself to adopting a regulation on landfilling tax by 
the end of 2024. 

Graph A9.2: Treatment of municipal waste 

the  recovery  and  resilience  plan  and  cohesion 
policy,  there  is  still  room  for  improving  waste 
management in Croatia’s built environment.  

the 

into 

Construction and demolition waste per capita 
increased  during  the  last  decade.  With  the 
support  of  the  World  Bank,  Croatia  developed  a 
circular  economy  action  plan  for  construction  and 
is 
demolition  waste  management,  which 
integrated 
country’s  new  waste 
management plan (2023-2028). The proportion of 
backfilling has decreased since 2014 and stood at 
12.4%  in  2020.  Croatia’s  recovery  rate  rapidly 
increased  to  89%  in  2020,  achieving  the  Waste 
Framework Directive’s target for 2020 (70%),  but 
went  down  to  63.5%  in  2021.  There  is  scope  to 
reduce pressure from human activities to meet the 
EU  targets.  In  2012-2018,  net  land  take  stood 
slightly below the EU average and decreased only 
by  12%  compared  with  the  previous  reporting 
period.  This  trend  puts  Croatia  at  risk  of  not 
achieving  the  8th  Environment  Action  Programme 
objective of reaching no net land take by 2050. 

Wastewater  treatment  shows  scope  for 
improvement.  In  2021,  only  31%  of  Croatia’s 
population  was  connected  to  at  least  secondary 
wastewater treatment. Croatia would benefit from 
prioritising  alignment  with  EU  standards  and 
meeting  the  obligations  under  the  Urban  Waste 
Water Treatment Directive (UWWTD). According to 
the  12th  UWWTD  implementation  report  (2020 
data),  Croatia’s  implementation  status  is  ‘poor’, 
with  compliance  rates  slightly  above  70%  for 
collection,  and  treatment  rates  of  only  10-12%. 
Improvements  are  urgent  as  Croatia’s  derogation 
from complying with the UWWTD laid down in the 
Accession Treaty expired on 31 December 2023. 

Source: Eurostat 

Improving  resource  efficiency  is  key  for  the 
green transition of the built environment. The 
residential  and  non-residential  floor  areas  per 
capita both stand below the EU average. In 2020, 
Croatia submitted a long-term strategy for energy 
renovation  in  the  building  sector  to  promote  the 
stock  by 
decarbonisation  of 
2050. Despite  some  positive  trends, 
including 
in  the  green  transition  and  the 
investments 
decarbonisation  of  buildings  planned  under  both 

the  building 

Table A9.1:  Circularity indicators 

Source: Eurostat, European Environment Agency 

51 

432445418447478010020030040050020182019202020212022Kg per capita Waste treatment to be determinedLandfill/disposalTotal incineration (including energy recovery)Composting and digestionMaterial recyclingEU-27201820192020202120222023EU-27Latest yearIndustryResource productivity (purchasing power standard (PPS) per kilogram)1.91.91.82.02.1-2.52022Circular material use rate (%)5.05.35.55.75.8-11.52022Eco-innovation index (2013=100)75.779.083.386.188.8-121.52022Recycling of plastic packaging (%)37.335.734.134.2--40.72021Cost of air emissions from industry (EUR bn)2.42.01.81.7--352.72021Built environmentRecovery rate from construction and demolition waste (%)78.0-89.063.5--89.02020Soil sealing index (base year = 2006)103.1-----103.42018Non-residential floor area (m2 per capita)12.212.512.7---18.02020Waste backfilled (%)7.9-12.4-3.2-9.92020 
  
 
 
      
 
ANNEX 10: DIGITAL TRANSFORMATION 

its 

for 

targets 

Digital  transformation  is  key  to  ensuring  a 
resilient and competitive economy. In line with 
the  Digital  Decade  policy  programme,  and  in 
particular  with 
digital 
transformation  by  2030,  this  Annex  describes 
Croatia’s  performance  on  digital  skills,  digital 
infrastructure/connectivity, and the digitalisation of 
businesses  and  public  services.  Where  relevant,  it 
refers  to  progress  on  implementing  Croatia's 
recovery  and 
(RRP).  Croatia 
resilience  plan 
allocates 20% of its total Recovery and Resilience 
Facility RRP budget to digital (EUR 1.48 billion) (87). 
Under cohesion policy, an additional EUR 0.8 billion 
(9% of the country’s total cohesion policy funding) 
is 
digital 
the 
allocated 
transformation (88). 

country’s 

to 

The  Digital  Decade  policy  programme  sets 
out a pathway for the EU’s successful digital 
transformation  by  2030.  Croatia’s  national 
roadmap outlines the actions it intends to take to 
reach the objectives and targets at national  level. 
The first report on the state of the Digital Decade 
highlighted the need to accelerate and deepen the 
collective efforts to reach the EU-wide targets and 
objectives (89).  Through  this,  a  digitally  skilled 
population 
the  development  and 
adoption  of  digital  technologies  and  leads  to 
productivity  gains  and  new  business  models.  It 
also  leads  to  higher  inclusion  and  participation  in 
an environment increasingly shaped by the digital 
transformation (90). 
technologies, 
infrastructure  and  tools  all  play  a  role 
in 
the  current  structural  challenges, 
addressing 

increases 

Digital 

(87)  The share of financial allocations that contribute to digital 
objectives has been calculated using Annex VII to the 
Recovery and Resilience Facility Regulation. 

(88)  This amount includes all investment specifically aimed at or 
substantially contributing to digital transformation in the 
2021-2027 cohesion policy programming period. The source 
funds are the European Regional Development Fund, the 
Cohesion Fund, the European Social Fund Plus, and the Just 
Transition Fund. 

(89)  European Commission (2023): Report on the state of the 

Digital Decade 2023:  https://digital-
strategy.ec.europa.eu/en/library/2023-report-state-digital-
decade  

(90)  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) and OECD (2019): Going Digital: 
Shaping Policies, Improving Lives – Summary, 
https://www.oecd.org/digital/going-digital-synthesis-
summary.pdf. 

including  strategic  dependence  in  various  areas, 
cybersecurity and climate change. 

to 

tried 

recruit 

Croatia  faces  significant  challenges 
in 
retaining  ICT  specialists.  Croatia  made  some 
progress  in  the  field  of  digital  skills  with  the 
Croatian  Academic  and  Research  Network 
(CARNET), 
the  e-Universities  and  e-Schools 
projects,  the  adoption  of  the  National  Education 
Development  Plan  2027  and 
the  Croatian 
Qualifications  Framework  (CROQF)  Act.  In  Croatia, 
ICT  specialists  continue  to  account  for  a  lower 
percentage of the workforce in Croatia than in the 
EU (4.3% vs 4.8%). The percentage of female ICT 
specialists  is  below  the  EU  average  (17.4%  vs 
19.4%). Eurostat data from 2022 reveals that only 
5.3%  of  Croatian  SMEs  have  been  searching  for 
ICT  specialists  compared  with  the  EU  average  of 
7.8%.    Also  in  2023,  about  7.8%  of  enterprises 
recruited  or 
ICT  specialists 
compared  with  an  EU  average  of  9.5%.  The  ICT 
sector  in  Croatia  faces  challenges  in  competing 
with the salaries and conditions offered by foreign 
companies.  This  issue  is  compounded  by  the 
presence  of  foreign  ICT  experts  who  work  in 
Croatia  as  ‘digital  nomads’  and  local  ICT  experts 
working for overseas companies, who often evade 
the visibility of national tax authorities, presenting 
additional  challenges  for  the  domestic  industry.  
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 to increase 
and  retain  ICT professionals  in Croatia.  This  could 
possibly  be  within  a  framework  aimed  at 
stemming  the  outflow  of  the  young  and  most 
skilled  part  of  the  population,  which  in  turn  also 
creates difficulties in recruiting skilled personnel in 
schools and universities alike. 

Croatia  has  a  mixed  performance  on  digital 
infrastructure/connectivity.  Fixed  very  high-
capacity  network  (VHCN)  coverage  has  been 
steadily  increasing,  but  it  remains  significantly 
below  the  EU  average.  Croatia  has  an  overall 
penetration  of  100 Mbps  services  at  38.6%,  well 
below  the  EU  average  of  65.9%.  Croatia  is  also 
below  the  EU  average  in  the  coverage  of  fixed 
VHCN, with 67.8% versus an EU average of 78.8%. 
In  the  coverage  of  fibre  to  the  premises,  with 
62.1%,  the  country  is  marginally  below  the  EU 
average  of  64%.  Croatia  has  assigned  all  5G 
spectrum  in  the  pioneer  bands.  However,  the  5G 
coverage is at 83.4%, is about 6 percentage points 

52 

 
 
 
 
below the EU average of 89.3%. To address these 
connectivity  issues,  Croatia  improved  its  permit 
granting  process,  selected  a  universal  service 
provider,  and  programmed,  through  the  European 
Regional Development Fund, an additional EUR 50 
million  for  connectivity.  The  scope  of  investments 
in  very  high-capacity  networks  should  be  closely 
monitored with a view to verifying to what extent 
either  private  or  public  investment  falls  short  of 
expectations and to ensure that corrective actions 
are  taken  accordingly.  Furthermore,  the  delay  in 
the adoption of the Croatian Regulation on spatial 
communication 
electronic 
planning 
infrastructure is making it very difficult to increase 
5G  coverage,  also  due  to  the  reluctance  of  local 
authorities to grant permission to build or place 5G 
masts and rooftop antennas. 

of 

particularly,  for  businesses  (66.2  vs  EU  85.4). 
Other  DESI  indicators  in  this  dimension  are  also 
below the EU  average: pre-filled  forms (49.4% vs 
EU  70.8%),  and  transparency  of  service  delivery 
(59.1%  vs  EU  66.9%),  but  better  in  terms  of  e-
Government users (88.5% vs EU 75.1%). However, 
Croatia scores high on access to electronic health 
records  (86  vs  EU  79).  Progress  in  the  e-health 
domain  is  evident  with  the  development  of  the 
Central Health Information System of the Republic 
(CEZIH),  which  has  successfully 
of  Croatia 
digitalised  business  processes 
in  the  health 
system,  as  well  as  with  the  introduction  of 
Artificial  Intelligence  for  Smart  Healthcare  and 
Medicine  (AI4Health.Cro).  As  regards  electronic 
identification  (eID),  Croatia  has  one  eID  card 
(see 
notified  under 
Annex 12). 

the  eIDAS  Regulation 

that 

the  opportunities 

Croatian businesses perform satisfactorily in 
most  of  the  Digital  Economy  and  Society 
Index  (DESI)  indicators  for  the  digitalisation 
of businesses. Despite many positive results, the 
share of SMEs with at least a basic level of digital 
intensity remains at 56%, close to the EU average 
of 57.7%, with the sharing of information (23.7% 
vs  EU  42%)  and  the  use  of  electronic  media 
(21.9%  vs  EU  30.6%)  also  below the  EU  average. 
However,  Croatian  businesses  are  making  good 
the  digital 
use  of 
technologies  offer.  For  example,  the  use  of  data 
analytics 
(51.7%  vs  EU  33.2%)  and  cloud 
computing  services  (40.7%  vs  EU  38.9%)  are 
above  the  EU  average,  while  the  use  of  artificial 
intelligence matches the  EU  average  (7.9%  vs  EU 
8%).  The  use  of  e-Invoices  (46.2%  vs  EU  38.6%), 
%)  and  SME  selling  on-line  (29.5%  vs  EU  19.1%) 
are  above  the  EU  average  while  e-Commerce 
turnover  is  marginally  below  the  EU  average 
(11.3% vs EU 11.9%). As part of its RRP, Croatia is 
putting  in  place  vouchers  and  financial  schemes 
that  support  the  digitalisation  of  SMEs  and  large 
in 
companies, 
the 
digitalisation 
business 
processes. In 2022, 1.3% of enterprises in Croatia 
reported  ICT  service  outage  due  to  cyberattacks 
(e.g. 
ransomware  attacks,  denial  of  service 
attacks). Over the same year, 28.7% of enterprises 
developed  or  reviewed  their  ICT  security  policy 
within the previous 12 months. 

investment 
and 

including 
of 

production 

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 (67.2 vs EU  79.4) and, 

53 

 
Table A10.1:Key Digital Decade targets monitored by the Digital Economy and Society Index indicators 

Source: Digital Economy and Society Index 

54 

EUDigital Decade target by 2030 2022202320242024(EU)Digital skillsAt least basic digital skills63%63%59%56%80%% individuals20212021202320232030ICT specialists (1)3.6%3.7%4.3%4.8%20 million% individuals in employment aged 15-7420212022202320232030Digital infrastructure/connectivityFixed very high capacity network (VHCN) coverage52%61%68%79%100%% households20212022202320232030Fibre to the premises (FTTP) coverage (2)39%54%62%64%-% households2021202220232023Overall 5G coverage34%82%83%89%100%% populated areas20212022202320232030Digitalisation of businessesSMEs with at least a basic level of digital intensity50%NA56%58%90%% SMEs2021202320232030Data analyticsNANA52%33%-% enterprises20232023Cloud35%35%41%39%-% enterprises2021202120232023Artificial intelligence9%9%8%8%-% enterprises2021202120232023AI or cloud or data analytics (3)NANA66%55%75%% enterprises202320232030Digitalisation of public servicesDigital public services for citizens69716779100Score (0 to 100)20212022202320232030Digital public services for businesses68676685100Score (0 to 100)20212022202320232030Access to e-health recordsNA868679100Score (0 to 100)2022202320232030(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.Croatia(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 data in the Digital Decade. 
 
   
 
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  transition  and  ensuring  long-
term competitiveness. 

Croatia  is  an  ‘emerging  innovator’  with  an 
improving performance. The 2023 edition of the 
European  Innovation  Scoreboard (91)  notes  that 
Croatia’s innovation performance has grown faster 
than the EU average. This is particularly driven by 
increases  in  venture  capital  and  a  higher  number 
of public-private co-publications since 2016. 

is 

in 

the 

improvements 

Scientific  outputs  remain  of  modest  quality, 
amid 
terms  of  R&D 
low,  as 
expenditure.  Scientific  excellence 
illustrated  by  the  share  of  the  country’s  scientific 
publications  within 
top  10%  most-cited 
scientific  publications  worldwide  as  %  of  total 
scientific  publications  of  the  country,  which  has 
increased  but  sits  substantially  below  the  EU 
average  (4.47%  vs  9.6%).  This  is  caused  by 
historically  low  investment  in  R&I,  combined  with 
the 
fragmentation  of  public 
research  and  higher  education  institutions,  which 
weighs on the efficiency and impact of public R&D 
expenditure (92) (see Graph A11.1). 

long-standing 

Graph A11.1: Top 10% most-cited publications in 
relation to Public R&D expenditure, 2020 

Marked  increases  in  public  R&D  expenditure 
over  the  last  few  years  (0.40%  of  GDP  in 
2015  compared  to  0.65%  in  2022)  are  a 
positive  signal.  Further  investment  from  the 
recovery  and  resilience  plan  (RRP)  and  cohesion 
policy can help  to close the public funding gap  to 
the EU average in the medium term. The recently 
introduced performance-based funding model has 
the  objective  of  linking  a  share  of  funding  for 
higher  education  institutions  and  public  research 
organisations  to  achievements  and  structural 
improvements.  While 
is 
commendable,  its  impact  on  scientific  excellence 
depends  on  proper  and  ambitious implementation 
paired with rigorous evaluation of the instrument’s 
effectiveness (93).  Apart  from  this,  it  remains  key 
to  address  the  severe  fragmentation  of  higher 
education  institutions  including  the  large  number 
of  faculties,  which  has  so  far  not  been  tackled 
systematically  and  could  significantly  limit  the 
impact of efforts currently being made to enhance 
public R&D spending. 

the  model 

itself 

actors 

streamlined 

successfully 

government 

the  National 

administrative 

Innovation  Council 

Further  improvements  in  R&I  performance 
will  require  close  collaboration  between 
relevant 
and 
capacities. 
strengthened 
R&I 
has 
Croatia 
governance, among other things clarifying the role 
of 
(NIC). 
Nevertheless,  considering  the  large  number  of 
support 
forthcoming 
ongoing 
programmes,  implementing  a  stronger  system  of 
collaboration  between  relevant  actors  (ministries, 
is  of  major 
funding  agencies  and  others) 
in  a  recently 
significance,  as  recommended 
published report (94). Furthermore, to deal with the 
multitude of ongoing R&I initiatives, ministries and 
funding  agencies  require  the  necessary  human 
capacities  to  implement  reforms  and  investments 
in timely and proper fashion (95). 

and 

R&I 

Source: Based on Eurostat / Science-Metrix. 

(91)  2023 European Innovation Scoreboard (EIS), country profile: 
Croatia https://ec.europa.eu/assets/rtd/eis/2023/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). 

(92)  See also World Bank (2019): Analysis of the quality and 
coherence of the policy mix – Croatia Public Expenditure 
Review in STI. 

Business-science  linkages  have 
improved, 
in  dedicated  support 
while  consistency 
measures  is  pivotal.  Despite  a  decline  between 
2019 and 2022, the number of public-private co-
publications  as  a  share  of  total  publications 

(93)  JRC (2023): Strategic Evaluation of the Technology Transfer 

and IPR protection systems of Bulgaria, Croatia and Romania. 

(94)  Ibid. 

(95)  Programmes to support these capacities such as the World 

Bank’s DIGIT project can be used in this regard. 

55 

BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISE024681012141600.20.40.60.811.2Top 10% highly-cited publications, 2020Public Expenditure on R&D (as % of GDP), 2020 
 
   
 
 
 
to 

support 

technology 

remains  above  the  EU  average  (8.3%  vs  7.6%). 
Collaboration  between  businesses  and  academia 
benefits from a range of dedicated RRP and ERDF 
funding  programmes (96)  targeting  collaborative 
research.  New  technology  transfer  guidelines  and 
transfer 
financial 
programmes  are  noteworthy  and  very  much 
needed,  as  patent  applications  filed  under  the 
Patent Cooperation Treaty per billion GDP (0.46 vs 
an  EU  average  of  3.4  in  2019)  are  very  low  and 
decreasing further (see Annex 12). Going forward, 
it  is  important  to  ensure  funding  stability  and 
consistent  support  to  technology  transfer  offices 
to build their capacities, also beyond EU funds (97). 
Further  soft  support  measures,  e.g.  networking 
events  and  trainings  for  collaborative  research, 
might  be  beneficial  –  existing  but  strengthened 
initiatives  could  be  used, e.g.  Thematic  Innovation 
Councils (98). 

in  the 

is  also  visible 

Business  R&D  expenditure  is  below  the  EU 
average but has increased markedly. Business 
enterprise  expenditure  on  R&D  as  %  of  GDP  has 
almost  doubled  since  2015  but  remains  well 
below the EU average (0.78% vs 1.48% in 2022). 
low  number  of 
This 
researchers  employed  by  business  per  thousand 
active  population  (1.4  in  Croatia  vs  5.4  on  EU 
average  in  2021) (99).  The  R&D  tax  incentive 
system  is  characterised  by  low  take-up (100);  the 
envisaged  analysis  of  the  R&D  tax  incentive 
system  will  be  important  and  the  implementation 
of  its  findings  key.  The  availability  of  venture 
capital  (as  %  of  GDP)  is  improving (101)  but 
remains  below  the  EU  average  (0.034%  vs 
0.085%). 

(96)  E.g. targeted scientific research programme with the aim of 

supporting collaborative industrial research projects. 

(97)  JRC (2023): Strategic Evaluation of the Technology Transfer 

(99)  Eurostat. 

and IPR protection systems of Bulgaria, Croatia and Romania. 

(100) OECD (2023): OECD Economic Surveys: Croatia 2023. 

(98)  European Commission (2023): PSF to support early stages of 

(101) Croatian start-ups are also supported through the EIF/ERDF 

innovation and science-business linkages in Croatia. 

‘Croatian Venture Capital Initiative 2’: Link. 

56 

 
 
 
Table A11.1:Key innovation indicators 

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

57 

EU2022average (1)R&D intensity (GERD as % of GDP)0.730.831.241.241.432.24Public expenditure on R&D as % of GDP0.410.40.650.660.650.73Business enterprise expenditure on R&D (BERD) as % of GDP0.320.420.60.580.781.48Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 33.64.74::9.6Patent Cooperation Treaty (PCT)  patent applications per billion GDP (in PPS)0.70.40.46::3.4Public-private scientific co-publications as % of total publications7.56.98.78.78.37.6Public expenditure on R&D financed by business enterprise (national) as % of GDP0.030.0330.0300.026:0.054New graduates in science & engineering per thousand pop. aged 25-3411.812.816.616.4:16.9Total public sector support for BERD as % of GDP0.0130.0050.0530.066:0.204R&D tax incentives: foregone revenues as % of GDP0.03100.0130.004:0.104Share of environment-related patents in total patent applications filed under PCT (%)16.712.813.7::14.7Venture capital (market statistics) as % of GDP0.0030.0060.0090.0290.0340.085Employment share of high growth enterprises measured in employment (%):14.5512.3:12.51Finance 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 2021Croatia201020152020 
 
   
 
ANNEX 12: INDUSTRY AND SINGLE MARKET 

has 

competitiveness 

Croatia’s 
been 
progressively improving. In the 2023 IMD World 
Competitiveness  Ranking (102),  Croatia  is  ranked 
50th, down 4 places compared to 2022 but up 10 
places  compared  to  2019.  Croatia’s  strengths 
include good performance in the tourism sector (in 
2019,  the  direct  contribution  of  tourism  to  GDP 
was estimated at 11.8% (103)), long-term growth in 
employment  and  its  GDP  growth  rate  per  capita. 
Croatia increased its market share in world exports 
(goods  and  commercial  services)  slightly  from 
0.13% in 2018 to 0.14% in 2022.  

Croatia’s  labour  productivity  is  catching  up 
with  the  EU  average,  but  more  slowly  than 
its  peers.  Its  real  labour  productivity  per  person 
employed rose by 13.3% between 2015 and 2022, 
well above the EU average of 4.5% (104). However, 
labour productivity has grown less in Croatia than 
in peer countries (105). 

Graph A12.1: Labour productivity per person 
employed (index 100 in 2015) 

Source: Eurostat 

to 

improvements 

the  World  Bank (107). 
economy,  according 
in  2021  and  2022, 
Despite 
productivity  in  this  sector  failed  to  grow  between 
2018  and  2022  (-0.1%  on  average  per  year 
against +1.63% for the EU-27). Productivity in the 
construction  sector  is  also  low  (less  than  40%  of 
Germany).  This  is  problematic  given  the  large 
investments in the Croatian recovery and resilience 
renovating  buildings  and 
plan 
reconstructing  buildings  damaged  in  the  2020 
earthquakes.  Croatia’s 
low  productivity  within 
sectors  is  due  to its  comparatively  large  share  of 
poor  performing  firms  and  relatively  few  high 
performers (108). However, since 2016 the share of 
high-growth  firms  has  been  relatively  higher  in 
Croatia than in the EU (109).  

(RRP) 

for 

offers 

countries 

The  manufacturing  sector  is  smaller  than  in 
peer 
growth 
but 
opportunities.  Croatia  relies  heavily  on  the 
tourism  sector  and  has  a  relatively  low  level  of 
industrialisation (13%  of GDP  against  15%  in  the 
EU-27  and  17%  in  the  EU’s  Central  and  Eastern 
European  countries/EU-CEE).  In  addition,  medium- 
and high-tech manufacturing represents a smaller 
share of the manufacturing added value in Croatia 
than  in  peer  countries  (31%  against  41%  in  the 
EU-27  and  38%  in  the  EU-CEE).  However,  Croatia 
high 
export 
has 
competitiveness 
a 
and  has 
comparative  advantage  in  low  carbon  technology 
products (110).  It  expects  to  have  an  electrolyser 
capacity  of  10MW  by  2026  (see  Annex  7).  Smart 
specialisation  and  a  promotion  policy  of  foreign 
direct  investment  tailored  to  drive  the  expansion 
of  promising  niche  sectors  could  help  develop 
Croatia’s manufacturing potential (111). 

demonstrated 

shown 

goods 

also 

Despite  the  progress,  the  gap  with  EU 
productivity  remains  significant.  Croatia’s 
labour  productivity  amounts  to  70%  of  the  2023 
EU  aggregate (106).  The  gap  is  due  to  poor  within-
sector  performance  rather  than  the  structure  of 
the  Croatian  economy.  For  example,  Croatia’s 
productivity  in  the  manufacturing  sector  is  just  a 
quarter  of  that  in  Germany,  the  regional  frontier 

Energy  prices  and  material  shortages  are 
still  an  issue,  but  are  less  acute  than  last 
year. During  winter  2022-2023,  the  energy  crisis 
had a substantial impact on firms, in particular on 
energy-intensive  industries  such  as  aluminium, 
construction materials, shipbuilding and fertilisers. 
The  situation  is  now  improving  due  to  the  fall  in 
energy  prices.  The  situation  regarding  material 

(102) IMD World Competitiveness Rankings, 2023. 

(107) World Bank, Croatia Country Economic Memorandum, 2022. 

(103) Eurostat, Tourism satellite data 2023 

(108) OECD Economic Surveys: Croatia, 9/2023. 

(104) Eurostat (NAMA_10_LP_ULC) 

(109) Eurostat (bd_9pm_r2). 

(105) World Bank, Croatia Country Economic Memorandum, 2022. 

(110) IMF, Croatia- Article 4 report, 29/6/2023. 

(106) GDP per hour worked in purchasing power standards, 
European Commission, Autumn 2023 forecast. 

(111) Friedrich Ebert Stiftung, Industrial Policy for a new growth 

model, Country briefing Croatia, 2023. 

58 

909510010511011512020132014201520162017201820192020202120222023European Union - 27 countries (from 2020)CroatiaAverage BU, CZ, EE, LV, LT, HU, PL, RO, SL, SK 
 
      
 
 
 
shortages  is  also  improving:  the  number  of  firms 
in industry reporting material shortages decreased 
significantly in 2023 compared to 2022 (12.2% vs 
24.8%) (see Table A12.1). It is however still much 
higher  than  in  2019,  when  only  4%  of  firms  in 
industry reported material constraints.  

A  workforce  shortage  harms  innovation  and 
growth.  Businesses  find  that  the  availability  of 
skilled staff is the main barrier to investment (112). 
Labour  shortages  are  harming  key  sectors  of  the 
economy  like  construction,  tourism  and  industry 
(see  Annex  14).  In  industry,  these  shortages  are 
affecting  Croatia  more  severely  than  the  rest  of 
the  EU,  with  39%  of  firms  surveyed  facing 
constraints compared to the EU average of 23.3% 
(see  Table  A.12.1).  The  shortage  of  professional 
and skilled workers in the construction sector is a 
major  concern (113).  The  shortage  of  specialists  is 
affecting  the  integration  of  digital  and  green 
technologies  into  local  firms (114).  The  share  of 
small  and  medium-sized  enterprises  (SMEs)  with 
at  least  a  basic  level  of  digital  intensity  stood  at 
56%  against  58%  in  the  EU  in  2023 (115)  (see 
Annex 10). 

Croatia’s 
innovation  performance  suffers 
from the low level of business investments in 
research and innovation. The share of business 
expenditure  on  R&D  has  almost  doubled  since 
2015,  but  remains  well  below  the  EU  average 
(0.78%  against  1.48%  in  2022) (see  Annex  11). 
Compared  to  the  EU,  Croatia’s  performance  in 
terms  of  firms’  investments  in  research  and 
innovation  decreased  by  nearly  20  percentage 
points  between  2016  and  2023 (116).  The  number 
of  patents  per  inhabitant  is  one  of  the  lowest  in 
the  EU (117),  and  Croatia  is  not  participating  in 
enhanced  cooperation  with  respect  to  the  unitary 
patent  system.  This  weak  performance  is  the 
result  of  several  factors,  including  the  relatively 
low  number  of  large  industrial  companies,  the 
dispersion of public support for innovation and the 

life-long 

such  as 

low take-up of the R&D tax incentive scheme (118). 
Croatia  also  scores  badly  on  human  resources 
indicators 
learning  and 
population  with  higher  education  and  doctorate 
graduates, in particular in STEM. These low scores 
can  be  linked  with  the  low  level  in  basic  skills  as 
measured  by 
for 
International  Student  Assessment  (PISA),  which 
points to weaknesses in the education system. One 
in  three  students  do  not  reach  a  minimum 
proficiency level in mathematics, and the share of 
top  performers  is  below  the  EU  average  for  all 
three basic skills (see Annex 15). 

the  OECD’s  Programme 

Access  to  equity  remains  well  below  the  EU 
average.  The  share  of  financially  constrained 
firms  is  higher  in  Croatia  than  in  the  EU  (around 
12%  against  6%) (119),  while  the  increase  in 
interest  rates  weighs  on  investment.  Banking 
finance  dominates,  and  access  to  loans  is  above 
the EU average (120). By contrast, access to equity, 
which is key to investment in and growth of young 
and innovative firms, is well below the EU average. 
In  2022,  the  EIF  SME  Access  to  Finance  Index  for 
equity was 0.09 in Croatia against 0.17 for the EU 
(see  Table  A12.1).  This  is partly  due  to  the  overly 
complex  public  equity  market  structures (121). 
Croatia’s  RRP  contains  a  number  of  measures  to 
improve  access  to  finance  and  strengthen  the 
capital  markets,  which  are  expected  to  produce 
results in the coming years. 

in  the  public  sector-to-
Payment  gaps 
business sector are increasing. Late payments 
may increase the risk of bankruptcy, especially for 
SMEs.  Payment  gaps  have  increased  in  the public 
sector-to-business sector since 2021 and are now 
slightly  above  the  EU  average (122)  (see  Table 
A12.1).  In  addition,  the  timeliness  of  payments, 
especially  in  sectors  with  a  significant  number  of 
transport  and 
SMEs  such  as  construction, 
distribution, 
remains 
and 
unsatisfactory (123).  

trade, 

retail 

(112) European Investment Bank, EIB survey - Croatia overview, 

2023. 

(118) OECD Economic Surveys Croatia, 9/2023. 

(113) European Construction Sector Observatory 

(119) European Investment Bank, EIB investment survey 2023.  

(114) Friedrich Ebert Stiftung, Industrial Policy for a new growth 

(120) European Investment fund, SME Access to Finance Index – 

model, Country briefing Croatia, 2023. 

Loans. 

(115) European Commission, Digital Decade report – Croatia. 

(121) OECD Economic Surveys: Croatia, 9/2023, p. 12 and 86. 

(116) European Commission, 2023 European Innovation 

(122) https://www.dnb.com/en-ch/knowledge/study/payment-study-

Scoreboard 

(117) European Patent Office 

2023-download3.html 

(123) Dun & Bradstreet Payment study 2022  

59 

 
 
 
in 

overall 

performance 

Regulations and administrative burden weigh 
on  competition  and  dynamism.  As  stressed  by 
the OECD (124), Croatia enjoys a dynamic economy 
with  internationally  competitive  and  young  firms. 
labour 
However, 
productivity  growth  has  been  limited.  One  of  the 
reasons is that the share of low-productivity firms 
remains high, while productive firms often struggle 
to grow. This likely reflects a business environment 
that  weakens  competitive  pressures  between 
firms.  Barriers  to  competition  are  a  key  issue  in 
services (125),  in  particular  restrictions  in  regulated 
professions.  Even  where  the  design  of  the 
regulation  framework  is  sound,  regulations  are 
often burdensome in practice and the measures to 
reduce  this  burden  are  sometimes  compromised 
by shortages of experts to implement the reforms. 
Croatia  ranks  below  the  EU-27  average  on 
government  effectiveness (126)  (see  Annex  13). 
Further  reducing  the  burden  of 
lengthy  and 
and 
unpredictable 
increasing  administrative  efficiency  will  be  key  to 
boosting productivity growth (127). 

procedures 

regulatory 

other 

guides. 

Despite  recent  reforms,  several  professions 
face higher regulatory restrictions than their 
EU  counterparts (128).  This  is  particularly  acute 
for lawyers, architects, tax advisers, 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  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. 
Croatia  adopted  amendments  to  the  Lawyers  Act 
in  2022  to  remove  some  barriers,  but  barriers 
remain.  In  relation  to  tourist  guides,  diverging 
regional  regulations  seem  to  hinder  access  to  the 
market  and  affect  both  national  service  providers 

prices 

and 

and  the  cross-border  provision  of  services.  To  lift 
regulatory  barriers  in  services,  the  RRP  puts 
forward ambitious reforms for the liberalisation of 
the  service  markets (129).  Croatia  has  to  complete 
the reforms by the end of 2024.  

delivery, 

policymaking, 

Croatia is making some progress in reducing 
the  regulatory  burden.  Reforms  under  the  RRP 
tackle  challenges  in  digital  government,  public 
service 
territorial 
fragmentation  and  the  civil  service.  These  efforts 
are  already  showing  results.  The  share  of  firms 
that  consider  restrictive  business  regulations  a 
major  obstacle  to  long-term  investments  has 
decreased  considerably  since  2018  (see  Table 
A12.1). However, it remains above the EU average 
(29.0% compared to EU average of 22.2%) (130).  

procedures, 

Croatia  is  simplifying  permitting  procedures 
for  the  deployment  of  renewable  energy. 
Investment in the deployment of renewable energy 
long 
infrastructure  has  been  hampered  by 
administrative 
in 
authorisation 
particular  for  onshore  wind  and  ground-mounted 
solar  photovoltaic  systems (131).  As  part  of  the 
Single  Market  Enforcement  Taskforce,  Croatia 
confirmed  several  barriers  to  permitting  and  is 
working  on  removing  them.  They 
include  a 
confusing  and  complex  legal  framework,  lack  of 
process  overviews,  unclear  process  steps  and 
shortages  of  skilled  staff 
relevant 
authorities. In 2022, as part of its RRP (132), Croatia 
removed several administrative barriers that were 
restricting  renewable  energy  source  uptake  by 
self-consumers  (see  Annex  7).  However,  Croatia 
reported that it has no plans so far to introduce a 
one-stop shop for renewable energy permitting. 

the 

in 

Indicators  in  the  Single  Market  Scoreboard 
show a relatively good performance. Croatia’s 
average  delay  in  transposing  directives  was  16.8 
months in 2023 (133). This delay is shorter than the 
EU average (18.3 months), but has increased since 
2021,  when  it  was  only  10.1  months.  On  a  more 
positive  note,  Croatia’s  transposition  deficit  and 

(124) OECD Economic Surveys: Croatia, 9/2023. 

(129) Reform C1.1.1. R2 of Croatia’s Recovery and Resilience Plan  

(130) European Investment Bank, EIB survey - Croatia overview,  

(125) World Bank, Croatia Country Economic Memorandum, 2022. 

2023. 

(126) Worldwide Governance Indicators, 2022.  

(131) European Commission, Report on technical support for RES 

(127) OECD Economic Surveys: Croatia, 9/2023. 

policy, 4/2023. 

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

(132) Milestone 37 of Croatia’s Recovery and Resilience Plan 

(133) European Commission, Single Market Scoreboard – Croatia  

60 

 
 
 
improving 

conformity  deficit  are  in  line  with  the  EU  average 
(see  Table  A12.1).  On 
and  are 
infringements,  Croatia  is  performing  well.  The 
number of pending cases is below the average and 
the  duration  of  infringement  proceedings  is  the 
shortest in the EU. Croatia solved 93.3% of the 15 
SOLVIT cases that it handled as lead centre, above 
the  EU  average  of  88.3%.  However,  staffing 
remains an issue. 

is  now  around 

Croatia’s  firms  benefit  more  and  more  from 
the  opportunities  offered  by  the  single 
market.  For  the  last  few  years,  Croatia’s  trade 
integration  into  the  single  market  has  increased 
and 
(see 
Table A12.1).  The  share  of  SMEs  that  have  done 
electronic  sales  to  the  rest  of  the  world  is  far 
above  the  EU  average  (8.1%  vs  4.9%) (134).  The 
adoption  of  the  euro 
in  2023  has  further 
facilitated  trade  with  customers  and  suppliers 
from other euro countries. 

the  EU  average 

the  system  will  enable 

Croatia  is  in  the  intermediate  stage  of 
implementing  the  components  needed  to 
connect to the  ‘Once-Only’  Technical  System 
(OOTS) (135). As part of the Single Digital Gateway 
Regulation (136), 
the 
automated  cross-border  exchange  of  evidence 
between  competent  authorities,  improving  online 
access  to  information,  administrative  procedures 
and  assistance  within  the  EU.  The  onboarding  of 
Croatian  competent  authorities  is  crucial  for  the 
system  to  function  smoothly  and  to  reduce 
administrative burden.  

(134) European Commission, SME Performance review 2022/2023 

– Croatia, 6/2023. 

(135) Implementing Regulation (EU) 2022/1463 

(136) Regulation (EU) 2018/1724  

61 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A12.1:Single Market and Industry 

Source: (1) AMECO, (2) Eurostat, (3) Single Market scoreboard, (5) ECFIN BCS, (6) COMEXT and Commission calculations, (7) EIB 
Investment Survey, (8) Intrum Payment Report, (9) SAFE survey, (10) EIF SME Access to Finance Index 
* Own Commission calculations for the EU27 average  

62 

POLICY AREAINDICATOR NAME20192020202120222023EU27 average*Net Private investment, level of private capital stock, net of depreciation, % GDP13,623,14,22,73,8Net Public investment, level of public capital stock, net of depreciation, % GDP10,91,81,20,62,21,2Real labour productivity per person in industry (% yoy)2-2-5,510,61,3--1,24Cost competitivenessNominal unit labour cost in industry (% yoy)20,43,6-4,78,8:9,83Single Market integrationEU Trade integration, % (Average intra-EU imports + average intra EU exports)/GDP238,034,638,645,041,442,9Transposition deficit, % of all directives not transposed30,21,21,41,10,60,7Conformity deficit, % of all directives transposed incorrectly31,91,81,41,21,11,1SOLVIT, % resolution rate per country389,5100,0100,092,993,088,3Number of pending infringement proceedings3182626222225,9RestrictionsEEA Services Trade Restrictiveness Index4-----0,05Single bids, % of total contractors3172521232228,6Direct Awards, %3876558,1Material Shortage (industry), firms facing constraints, %54,38,413,324,812,217,2Labour Shortage using survey data (industry), firms facing constraints, %529,813,517,934,039,023,3Vacancy rate, % of vacant posts to all available ones (vacant + occupied)21,4251,01,51,61,52,5Concentration in selected raw materials, Import concentration index based on a basket of critical raw materials60,130,150,140,150,160,22Installed renewables electricity capacity, % of total electricity produced262,766,967,570,80,050Investment obstaclesImpact of regulation on long-term investment, % of firms reporting business regulation as major obstacle745,438,838,727,029,022,2Bankruptcies, Index (2015=100)2201,9145,0197,7215,4167,2105,6Business registrations, Index (2015=100)2153,2114,3140,0153,9170,5120,2Payment gap - corporates B2B, difference in days between offered and actual payment8-1612131315Payment gap - public sector, difference in days between offered and actual payment8-2410151716Share of SMEs experiencing late payments in past 6 months, %950,250,748,039,532,648,7EIF Access to finance index - Loan, Composite: SME external financing over last 6 months, index values between 0 and 1100,570,500,430,68-0,49EIF Access to finance index - Equity, Composite: VC/GDP, IPO/GDP, SMEs using equity, index values between 0 and 110 0,090,050,120,09-0,17CroatiaHEADLINE INDICATORSEconomic StructureSINGLE MARKETCompliancePublic procurement ECONOMIC STRUCTUREShortagesStrategic dependenciesBUSINESS ENVIRONMENT - SMEsBusiness demographyLate paymentsAccess to finance 
 
      
 
ANNEX 13: PUBLIC ADMINISTRATION 

Croatia’s  public  administration  is  essential 
for  the  economy’s  competitiveness  by,  in 
particular,  shaping  the  conditions  for  the 
twin  transitions  and  creating  a  favourable 
Croatia’s 
environment.  Overall, 
business 
perception  of  government  effectiveness  ranks 
below  the  EU  average (137).  Reforms  under  the 
recovery  and 
tackle 
resilience  plan 
challenges  in  digital  government,  public  service 
delivery,  policymaking,  territorial  fragmentation 
and the civil service.  

(RRP) 

faces  certain 
in  Croatia 
Policymaking 
challenges.  There  are  no  formal  mechanisms  to 
systematically  incorporate  evidence  into  policy 
decisions,  leading  to  limited  transparency  and 
the  government  and 
coordination  between 
knowledge  generating  organisations.  The  new 
legislative framework drafted under the RRP aims 
to  unify  and  improve  the  better  regulation  policy 
legislative  activity 
instruments, 
assessment, 
planning, 
evaluations 
public 
consultations (138).  The  adoption  of  laws  through 
emergency  procedures  rose  in  2022:  53.7%  of 
legislation  was 
the 
principles  of  transparency,  accountability  and 
public participation (139). 

fast-tracked,  weakening 

in  particular 

regulations 

regulatory 

impact 

and 

of 

is 

Croatia  scores  below  the  EU  average  on 
satisfaction  with  the  provision  of  public 
services,  with  only  42%  of  people  surveyed 
giving a positive rating (140). One of the possible 
reasons 
territorial 
the  organisational  and 
fragmentation  in  central  and  local  government. 
local 
The  ongoing  RRP 
government fragmentation has had limited results. 
Certain  municipalities  have  shown  interest  in 
jointly delivering selected services. However, inter-
municipal cooperation is currently restricted to the 
joint  provision  of  administrative  services  with  no 
collaborative  coordination  of  municipal  policies. 
Additionally,  out  of  the  428  municipalities,  less 
than  half  have  shown  interest  in  such  “functional 

reform  addressing 

incentives  and 

merging”  despite 
legal 
possibility  introduced  in  2015.  Moreover,  the 
interest in actual mergers, i.e. not just mergers of 
functions  but  rather  two  municipalities  merging 
into one, remains limited. 

the 

Croatia  has  been  implementing  a  range  of 
measures  to  tackle  the  civil  services’  long-
standing  challenges.  New  wage  and  work 
models  have  been  brought  in  under  the  RRP.  The 
new  legislative  framework  sets  out  a  reward 
system  based  on  performance  and  introduces  a 
hybrid  working  model.  An  amended  legislative 
framework for a centralised  system to select civil 
servants  aims  to  increase  the  transparency  of 
public  sector  employment  and  facilitate  staff 
in  the 
mobility.  There 
participation  of  civil  servants  in  adult  learning: 
10.3%  in  2022  in  Croatia  vs  the  EU  average  of 
17.9% (Table A13.1 and Graph A13.1). 

is  still  a  clear  gap 

Significant  efficiency  issues  persist  in  the 
justice  system (141).  The  backlog  and  length  of 
proceedings  remain  among  the  highest  in  the  EU, 
despite  the  disposition  time  in  civil  and  litigious 
cases  at  first  instance  falling  to  559  days  from 
655 in 2021. The use of electronic communication 
tools  has  grown,  and  the  level  of  remuneration 
increased  for  judges,  state  attorneys  and  court 
objective 
staff,  while 
remuneration  criteria 
judicial 
independence, no systemic deficiencies have been 
reported. 

is  expected.  On 

legislation 

set 

to 

Wide-ranging  reforms,  accelerated  through 
the  RRP,  have  the  potential  to  greatly 
improve  the  public  investment  management 
system (142).  A  new 
long-term  strategy,  the 
national  development  strategy  to  2030,  was 
launched  in  2017  and  accompanied  by  a  clear 
monitoring  process.  In  January  2024,  a  new 
standardised 
project 
methodology 
assessments 
for  all  budgetary  and  extra-
is 
budgetary  users  entered 
monitored  centrally  by  the  Ministry  of  Finance. 
Implementation  has  also  been  strengthened  by 

into  force  and 

for 

(137) Worldwide Governance Indicators, 2022. 

(138) European Commission, European Public Administration 
Country Knowledge: Evidence-informed policymaking, 
Publications Office of the EU, 2024 (forthcoming). 

(139) European Commission, European Public Administration 

Country Knowledge: Country Brief 2023 Croatia, Publications 
Office of the EU, 2024 (forthcoming). 

(140) European Commission, Standard Eurobarometer 99, 2023. 

(141) For a more detailed analysis of the performance of the 

Croatian justice system, see the 2024 EU Justice Scoreboard 
(forthcoming) and the country chapter on Croatia in the 
Commission’s 2024 Rule of Law Report (forthcoming). 

(142) Belu Manescu, C. (2022), ‘New evidence on the quality of 
public investment Management in the EU’, European 
Economy Discussion Paper No 177, European Commission. 

63 

 
 
 
 
 
 
Table A13.1:Public administration indicators 

(1) High values denote a good performance, except for indicator # 6. (2) 2023 value. If unavailable, the latest value available is 
shown. (3) Measures the user centricity (including for cross-border services) 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: E-government activities of individuals via websites, 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). 

new  reporting  guidelines  for  line  ministries  and  a 
digital  monitoring  system  shared  by  all 
line 
ministries. 

The  overall  maturity  of  e-government 
services  is  still  below  the  EU  average  but  is 
improving  (Table  A13.1).  The  Digital  Croatia 

strategy sets the framework for investments in the 
digital  transition  until  2032.  Coordination  is  still 
weak,  and  no  criteria  for  prioritisation,  selection, 
implementation  and  evaluation  of 
IT/digital 
projects have been set.  

Graph A13.1: Adult education: a) participation rate in job-related employer-sponsored education and 
training (left side); b) mean instruction hours spent by participants in education and training by sector 
(centre); c) share of women and men in management positions in the public administration (right side) 

Source: Eurostat, 2022 Adult Education Survey (charts a and b); European Institute for Gender Equality (chart c). 

64 

HR20192020202120222023EU-27(2)1n/an/an/a68.788.575.02n/a60.660.663.266.975.830.70.80.80.70.60.8449.749.349.9 (b)47.850.0 (b)52.953.4 (u)3.7 (u)8.0 (bu)5.5 (u)10.3 (b)17.969.414.215.218.424.09.271.71.81.6 (b)1.51.61.580.50.50.60.7n/a0.791.21.21.21.2n/a1.410n/an/a1.75n/an/a1.7Medium-term budgetary framework indexIndicator (1)E-government and open government dataShare of internet users within the last year that used a public authority website or appE-government benchmark overall score (3) Open data and portal maturity indexEducational attainment level, adult learning, gender parity and ageingShare of public administration employees with higher 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 governance020406080100120140160PublicadministrationEducationHealth andsocial workTotaleconomyb) Average instruction hoursHREU-270102030405060708090100HREU-27HREU-27HREU-27Level 1administratorsLevel 2administratorsSenioradministratorsc) Gender parityMenWomen0%10%20%30%40%50%60%70%PublicadministrationEducationHealth andsocial workTotaleconomya) Adult learningHREU-27 
 
 
      
 
  
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  the  EU’s  headline  and  national  targets  for 
2030 on employment, skills and poverty reduction. 

Table A14.1:Social scoreboard for Croatia 

(1) Update of 27 October 2023. Members States are 
categorised based on the Social Scoreboard according to a 
methodology agreed with the EMCO and SPC Committees. 
Please consult the Annex of the Joint Employment Report 
2024 for details on the methodology. 
Source: Eurostat. 

Croatia’s labour market continues improving, 
albeit  with  persistent  skills  mismatches, 
labour shortages and employment challenges 
for  disadvantaged  groups.  The  employment 
rate  in  Croatia  reached  70.7%  in  2023,  but 
remains  significantly  below  the  EU  average  of 
75.3%. In October 2023, reported labour shortages 
in  Croatia  were  near  double  the  EU  average  in 
construction  (60%  vs  28%)  and  industry  (39%  vs 
22%) and also higher in services (37% vs 30%). To 
address  the  persistent  labour  shortages  in  some 
sectors  Croatia  is  tapping  the  workforce  from 
outside  the  EU,  with  the  number  of  work  permits 
issued doubling since 2020. With improved labour 
market 
legal 
legislation  creating  a  better 
framework,  and  with  new  active  labour  market 

65 

policies  (ALMPs),  Croatia  aims  to  draw  inactivate 
people  into  the  labour  market  and  encourage  the 
transition from undeclared to declared work. 

Significant challenges exist for women, older 
low-skilled  workers,  persons  with 
and 
disabilities  and  young  people  not 
in 
employment, education or training (NEETs) to 
get  access  to  good  quality  jobs.  The  disability 
employment  gap  in  2023  was  39.2  percentage 
points  (pps),  (increasing  from  36  pps  in  2022, 
which  was  already  above  the  EU  average  of 
21.4 pps)  and  has  increased  by  10.5  pps  since 
2021.  Women's  employment  rate  (at  66.8%  in 
2023)  is  considerably  below  the  EU  average 
(70.2%).  The  employment  rate  of 
low-skilled 
workers (39.2% in 2023) lags considerably behind 
that  of  medium-skilled  and  high-skilled  workers 
(69%  and  86.6%  respectively).  The  employment 
rate  of  older  workers  stood  at  51.7%  in  2023, 
considerably  lower  than  in  the  EU  (63.9%).  The 
rate of young NEETs (aged 15-29) remains slightly 
above the  EU  average  (11.8%  vs  11.2% in  2023) 
and  includes  a  growing  number  of  inactive  young 
people. This highlights the importance of efforts to 
better  target  ALMPs  to  achieve  the  national 
employment rate target of 75% by 2030.  

Investments  and  reforms  in  education  and 
training  at  different  levels  aim  to  improve 
the  supply  of  skilled  workers  and  boost 
employment. Participation in formal childcare for 
children  below  the  age  of  three  decreased  from 
33.3%  in  2021  to  29.6%  in  2023,  (with  a  slight 
increase  from  27.5%  in  2022  vs  35.9%  EU 
average). Investments under the RRP and cohesion 
policy  could  increase  the  enrolment  of  children  in 
formal  childcare,  although  concerns  remain  about 
the shortage of early childhood education and care 
teachers. Croatia continues modernising vocational 
training  and  education,  aligning  programmes  with 
labour  market  needs.  Work-based  learning  is  still 
limited,  with  efforts  to  increase  it.  The  RRP,  the 
ESF+  and  the  European  Regional  Development 
Fund  (ERDF)  provide  substantial  investments  in 
these  areas.  The  ESF+  focuses  on  connecting 
curricula  to  labour  market  needs,  increasing  the 
offer  and  quality  of  vocational  education  and 
training,  and  supporting  vulnerable  students  by 
providing teaching assistants. 

23.3259.011.87.84.670.76.12126.919.918.120.35363.827.51.3Critical situationTo watchWeak but improvingGood but to monitorOn averagePolicy areaHeadline indicatorEqual opportunities and access to the labour marketAdult participation in learning (during the last 12 months, excl. guided on the job training, % of the population aged 25-64, 2022)Early leavers from education and training(% of  the population aged 18-24, 2023)Share of individuals who have basic or above basic overall digital skills(% of the population aged 16-74, 2023)Young people not in employment, education or training(% of the population aged 15-29, 2023)Gender employment gap(percentage points, population aged 20-64, 2023)Income quintile ratio (S80/S20, 2022)Dynamic labour markets and fair working conditionsEmployment rate(% of the population aged 20-64, 2023)Unemployment rate(% of the active population aged 15-74, 2023)Long term unemployment(% of the active population aged 15-74, 2023)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2022)Social protection and inclusionAt risk of poverty or social exclusion (AROPE) rate (% of the total population, 2022)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2022)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2022)Disability employment gap (percentage points, population aged 20-64, 2022)Housing cost overburden (% of the total population, 2022)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2022)Self-reported unmet need for medical care (% of the population aged 16+, 2022)Better than averageBest performers 
 
 
 
     
 
 
Skills  mismatches  present  a  pressing 
challenge  in  the  labour  market,  which  is 
currently  characterised  by  labour  shortages. 
Croatia  is  investing  in  upskilling  and  reskilling 
under the RRP and the ESF+, including with a view 
to  creating  Individual  Learning  Accounts  (ILA).  So 
far, the scope of adult learning is very limited, with 
only  23.3%  of  Croatian  adults  participating  in 
learning in the previous 12 months, against 39.5% 
in the EU in 2022. Together with demographic and 
other  challenges,  this  also  undermines  Croatia’s 
potential to increase its economic competitiveness. 
Investments  in  ILA  will  need  to  be  boosted  to 
reach  the  national  target  of  at  least  55%  of  all 
adults participating in training every year by 2030 
(from the baseline of 26.9% in 2016). 

The  impact  of  social  transfers  on  poverty 
reduction  remains  low  and  continued  to 
decrease.  The  impact  stood  at  20.9%  in  2023 
(showing  a  slight  increase  from  20.3%  vs  the  EU 
average of 35.04% in 2022) and is also below the 
EU  average  in  terms  of  reducing  child  poverty 
(33.2%).  Despite  recent  reforms,  the  national 
minimum  income  scheme  lacks  the  capacity  to 
reduce poverty due to its limited coverage and the 
low  cash  value  of 
the  benefit.  Likewise, 
unemployment  benefits  do  not  provide  an 
adequate  safety  net  for  dismissed  workers.  The 
benefit  receipt  rate  is  very  low  for  self-employed 
people  and  workers  with  temporary  contracts. 
Pensions  are  low  compared  to  work  incomes;  the 
aggregate  replacement  ratio  was  36%  against 
58% in the EU in 2022.  

There are still considerable gaps in the social 
protection  system.  The  overall  share  of  the 
population  at  risk  of  poverty  or  social  exclusion 
(AROPE) 
increases 
in  Croatia  showed  annual 
reaching 20.7% in 2023 (up from 19.9% in 2022 
compared to the EU average of 21.6%). However, 
there  is  a  substantially  higher  risk  of  old-age 
poverty  (34.8%  in  2023  and  32.4%  in  2022  vs 
17.3%  EU  2022),  especially  in  comparison  to 
poverty  in  the  working-age  population  in  Croatia 
(14.5%).  The  AROPE  rate  for  persons  with 
disabilities  increased  in  2023  to  37.5%  (from 
35.3% in 2022) and it remains significantly higher 
than  for  persons  without  disabilities  (a  22.6  pps 
gap in 2023, up from 21.5 pps in 2022).  

Table A14.2:Croatia's situation on 2030 
employment, skills and poverty reduction targets 

(1) Adult Education Survey, special extraction: adults in 
learning in the past 12 months, special extraction excl. guided 
on-the-job training. 
(2) Change in the number of persons at risk of poverty or 
social exclusion (AROPE), reference year 2019. 
Source: Eurostat, DG EMPL 

The  availability  and  adequacy  of  social 
services, especially long-term care (LTC) is a 
concern  given  negative  demographic  trends. 
LTC  is  one  of  the  least  developed  parts  of 
Croatia’s healthcare and social care system. It is of 
low  quality,  fragmented,  highly  institutionalised, 
understaffed and severely underfunded (only 0.5% 
of  GDP  against  1.7%  EU  average  in  2022) (143)). 
The  number  of  formal  LTC  workers  is  very  low, 
driven by non-competitive wages. This particularly 
affects  Croatia’s  increasing  population  of  older 
people  who  additionally  have  low-value  pensions 
and high rates of poverty. Croatia is developing a 
national  LTC  strategic  framework.  The  successful 
implementation of this future strategic framework 
will  require  significant  stepping  up  of  efforts  to 
integrate  social  and  health  care,  to  ensure  a 
qualified  LTC  workforce  and  speed  up  the 
deinstitutionalisation of these services.  

to 

slow  progress 

faces 
The  deinstitutionalisation  process 
challenges  due 
in 
developing  non-residential  services  and 
living.  The 
social  housing  for  organised 
increasing demand for institutional care, especially 
for  children, 
the 
development  of  family-  and  community-based 
in  ensuring  the  conditions  for 
services  and 
independent  living, in  line with  the  Social  Welfare 
Act.  ESF+  and  ERDF  investments  contribute  to 
reducing occupancy and to the eventual closure of 
long-stay residential institutions. 

indicates  shortcomings 

in 

(143) European Commission and Economic Policy Committee, 

2024, The 2024 Ageing Report – Economic and budgetary 
projections for the 27 EU Member States (2022-2070), 
Publications Office of the European Union, Luxembourg. 

66 

IndicatorsLatest dataTrend            (2016-2023)2030 targetEU target 70.7(2023)23.3(2022)-89(2022)Poverty reduction3 (thousands)-298-15 000Employment1 (%)7578Adult learning2 (%)5560 
 
  
 
 
 
ANNEX 15: EDUCATION AND TRAINING 

This  Annex  outlines  the  main  challenges  of 
Croatia’s  education  and  training  system  based  on 
the  2023  Education  and  Training  Monitor  and the 
2022  OECD  Programme  for  International  Student 
Assessment (PISA) results. 

low 
represent 

share  of 
risk 
a 

in 
The  high  share  of  underperformers 
top 
mathematics  and 
for 
performers 
competitiveness.  Results  of  the  OECD’s  PISA 
2022  show  a  relatively  stable  performance  of 
students, despite the COVID pandemic disruptions. 
The  rate  of  underperformance  in  mathematics  is 
high  (32.9%  vs  EU  29.5%)  with  one  in  three 
students  underperforming,  but  is  below  the  EU 
average  in  reading  (22.7%  vs  EU  26.2%)  and 
science  (22.4%  vs  EU  24.2%).  The  share  of  top 
performers  in  all  three  skills  is  below  the  EU 
average (e.g. mathematics 5.9% vs EU 7.9%). Low 
results are probably related to the low instruction 
time  and  the  shortage  of  qualified  teachers  in 
mathematics  and  physics.  This  may  have  a 
negative effect on competitiveness, innovation and 
upskilling.  The  results  in  science  have  improved: 
underachievement  reduced  by  2.9 pps  and  the 
share of top performers increased by 1.8 pps (144). 
At  2.8%  in  2023,  the  rate  of  early  leavers  from 
education and training is the lowest in the EU. 

Graph A15.1: Underachievement rates by field, 
PISA 2012, 2018 and 2022 

school  infrastructure  is  financed  by  the  national 
(RRP)  and  the 
recovery  and  resilience  plan 
European  Regional  Development  Fund,  legislative 
changes  needed  for  the  reform  have  been 
made (146), and, in September 2023, 62 single-shift 
schools entered the pilot project that tests the new 
whole-day teaching model, planned to be extended 
to  all  schools  from  2027-2028 (147).  The  pilot 
includes  professional  development  of 
project 
teachers, 
and 
principals (148). 

professional 

associates 

There  are  shortages  of  teachers  in  early 
childhood  education  and  care  (ECEC)  and  in 
physics and mathematics. According to the RRP, 
5 658  additional  ECEC  teachers  would  be  needed 
to  achieve  the  EU-level  target  in  participation  by 
2030 (149).  Since  May  2022,  primary  school 
teachers  can  be  recruited  with  a  requirement  to 
complete a requalification programme at a higher 
education  institution  within  2  years (150).  However, 
these  programmes  have  not  yet  been established 
and the uptake of the measure is not monitored as 
ECEC  is  in  the  competence  of  local  authorities. 
Lower  salaries  –  only  80%  of  the  salaries  in 
primary  education  in  2021 (151)  –  and  a  high 
proportion  of  temporary  contracts  (19.7%) (152) 
reduce  the  attractiveness  of  the  profession. 
Increasing  its  attractiveness  and  the  number  of 
ECEC  teacher  graduates  would  help  reduce  the 
shortages and maintain the quality of ECEC. About 
one sixth of mathematics and physics teachers are 
not  qualified  for  the  subjects  they  teach.  This  is 
attractive 
addressed 
currently 

being 

by 

Source: OECD (2023). 

in  education  are 

Reforms 
continuing. 
Preparations  for  the  transition  to  single-shift 
schools (145)  and  whole-day  teaching  are  under 
way. Construction and reconstruction of necessary 

(146) https://narodne-novine.nn.hr/clanci/sluzbeni/ 

2023_12_156_2387.html 

(147) https://mzo.gov.hr/javni-poziv-osnovnim-skolama-za-podno 
senje-prijava-za-sudjelovanje-u-eksperimentalnom-progra 
mu-osnovna-skola-kao-cjelodnevna-skola-uravnotezen-pra 
vedan-ucinkovit-i-odrziv-sustav-odgoja-i-obrazovanja/5407 

(148) https://mzo.gov.hr/UserDocsImages//dokumenti/Obrazovanje 
/OsnovneSkole/Cjelodnevna-skola//Eksperimentalni-program-
Osnovna-skola-kao-cjelodnevna-skola.pdf 

(149) https://ec.europa.eu/info/sites/default/files/recovery_and_ 

resilience_plan_for_croatia_hr.pdf 

(150) https://narodne-novine.nn.hr/clanci/sluzbeni/ 

2022_05_57_805.html 

(151) https://podaci.dzs.hr/2022/en/29061. 

(144) OECD (2023), PISA 2022 Results (Volume I): The State of 
Learning and Equity in Education, PISA, OECD Publishing, 
Paris, https://www.oecd.org/publications/pisa-2022-results-
volume-i-53f23881-en.htm. 

(145) Schools in which teaching takes place in one shift. 

(152) ed. Ivšić, I., Jaklin, K. (2020), Raditi u dječjim vrtićima: 

Rezultati istraživanja uvjeta rada u ranom i predškolskom 
odgoju i obrazovanju, Sindikat obrazovanja, medija i kulture 
Hrvatske (SOMK), Zagreb. http://idiprints.knjiznica.idi.hr/932/ 
1/Raditi%20u%20dje%C4%8Djim%20vrti%C4%87ima.pdf 

67 

0.05.010.015.020.025.030.035.0HREUHREUHREUMathematicsReadingScience%2012201820222030 EU target 
 
  
 
 
 
 
Table A15.1:EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

Notes: b = break in time series; d = definition differs; e = estimated; p = provisional; u = low reliability; : = data not available. 
Source: 1,3,4,5,7,8,9,10,12=Eurostat; 11= Eurostat, Adult Education Survey; 2,6=OECD, PISA. 

scholarships  for  science,  technology,  engineering 
and mathematics teachers’ studies (see the 2023 
Country Report). 

Participation  in  ECEC  is  low  and  varies 
between  regions.  In  2021,  it  was  77.8%  (vs  EU 
92.5%)  for  children  older  than  3  years.  There  are 
significant  regional  differences. 
In  2022,  55 
municipalities  had  no  ECEC  facility,  and  the 
nearest one was 0.5-11.5 km away (153). According 
to the 2020 UNICEF study, 69% of children live in 
areas  where  tuition  fees  are  not 
linked  to 
household income, and 47% where even recipients 
of  social  assistance  have  to  pay  the  full  fees. 
UNICEF  has  developed  a  calculator  for  adjusting 
tuition fees to household income (154). 

The  state  co-financing  of  ECEC  should  help 
improve 
reduce 

inequalities 

and 

participation.  Since  1 October  2023, 
the 
government  co-finances  ECEC  facilities’  operating 
costs,  based  on  the  number  of  children  in  them 
and  the  development  category  of  municipalities 
(rising  to  50%  for  the  least  developed  ones) (155). 
This  funding  can  be  used  as  an  additional  source 
of  financing  for  availability,  sustainability  and 
affordability of ECEC. 

Tertiary  education  attainment  is  low,  with 
significant gender and regional gaps. In 2023, 
it  stood  at  38.7%,  below  the  EU  average  of 
43.1% (156). The gender gap in favour of women, at 
20.4 pps, is one of the highest in the EU, and has 
nearly  doubled  since  2012  (from  11.4 pps).  The 
rate  in  the  City  of  Zagreb  (54.6%)  is  more  than 
twice that of the Pannonian region (26.1%) (157). 

(153) https://app.powerbi.com/view?r=eyJrIjoiYTliOTk5MmYtMWE 
2Yi00N2NkLTg1YmUtNWIwMzA0ZjQzZDllIiwidCI6IjJjMTFjYm
NjLWI3NjEtNDVkYi1hOWY1LTRhYzc3ZTk0ZTFkNCIsImMiOjh9 

(155) https://narodne-novine.nn.hr/clanci/sluzbeni/full/2023_09_ 

109_1562.html 

(156) The national census data show a different trend with higher 

(154) https://www.unicef.org/croatia/kalkulator-za-izracun-

ekonomske-cijene-vrtica 

tertiary education attainment. 

(157) Eurostat: edat_lfse_04. 

68 

96%67.6%201391.8%201376.3%92.2%77.8%202192.5%2021,dReading< 15%18.7% 18.0%21.6% 22.5%22.7%202226.2%2022Mathematics< 15%29.9% 22.1%31.2%22.9%32.9%202229.5%2022Science< 15%17.3% 16.8%25.4%22.3%22.4%202224.2%2022< 9 %5.1%12.6%3.3%10.5%2.0%bu9.5%Men5.7%14.5%3.5%u12.1%2.8%bu11.3%Women4.4%u10.6%3.1%u8.7%1.2%bu7.7%Cities4.4%bu11.2%1.5%u9.4%:bu8.6%Rural areas6.8%b14.0%4.7%u11.0%2.6%bu9.9%5By country of birthNative5.1%11.3%3.3%9.2%1.9%bu8.2%EU-born:u26.2%:u22.4%:bu21.0%Non EU-born:u30.1%:u23.0%:bu21.6%6Socio-economic gap (percentage points)29.6:26.929.532.0202237.220227Exposure of VET graduates to work-based learning≥ 60% (2025) ::: :39.5% 64.5%45%23.6%34.1%35.4%38.7%38.7%b43.1%Men18.0%29.1%28.3%33.3%28.8%b37.6%Women29.4%39.2%42.8%44.2%49.2%b48.8%Cities32.8%b43.5%49.7%49.0%50.5%b53.3%Rural areas15.8%b24.8%26.0%27.7%29.8%b31.7%Native23.7%35.4%36.2%39.7%38.5%b44.2%EU-born37.5%u29.3%50.1%u36.7%36.8%bu40.2%Non EU-born18.6%u24.2%22.8%u31.0%41.0%b37.1%11Participation in adult learning (age 25-64)≥ 47% (2025) ::26.9%201637.4%201623.3%202239.5%202219.1%201322.7%201317.4%23.8%18.3%202124.5%2021Tertiary educational attainment (age 25-34)8Total8By gender9By degree of urbanisation10By country of birth12Share of school teachers (ISCED 1-3) who are 55 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 urbanisation201220182023IndicatorTargetCroatiaEU-27CroatiaEU-27CroatiaEU-27 
 
 
 
  
 
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. 

Graph A16.1: Life expectancy at birth, years 

Source: Eurostat 

Life  expectancy 
in  Croatia  had  been 
improving  steadily  before  the  COVID-19 
pandemic but remains below the EU average. 
Life expectancy dropped by nearly 2 years in 2020 
and  2021,  mainly  due  to  COVID-19.  Despite  an 
increase in mortality from COVID-19 from 2021 to 
2022 (158), 
rebounded, 
life  expectancy  partly 
although  not  to  pre-pandemic  levels.  Diseases  of 
the  circulatory  system  (‘cardiovascular  diseases’) 
remained  the  leading  cause  of  death  in  2021, 
followed  by  cancer  and COVID-19.  Mortality  rates 
from  preventable  and  treatable  causes  in  Croatia 
are far above the EU average. High smoking rates, 
poor nutrition, insufficient physical activity and the 
high  and  growing  prevalence  of  obesity  all 
contribute  to  preventable  deaths  from  ischaemic 
heart  disease,  which,  as  the  leading  single  cause 
of  death,  accounted  for  almost  1  in  7  deaths 
(13.0%) in 2021. The mortality rate from trachea, 
bronchus and lung cancer is the second highest in 
the  EU.  Historically  weak  anti-smoking  policies  in 
Croatia are partly responsible. Taxes on cigarettes 
are  still  too  low,  there  is  a  lack  of  smoke-free 
places  and  not  enough  media  campaigns  against 
tobacco  use.  Comparatively  high  levels  of  unmet 
needs for medical care are reported in rural areas. 
This  may  be  linked  to  the  average  travelling 
distance  to  healthcare  facilities  in  these  areas, 
exceeding  the  average  distance  reported  for  the 

(158) Based on data provided directly by Member States to the 

European Centre for Disease Prevention and Control, under 
the European Surveillance System.  

EU.  At  the  same  time,  there  is  a  duplication  of 
services,  with  some  hospitals  near  to  each  other 
offering the same types of services. 

Health  spending  relative  to  GDP  in  Croatia 
was  below  the  EU  average  in  2021.  In  that 
year, Croatia’s health spending per inhabitant was 
less  than  half  the  EU  average.  Outpatient  care 
accounts  for  the  largest  share  of  total  health 
inpatient  care  and 
expenditure,  followed  by 
spending  on  pharmaceuticals. 
In  2021,  total 
healthcare  spending  increased  to  8.1%  of  GDP 
from 7.7% of GDP in 2020. Public health spending 
as  a  proportion  of  total  health  spending  is  higher 
than  the  EU  average  (85.5%  vs  81.1%  in  2021). 
Based  on  the  age  profile  of  the  Croatian 
population,  public  spending  on  health  is  projected 
to increase by 0.8 percentage points (pps) of GDP 
by  2070,  compared  to  0.6 pps  for  the  EU  overall 
(See Graph 16.2 and Annex 21). 

Graph A16.2: Projected increase in public 
expenditure healthcare over 2024-2070 

Baseline scenario 
Source: European Commission / EPC (2024) 

In  2021,  spending  on  prevention  in  Croatia 
amounted  to  4.4%  of  total  spending  on 
healthcare,  compared  to  6.0%  for  the  EU 
overall.  Between  2019  and  2021,  spending  on 
prevention  increased  by  49%,  which  is  markedly 
lower than the increase for the EU overall (106%). 
Proportionally, budget shares for prevention across 
the  EU  increased  most  for  emergency  response, 
disease  detection  and  immunisation  programmes. 
In  Croatia,  the  increase  in  spending  on  preventive 
care in 2021 is mainly due to the 342% increase 
in spending on immunisation programmes. 

Croatia  has  had  fewer  doctors  and  nurses 
than many other EU countries. According to the 
definition  that  Eurostat  previously  used,  in  2021 
Croatia  had  7.5  nurses  per  1 000  population  (EU 
average: 7.9) and 3.7 doctors per 1 000 population 
(EU  average:  4.1).  However,  Eurostat  changed  the 

69 

78.078.278.677.876.777.780.981.081.380.480.180.6201720182019202020212022CroatiaEU6.65.70.60.802468EUCroatia% of GDP20242070increase 
 
 
   
 
   
 
Table A16.1:Key health indicators 

Note: The EU average is weighted for all indicators except for doctors and nurses per 1 000 population, for which the EU simple 
average is used. Doctors’ density data refer to practising doctors in all countries except Greece, Portugal (licensed to practise) and 
Slovakia (professionally active). Nurses’ density data refer to practising nurses in all countries except Ireland, France, Portugal, 
Slovakia (professionally active) and Greece (hospital only). 
Source: Eurostat Database; except: * OECD, ** Joint Questionnaire on non-monetary healthcare statistics, *** ECDC, **** Council 
Recommendation on stepping up EU actions to combat antimicrobial resistance in a One Health approach. 

i.e. 

“Nurses 

definition  of  nurses  in  its  data  set,  following  the 
EU  Directive  2005/36/EC  on  the  recognition  of 
professional  qualifications 
(EU 
recognised  qualification)”.  As  a  result,  the  figure 
for Croatia fell to 2.2 nurses per 1 000 population. 
Furthermore,  according  to  the  Labour  Force 
Survey,  there  was  a  16%  drop  in  the  number  of 
staff  working  in  human  health  activities  between 
the  first  quarter  of  2020  and  the  second  quarter 
of 2023. On a positive note, the number of nursing 
graduates  per  100 000  population  in  Croatia  is 
above  the  EU  average,  and  the  ratios  of  both 
doctors  and  nurses 
increased 
between  2013  and  2021,  despite  initial  concerns 
about  the  effects  of  Croatia’s  EU  accession  in 
2013. 

to  population 

Historical levels of investment in healthcare, 
measured as gross capital formation, are low 
in  Croatia,  but  EU  funds  provide  substantial 
support.  Through  its  recovery  and  resilience  plan 
(RRP),  Croatia  plans  to  invest  EUR 353 million 
(3.5%  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 
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 
Complementary 
components). 
investments worth more than EUR 226 million are 
also  planned  under  the  cohesion  policy  funds  in 
2021-2027.  Investment  will  be  directed  towards 
development 
health 
infrastructure,  medical  equipment,  health  mobile 
assets,  digitalisation  in  healthcare,  as  well  as 

renovation 

other 

and 

of 

to 

measures 
effectiveness  and 
system (159). 

improve 

the 

resilience  of 

accessibility, 
the  health 

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  transferring 
hospital ownership from the regions to the central 
authorities,  setting  up  excellence  centres,  making 
hospital  accreditation  and  payments  more 
efficient,  and  introducing  modern  management 
and  procurement  practices.  These  measures  can 
change  the  way  that  hospitals  operate  and  help 
them to avoid incurring debts which they can only 
pay  off  with  financial  support  from  the  state 
are 
budget.  Quality  monitoring 
underdeveloped, but available indicators on quality 
of  care  suggest  much  scope  for  improvement  by 
speeding up the pace of hospital and primary care 
reforms and improving quality of care. 

systems 

(159) The EU cohesion policy data reflect the status as of 13 May 

2024. 

70 

20182019202020212022EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)133,1128,3130,8139,7NA93.3 (2021)Cancer mortality per 100 000 population323,9311,0303,9308,2NA235.4 (2021)Current expenditure on health, % GDP 6,76,87,78,1NA10.9 (2021)Public share of health expenditure, % of current health expenditure82,081,984,285,5NA81.1 (2021)Spending on prevention, % of current health expenditure 3,13,03,14,4NA6.0 (2021)Available hospital beds per 100 000 population561566566568NA525 (2021)Doctors per 1 000 population3,43,53,53,7NA4.1 (2021)*Nurses per 1 000 population1,71,81,92,2NA7.9 (2021)Total consumption of antibacterials for systemic use, daily defined dose per       1 000 inhabitants per day ***18,818,815,718,220,219.4 (2022) 
 
 
  
 
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

Annex 17 showcases the economic and social 
regional  dynamics  in  Croatia.  It  provides  an 
analysis  of  economic,  social  and 
territorial 
cohesion  in  the  Croatian  regions  and  assesses 
investment  and  subnational  reform 
emerging 
social 
needs 
development and competitiveness in the country. 

foster  economic  growth, 

to 

of 
Overview 
performance at regional level 

economic 

and 

social 

Croatia 
is  characterised  by  significant 
regional  disparities.  Important  gaps  in  labour 
productivity,  investment  and  employment  persist 
between  the  capital  region  and  other  regions.  In 
2022, the capital region of Grad Zagreb had a GDP 
per capita (in PPS) of 134% of the EU-27 average, 
almost two times higher than Jadranska Hrvatska 
(70%),  almost  two  and  a  half  times  higher  than 
Sjeverna  Hrvatska  (59%),  and  almost  three  times 
higher than Panonska Hrvatska (46%). 

strong 

Between 2013 and 2022, all Croatian regions 
demonstrated 
growth  with  a 
development  rate  well  above  the  EU-27 
average.  Over  the  same  period,  the  region  of 
Sjeverna  Hrvatska  and  the  richest  region,  Grad 
Zagreb,  have  grown  at  a  higher  rate  than  the 
country  average,  while  Panonska  Hrvatska  has 
grown  at  a  lower  rate.  This  translates  into  a 
process  of  internal  convergence  for  the  region  of 
Sjeverna Hrvatska, accompanying catching-up with 
the  EU-27.  Nonetheless,  the  region  of  Panonska 
Hrvatska  has  been  identified  as  falling  in  a 
development trap in 2003-2021. 

Graph A17.1: GDP per capita (2012) and GDP 
growth (2013-2022), Croatia 

Source: DG REGIO calculations based on JRC (ARDECO) and 
Eurostat data 

71 

The  observed  gap  in  GDP  per  capita  levels 
between  the  capital  region  and  the  less 
developed  regions  is  linked  to  disparities  in 
labour  productivity.  In  2022,  national  labour 
productivity measured by gross value added (GVA) 
per  worker  in  purchasing  power  standard  (PPS) 
was  73%  of  the  EU-27  average.  The  capital  city 
region has the highest productivity at 87% of the 
EU-27  average  while  Jadranska  Hrvatska  is  at 
73%,  Sjeverna  Hrvatska  at  68%,  and  Panonska 
Hrvatska at 58%. 

lower 

Productivity  disparities  have  fallen  slightly 
since 2011, mainly due to the catching-up of 
Sjeverna Hrvatska. The context, however, is of a 
generally 
rate  of  productivity  growth 
compared to the previous decade (Annex 12). Such 
slow  productivity  growth  dynamics  suggest  that 
the  process  of  convergence  of  GDP  per  capita  at 
the  national  level  with  the  EU-27  in  recent  years 
may  not  be  supported  by  sufficient  endogenous 
capacity to sustain competitiveness. 

Human capital and specialisation in high-tech 
sectors  are  key  productivity  factors.  At 
national level, in 2022, the share of the population 
aged  30-34  with  a  tertiary  education  was  8.6 
percentage points lower than in the EU-27 (34.2% 
compared  with  42.8%),  again  with  significant 
territorial  disparities:  Grad  Zagreb  stood  at  17 
percentage  points  above  the  EU-27  average 
(60.1%)  while  Panonska  Hrvatska  was  more  than 
20 percentage points below. In terms of the share 
of  employment  in  high-tech  sectors,  Croatia  was 
below the EU-27 average in 2022: 4.1% compared 
with 4.9%, in continuous reduction since 2019. The 
regional  spread  was  again  evident,  ranging  from 
9.7%  in  Grad  Zagreb,  to  just  1.8%  in  Jadranska 
Hrvatska, as a result of a structural specialisation 
in tourism, and 1.9% in Panonska Hrvatska.  

Croatia is experiencing negative demographic 
dynamics,  with  marked  differences  between 
the  capital  region  and  the  rest  of  the 
country. Between 2013 and 2021, the country as 
a  whole  experienced  a  significant  decline  in 
population, with an average annual decline rate of 
-  10.9  per  1  000  residents.  In  the  short  term, 
depopulation  trends  may  lead  to  a  shortage  of 
human  resources  in  certain  sectors,  especially  in 
the  least  developed  regions.  In  the  longer  term, 
protracted population  decline  may  also  affect  the 
country's  overall  capacity  to  grow  and  even  to 
cope  with  the  inherent  challenges  of  an  ageing 
population. 

 
 
 
 
 
Table A17.1:Selected indicators at regional level in Croatia 

Source: Eurostat, EDGAR database 

Total  R&D  expenditure  at  national  level  in 
2021 was below the EU-27 average (1.2% as 
against 2.3%) and again unevenly distributed 
across  regions.  It  ranged  from  a  mere  0.4%  in 
Panonska  Hrvatska  and  0.6% 
in  Jadranska 
Hrvatska, to 1.2% in Sjeverna Hrvatska and up to 
2.2%  in  the  capital  city  region.  All  these  factors 
point  consistently  to  a  reduced  ability  of  the 
country,  and  especially its  less  developed  regions, 
in  dynamic  and 
to 
advanced sectors. This is also well reflected in the 
Regional  Competitiveness  Index  2.0,  which  puts 
the country at 81% of the EU-27 average in 2022. 

intercept  growth  trends 

Map A17.1:  Regional Competitiveness Index 2.0, 
2022 edition - Basic sub-index - Croatia 

slightly  above  the  EU-27  average.  However,  in 
Panonska  Hrvatska  the  unemployment  rate  was 
close  to  10%.  The  employment  rate  (20-64  age 
group) in 2023 ranged from levels close to the EU-
27  average  (of  75.3%)  in  Sjeverna  Hrvatska 
(73.6%)  and even above in Grad Zagreb (78%) to 
levels 5 to 15 percentage points below the EU-27 
average 
(70.6%)  and 
Panonska  Hrvatska  (62.8%).  Two  of  the  Croatian 
regions,  Kontinentalna  Hrvatska  and  Jadranska 
Hrvatska,  can  be  identified  as  having  recently 
fallen into a 'talent development trap'. 

in  Jadranska  Hrvatska 

Investment  and  subnational  reform  needs 
ahead 

Continuous  effort 
in  development  of 
administrative  capacity  at  national,  regional 
and  local  levels  is  required.  In  particular, 
regional and local authorities should not only have 
adequate absorption capacity, but also play a key 
role in addressing key emerging investment needs 
and making full use of funding instruments. This is 
of utmost relevance, given that significant parts of 
the  2021-2027  cohesion  policy  programmes  and 
the  recovery  and  resilience  plan  will  be  delivered 
at  regional  and  local  level.  Furthermore,  efforts 
are  needed  at  all  levels  to  ensure  that  public 
authorities  become  a  more  attractive  employer 
and are able to attract and retain qualified staff. 

Access  to  affordable  housing  is  a  growing 
challenge in Croatia. Rising house prices, rentals 
and  energy  costs  absorb  an  increasing  share  of 
household  income,  and  entry  into  the  housing 
market  is  increasingly  difficult,  especially  for  first 
time  buyers.  An  ongoing  subsidy  scheme,  started 
in  2017  and  aimed  at  first  time  buyers,  has 
contributed 
than 
effective 
alleviating 

increases, 
situation.  More 

to  price 
the 

rather 

Source: DG REGIO, JRC 

Labour  market  conditions  have  generally 
improved  after  the  COVID-19  pandemic.  In 
2023, Croatia had an unemployment rate of 6.1%, 

72 

GDP per head (PPS)Productivity (GVA (PPS) per person employed)GDP per head growthPopulation growthAt-risk-of-poverty or social exclusionEmployment rate, ages 20-64R&D expenditureGreenhouse Gas EmissionsEU Regional Competitiveness Index 2.0 - 2022 editionIndex, EU27 = 100 (2022)Index, EU27 = 100 (2022)Average % change on the preceding year (2013-2022)Average annual change per 1000 residents (2013/20-2021)% of population (2022)% of population aged 20-64 (2023)% of GDP (2021)Percent change per head (%) (1990-2022)Index, EU27 = 100European Union (27 MS)1001001.441.921.675.32.3100Hrvatska7372.93.45-10.919.970.71.2-16.980.7Panonska Hrvatska4658.33.6-22.527.862.80.4-12.271Jadranska Hrvatska7073.23.17-9.220.570.60.6-17.977Grad Zagreb13487.42.78-2711.2782.2-790Sjeverna Hrvatska5967.94.29-18.217.373.61.2-8.590NUTS region name 
 
 
 
 
   
 
management  of  state-owned  real  estate  could 
into 
lead  to  transformation  of  these  assets 
affordable housing solutions, improving the overall 
prosperity of local communities. Lack of affordable 
housing  also  hinders  urban  development  and 
socioeconomic 
balanced 
conditions across regions. To tackle this challenge 
effectively,  a 
comprehensive 
strategic  and 
approach  is  essential  at  national  and  local  levels, 
also addressing energy poverty challenges.  

improvement 

of 

Research  and  development  activities  are 
largely  concentrated  in  the  capital  region of 
Zagreb. It would therefore be beneficial to further 
regionalise  support  with  aim  of  increasing  public-
private 
turn  strengthening 
transfer  capacity  and  share  of 
technology 
innovative  SMEs  in  the  market.  Efforts  to  further 
enhance 
research  and  development 
ecosystems  need  to  be  continued  and  closely 
monitored. 

collaboration, 

regional 

in 

recycling  of  solid  waste.  The  policy  response 
should  not  only  focus  on  strengthening  the 
sector’s performance at strategic level, but also on 
increasing local authorities’ capacity to implement 
investments in separation, collection, treatment of 
into  Croatia’s 
investing  more 
waste  and  on 
transition to circular economy along the entire life 
cycle of products. 

There  is  a  need  to  address  bottlenecks  to 
investment  at  subnational  level,  in  order  to 
facilitate investments and reforms identified 
in  the  recovery  and  resilience  plan.  The  key 
element  of  is  to  strengthen  the  role  of  regional 
and  local  administrations  in  the  preparation  and 
implementation  of  subnational  strategies  and 
investment  programmes.  This  could  be  achieved 
by  introducing  or  strengthening  more  innovative 
bottom-up  mechanisms  of  participation.  Some 
actions that could help achieve this objective. 

(renewable) 

There are continuing challenges in relation to 
clean energy and climate transitions and the 
energy 
of 
establishment 
communities,  despite  the  existing 
legal 
framework  in  place.  In  this  respect,  further 
energy 
promoting 
communities and supporting people's participation 
at  local  level  in  the  context  of  clean  energy 
transition,  would  be 
for  achieving 
decentralisation of energy production. 

creation 

crucial 

such 

the 

of 

in 

has 

Croatia  could  benefit  from  facilitating 
technologies 
net-zero 
investments 
shown  
Croatia 
manufacturing. 
a comparative advantage in low carbon technology 
products. It could benefit from the opportunities of 
the  Strategic  Technology  for  Europe  Platform  by 
further  strengthening  the  development  of  the 
necessary  skills,  technologies,  infrastructures  and 
by  stimulating  the  involvement  in  new  strategic 
value 
industry 
manufacturing  and  decarbonisation  of  energy-
intensive industries. 

such  as 

net-zero 

chains, 

for  Croatia, 

Collection and management of waste at local 
level  with  affordable  prices  remains  a  key 
challenge 
combined  with 
difficulties  in  achieving  full  alignment  with 
the  Waste  Framework  Directive  and  the 
Packaging  Waste  Directive  at  national  level. 
Among  other  efforts,  raising  the  population's 
awareness  could  lead  to  increasing  the  levels  of 

73 

of 

integrated 

Continued  capacity  building  to  ensure  better 
implementation  of  existing  territorial  tools 
(e.g. Integrated Territorial Investments (ITIs), 
national  tools  for  islands)  in  line  with  the 
principles 
territorial 
development  and  partnership.  Introduction  of 
new  territorial  tools  (e.g.  Community  Led  Local 
Development 
policy 
programmes), or different models of using existing 
tools  (e.g.  ITI  for  different  types  of  territories)  in 
order  to  more  precisely  respond  to  challenges  of 
specific territories.  

cohesion 

(CLLD) 

in 

of 

as 

role 

county 
the 
Strengthening 
regional 
agencies 
development 
coordinators  that  provide  expert  assistance 
in  the  preparation  and  implementation  of 
cohesion  policy  investments  to  regional  and 
local  beneficiaries.  This  could  be  achieved 
through targeted recruitment and capacity building 
efforts, 
regional 
combined  with  assigning 
coordinators  additional  responsibilities  in  relation 
to  gathering  territorial  inputs  for  cohesion  policy 
programming  and  managing  the  implementation 
of  territorial  instruments.  The  important  role  that 
regional coordinators perform in the programming 
and implementation of the Just Transition Fund in 
Croatia  demonstrates  the  relevance  of  active 
involvement of county-level administrations. In the 
longer term, these efforts should build on existing 
positive  examples  and  lead  to  an  even  stronger 
territorial  approach  to  programming  of  regional 
development investments. 

 
MACROECONOMIC STABILITY 
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS 

The  Croatian  banking  sector 
is  highly 
concentrated  and  predominantly  foreign-
owned. 
Total  banking-sector  assets  were 
equivalent  to  106.1%  of  GDP  in  2023.  The  five 
largest banks in Croatia account for 82.7% of total 
banking-sector  assets.  The  foreign-owned  banks 
account  for  around  89%  of  total  banking-sector 
assets.  Croatian  capital  markets  remain  less  well 
developed  than  the  EU  average,  but  reforms  are 
underway.  Croatia’s  stock  market  capitalisation 
was  equivalent  to  27.3%  of  GDP  in  2022  (EU 
average:  65.6%).  The  national  recovery  and 
resilience plan includes reforms to diversify capital 
markets and improve the availability of alternative 
finance.  In  2019,  the  Croatian  Financial  Services 
Supervisory  Agency  (HANFA)  set  up  a  regulatory 
innovation hub to encourage financial innovation. 

However,  defaults  may  increase  in  the  future,  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 

lending  has 

Household  lending  has  continued  to  rise, 
remained 
while  corporate 
subdued.  Lending  to  non-financial  corporations 
slowed down to an annual rate of growth of 6.7% 
in  December  2023,  a  major  drop  from  the  same 
month the year before (20.9%), when growth was 
likely  boosted  by  market  optimism  related  to  the 
in  2023.  Lending  to 
adoption  of  the  euro 
in 
households  was  up  9.5%  year-on-year 
December  2023,  with  the  bulk  of  growth  coming 
from  mortgage  loans,  reflecting  a  new  round  of 
government subsidies (160). 

and 

sector 

resilient. 

remains 
The  Croatian  banking 
profitable 
Banking-sector 
profitability remained high in Q3-2023, with return 
on  equity  of  17.9%  (EU  average:  9.9%),  mainly 
spurred by both growing interest margins and the 
release  of  provisions  for  credit  losses  built  up  in 
recent  years  during  the  uncertainty  over  the 
economic  effect  of  the  pandemic.  Croatian  banks 
remain well capitalised. The capital adequacy ratio 
was  21.7%  in  Q3-2023  (EU  average:  19.6%), 
underlining  the  robustness  of  the  banking  sector, 
with a common equity tier 1 ratio of 21.0% in Q3-
2023, well above the EU average (16.1%). There is 
a  significant  amount  of  liquidity  in  the  banking 
system,  as  the 
liquidity  coverage  ratio  was 
235.4%  in  Q3-2023.  To  further  strengthen  the 
resilience  of  credit 
institutions,  the  Croatian 
Central  Bank  (HNB)  increased  the  countercyclical 
capital  buffer  rate  applicable to  the  risk  exposure 
to  1%  as  of 
of 
31 December 2023,  and  announced  a  further 
increase  to  1.5%  as  of  30 June 2024.  The 
accession  to  the  euro  area  on  1 January 2023 
greatly  reduced  currency  risk  and  mitigated  the 
possible  effects  of increases  in  interest  rates due 
to growing inflation. 

local  banks  from  0.5% 

Croatian  banks  have  continued  to  reduce 
their  non-performing  loans  (NPLs).  The  NPL 
ratio  decreased  further  to  2.5%  in  Q3-2023,  the 
lowest level since 2015 (EU average: 1.8%). Asset 
quality  has  improved  for  both  corporates  and 
households. Similarly, the NPL  coverage ratio was 
68.6%  in  Q3-2023  (EU  average:  43.7%),  which 
reflects banks’ ability to absorb any future losses. 

74 

In  December  2021,  the  European  Systemic 
Risk  Board  (ESRB) (161)  issued  a  warning  to 
Croatia on medium-term vulnerabilities in its 
residential  real-estate  market  as  being  a 
potential  risk  to  the  country’s  financial 
stability.  The  ESRB  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 
lending 
standards.  In  its  February  2024  follow-up  report, 
the  ESRB  assessed 
the  current  policy 
that 
measures  were  partially  appropriate  and  partially 
sufficient.  The  ESRB  recommended  that  Croatia 
monitor  the  vulnerabilities  and  activation  or 
tightening  of  borrower-based  measures,  and  also 
recommended  structural  changes  to  mortgage 
loans  and  the  residential  real-estate  sector  (by 
addressing  the  lack  of  adequate  housing  supply, 
and 
for  mortgage 
loans) (162). 

in  mortgage 

government 

loosening 

subsidies 

Croatian real estate poses a risk to financial 
stability  due  to  continuous  price  increases 

(160) Hrvatska Narodna Banka, November 2023, Bulletin 287, 

HNB.hr 

(161) European Systemic Risk Board, February 2022, 

ESRB.europa.eu  

(162) European Systemic Risk Board, February 2024, 

ESRB.europa.eu 

 
 
 
 
 
 
Table A18.1:Financial Soundness Indicators 

(1) Last data: Q3 2023. 
(2) Data is annualized. 
(3) Data available for EA countries only, EU average refers to EA area. 
Source: ECB, Eurostat. 

purchases 

and  growth  in  mortgage  lending.  House-price 
growth was 10.9% in Q3-2023 (year-on-year) (163), 
spurred by excess liquidity in the banking system, 
real-estate 
and 
government  home-subsidy  programmes.  House 
prices  still  increased  more  quickly  than  income 
year-on-year,  further  reducing  the  already  low 
affordability  of  housing.  The  number  of  purchase 
and  sale  transactions  of  residential  real  estate 
declined in 2023 compared to the previous year. 

foreigners, 

by 

Household indebtedness has slightly dropped. 
According  to  Eurostat,  household  debt  dropped 
from  34%  of  GDP  in  2021  to  30.7%  of  GDP  in 
2022 (164).  This  debt 
is  mainly  composed  of 
mortgage  loans,  and  is  currently  on  a  downward 
path,  mitigating  risks.  There  is  a  relatively  high 
share of loans on fixed interest rates, while there 
is a binding legal limit to variable interest rates on 
housing  loans.  Government  subsidy  programmes 
for new housing loans reduce between 30-50% of 
eligible borrowers’ debt service costs. 

Croatia  has  also  made  progress  in  anti-
money  laundering  (AML)  as  part  of  the 
commitments  it  made  when  accessing  the 
Exchange  Rate  Mechanism  II  and  adopting 
the  euro.  Croatia  underwent  an  assessment  of 
the  effectiveness  of 
its  AML/CFT  framework 
against  international  standards  by  the  Financial 

Action Task Force in June 2023, which resulted in 
recommended action-plan items that it is currently 
addressing. 

Croatia’s insurance sector is relatively small 
and  non-life  oriented.  The  total  assets  of  all 
insurers  are  equivalent  to  8.7%  of  GDP,  which  is 
relatively  low  (EU  average:  56.1%).  The  sectoral 
solvency ratio was 229% in September 2023 (165). 
In  recent  years,  the  insurance  sector  has  been 
characterised by a trend in which there has been a 
decrease  in  the  share  of  premium  revenues 
accounted for by life insurance and an increase in 
the share accounted for by non-life insurance. This 
is  due  to  the  negative  market  trend  for  life 
insurance in the recent period and a high share of 
mandatory  insurance  for  motor-vehicle  liability 
that  covers  almost  a  third  of  the  total  insurance 
premiums. Furthermore, the EIOPA’s dashboard on 
for  natural 
the 
catastrophes  assessed 
the 
is 
European  country  that  has  the  third-highest 
aggregated  insurance  protection  gap  score  for 
natural  catastrophes  (in  particular  for  floods, 
earthquakes, and wildfires). 

insurance  protection  gap 

that  Croatia 

(163) Eurostat 

(164) Eurostat 

(165) HANFA, November 2023, Hanfa.hr 

75 

2017201820192020202120222023EUMedianTotal assets of the banking sector (% of GDP)115,1112,0107,4127,2118,3115,4106,1257,0184,6Share (total assets) of the five largest banks (%)72,879,479,880,581,282,7--69,6Share (total assets) of domestic credit institutions (%)19,29,48,98,98,910,310,6-62,9NFC credit growth (year-on-year % change)3,72,04,66,61,820,86,3-2,4HH credit growth (year-on-year % change)3,75,67,72,64,65,79,5-1,4Financial soundness indicators:1        - non-performing loans (% of total loans)8,87,35,25,34,23,02,51,81,8- capital adequacy ratio (%)21,421,122,523,224,422,821,719,620,1- return on equity (%)25,98,89,14,77,79,417,99,913,2Cost-to-income ratio (%)152,150,750,351,551,252,839,552,844,9Loan-to-deposit ratio (%)182,182,182,378,875,469,173,593,380,2Central bank liquidity as % of liabilities0,40,60,51,20,70,60,6-0,7Private sector debt (% of GDP)96,192,388,497,286,879,3-133,0118,4Long-term interest rate spread versus Bund (basis points)245,0177,6154,0134,482,1155,3136,2107,7104,2Market funding ratio (%)53,753,954,953,654,148,7-50,839,8Green bonds outstanding to all bonds (%)3-------4,02,71-34-1011-1718-2424-27Colours 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 

level 

Croatia’s tax mix is relatively favourable for 
growth  and  jobs.  Total  tax  revenues  were  37% 
of GDP in 2022, almost unchanged from 36.7% in 
2021,  and  slightly  below  the  EU  aggregate  of 
40.2%.  Labour 
taxes,  which  can  weigh  on 
employment, made up 12.6% of GDP in 2022, far 
below  the  EU  aggregate  of  20.3%.  Capital  taxes 
in  2022, 
accounted  for  only  5.8%  of  GDP 
less  than  the  share  at  the  EU 
significantly 
aggregate 
forward-looking 
(8.9%).  The 
effective  average  tax  rate  on  corporate  income 
was  16.5%  in  2022,  which  was  slightly  more 
conducive  to  growth  and  investment  than  the  EU 
aggregate  of  19.0%.  By  contrast,  Croatia  relied 
strongly on consumption taxes, which were 18.5% 
in 2022, (the EU aggregate was 11.0%) and which 
are  generally  considered 
less  detrimental  to 
growth.  However,  recurrent  property  taxation, 
which is also considered to be one of the sources 
of  tax  revenue  least  detrimental  to  growth  and 
easier  to  collect,  made  up  only  0.6%  of  GDP  in 
2022 (the EU aggregate was 1.0%).  

Table A19.1:Taxation indicators 

The scope of environmental taxation could be 
expanded. Croatia  has introduced  some pollution 
and  resources  taxes  (i.e.  taxes  on  NOx  emissions 
and  wastewater  pollution)  and  records  above  EU-
average  revenues,  but  there  may  be  scope  to 
strengthen  the  application  of  the  ‘polluter  pays’ 
principle  (for  example,  regarding  waste  disposal 
taxes,  including  landfilling).  The  recycling  and 
landfill  rates  were  only  34%  and  55%  in  2022. 
Croatia’s  amended  RRP  includes  measures  to 
invest  in  wastewater  infrastructure  and  to  reduce 
landfilling,  including  by  improving  waste  sorting 
and  recycling  and  by  adopting  a  Regulation  on  a 
Landfilling  Tax  by  December  2024.  Moreover, 
vehicle  circulation  taxes  decrease  according  to 
vehicle  age  and  owners  of  vehicles  older  than  10 
years do not pay this tax. Taking vehicle emissions 
into  account  when  determining  taxation  and 
applying  the  latter  along  the  whole  lifecycle  of 
incentives  and 
vehicles  could  better  align 
environmental 
with 
circulation 
considerations. 

taxes 

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 2023, the labour tax wedge 
was  similar  to  the  EU  average  for  both  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). 
At  the  same  time,  the  tax  wedge  for  second 

(1) Forward-looking effective tax rate (OECD). 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) Forecast value for 2022, if available. For more details on the VAT gap, see European Commission, Directorate-General for 
Taxation and Customs Union, 2023, VAT gap in the EU, https://data.europa.eu/doi/10.2778/911698. 
For more data on tax revenues as well as the methodology applied, see the Data on Taxation webpage, 
https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en. 
Source: European Commission and OECD. 

76 

HR2010202020212022202320102020202120222023Total taxes (including compulsory actual social contributions) (% of GDP)36.437.736.737.037.940.040.440.2Labour taxes (as % of GDP)15.013.812.812.620.021.320.720.3Consumption taxes (as % of GDP)17.318.719.118.510.810.711.211.0Capital taxes (as % of GDP)4.15.24.85.87.18.08.68.9Of which, on income of corporations (as % of GDP)1.92.32.23.22.42.53.03.4Total property taxes (as % of GDP)1.01.11.00.91.92.32.22.1Recurrent taxes on immovable property (as % of GDP)0.60.70.60.61.11.21.11.0Environmental taxes as % of GDP3.84.13.93.32.42.22.32.0Tax wedge at 50% of average wage (Single person) (*)na31.331.331.333.033.931.732.131.831.7Tax wedge at 100% of average wage (Single person) (*)na39.738.739.440.341.040.139.940.040.2Corporate income tax - effective average tax rates (1) (*)16.516.516.519.519.019.0Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)9.26.56.86.28.68.18.27.9Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)15.411.840.935.5VAT Gap (% of VAT total tax liability, VTTL)(**)5.85.75.59.75.4CroatiaEU-27Tax structureProgressivity & fairnessTax administration & compliance 
 
 
 
     
 
earners was clearly higher than the tax wedge for 
single  persons  at  the  same  wage  level,  thereby 
indicating  inferior  work  incentives  for  second 
earners. However, while the progressivity of labour 
taxes  was  similar  to  the  EU  average,  the  tax-
income 
benefit  system  seemed 
inequality  less  significantly  than  the  EU  average. 
The reduction in income inequality as measured by 
the  Gini  coefficient  was  6.2 pps  in  2022,  which 
was  below  the  EU  average  of  7.9 pps  (see 
Table A19.1).  

reduce 

to 

Graph A19.1: Tax wedge for single and second 
earners, % of total labour costs, 2023 

The second earner tax wedge assumes a first earner at 100% 
of the average wage and no children. For the methodology of 
the tax wedge for second earners see OECD, 2016, Taxing 
Wages 2014-2015. 
Source: European Commission 

 Several  changes  to  the  tax  system  aim  to 
streamline  the  tax  system  and  enhance 
economic  competitiveness.  Effective  since 
October  2023,  withholding  taxes  on 
interest, 
dividends  and  royalties  paid  to  non-cooperative 
jurisdictions  were  increased  from  20%  to  25%, 
while  the  exemption  for  tax  residents  in  the  EU 
was  extended  to  the  European  Economic  Area.  In 
addition,  withholding  taxes  no  longer  apply  to 
market  research,  tax  and  business  consultancy 
services,  and  audit  fees.  Several  changes  concern 
income  taxes:  Cities  and  municipalities  can  set 
individual income tax rates within specified ranges 
around the default tax rates of 20% for the lower 
bracket  and  30%  for  the  upper  bracket.  This  is 
intended  to  help  cities  mitigate  the  budgetary 
impact  stemming  from  the  abolition  of  the  city 
tax.  The  brackets  and  the  non-taxable  personal 
allowance have been increased, which should help 
offset  bracket  creep  caused  by  inflation.  The 
pension  contribution  base  was  lowered,  aiming  to 
increase  net  income  of  low-wage  earners.  Tax 
rates  on  capital  income,  property  income  and 
income  from  self-employment,  among  others, 

77 

were  increased  slightly.  Moreover,  the  maximum 
rate  of  the  tax  on  holiday  homes  municipalities 
can  choose  to  impose  was  more  than  doubled. 
Other  provisions 
in  the  tax 
treatment  of  optional  share  issuance  in  limited 
liability companies.  

include  changes 

EUROMOD 

inequality. 

 The  reform  of  tax  and  social  insurance 
contributions (SIC) had a negligible impact on 
income 
simulations 
indicate  that  personal  income  taxes  and  SIC 
decreased 
income 
distribution,  but  more  than  proportionally  so  for 
the middle deciles. The result is that, while at-risk-
of-poverty  rates  for  alternative  poverty  lines  are 
estimated to have decreased, the effect on income 
inequality has been negligible. 

for  all  deciles  of 

the 

further  scope 

While Croatia performs relatively well on tax 
compliance  and  tax  administration,  there 
to  streamline 
may  be 
compliance  procedures.  In  2021,  tax  arrears 
decreased  to  11.8%  of  total  tax  revenue,  which 
was  significantly  below  the  EU  average.  Croatia’s 
VAT  gap  was  below  the  EU-wide  gap  in  2020 
(5.8%  vs.  9.7%),  whereas  it  had  been  slightly 
above  it  in  2021  (5.7%  vs.  5.4%)].  It  should  be 
added  that  most  EU  Member  States  saw  a 
reduction  of  the  VAT  compliance  gap  in  2021, 
which  was,  however,  at  least  partly  due  to  the 
COVID-19-induced  economic 
crisis.  However, 
complex tax rules and compliance procedures may 
disincentivise  equity 
investment  and  hamper 
capital market development. (166) 

Croatia’s  Recovery  and  Resilience  Plan 
includes  measures  that  aim  to  improve  tax 
compliance,  prevent  VAT  fraud  and  simplify 
tax administration. First, Croatia has committed 
itself  to  accelerating  the  digitalisation  of  the  tax 
administration  by  introducing  a  new  information 
system  and  ensuring  a  significant 
rate  of 
digitalisation  of  collection tax  procedures.  Second, 
the  RRP  includes  a  measure  to  encourage  non-
cash payment systems through e-invoices. Against 
this  background,  Croatia  is  planning  to  introduce 
by  the  end  of  2024  a  new  system  of  electronic 
invoicing  and  continuous  transaction  control  as 
part of its Fiscalisation 2.0 project. 

(166) CFA Society Croatia report. Basis for the Capital Markets 

Strategy in Croatia, 
https://www.cfacroatia.org/_files/ugd/449b16_0111b5f5cc2
74d33931dd6bca55200ac.pdf  

33.036.740.343.241.42025303540455050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - HRSingle earner - EU averageSecond earner -  HRSecond earner -  EU average 
     
 
Graph A19.2: Tax revenues from different tax types, % of total revenue 

Source: European Commission 

78 

50.627.322.134.150.115.8Tax revenue shares in 2022, Croatia (outer ring) and EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital5.53.91.60.91.90.21.52.51.02.70246810Croatia -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) NIIP excluding direct investment and portfolio equity shares. 
Source: Eurostat and ECB as of 2024-5-17, where available; European Commission for forecast figures (Spring forecast 2024). 

79 

2004-072008-122013-2020212022202320242025Real GDP (y-o-y)4.7-1.80.913.07.03.13.32.9Potential growth (y-o-y).0.31.62.63.74.13.63.2Private consumption (y-o-y)3.9-1.80.910.66.73.04.32.7Public consumption (y-o-y)4.80.61.83.12.76.63.12.6Gross fixed capital formation (y-o-y)4.8-5.82.86.60.14.23.13.4Exports of goods and services (y-o-y)6.2-1.72.032.727.0-2.92.63.1Imports of goods and services (y-o-y) 6.2-4.34.017.326.5-5.33.42.9Contribution to GDP growth:Domestic demand (y-o-y)4.6-2.41.48.44.44.03.82.8Inventories (y-o-y)0.6-0.70.4-0.53.1-2.60.00.0Net exports (y-o-y)-0.61.1-0.85.2-0.51.7-0.50.1Contribution to potential GDP growth:Total Labour (hours) (y-o-y).-0.40.10.11.11.61.20.9Capital accumulation (y-o-y).0.90.50.70.80.90.90.9Total factor productivity (y-o-y).-0.21.01.81.81.71.61.4Output gap3.6-0.6-2.20.43.62.52.21.8Unemployment rate11.911.811.57.67.06.15.85.6GDP deflator (y-o-y)3.72.50.92.18.68.55.52.2Harmonised index of consumer prices (HICP, y-o-y)2.82.90.42.710.78.43.52.2HICP excluding energy and unprocessed food (y-o-y)2.72.30.91.89.19.53.82.9Nominal compensation per employee (y-o-y)4.82.00.26.411.411.39.44.7Labour productivity (real, hours worked, y-o-y)2.60.3-0.111.64.50.31.21.5Unit labour costs (ULC, whole economy, y-o-y)2.11.80.8-4.86.510.98.03.1Real unit labour costs (y-o-y)-1.6-0.7-0.1-6.7-1.92.22.41.0Real effective exchange rate (ULC, y-o-y)1.4-0.9-0.8-4.92.53.23.00.6Real effective exchange rate (HICP, y-o-y)1.5-0.2-0.20.50.92.3..Net savings rate of households (net saving as percentage of net disposable income)-1.6-2.21.61.61.0...Private credit flow, consolidated (% of GDP)14.63.80.42.95.63.9..Private sector debt, consolidated (% of GDP)85.8117.099.585.377.873.3..of which household debt, consolidated (% of GDP)32.240.135.633.830.629.9..of which non-financial corporate debt, consolidated (% of GDP)53.676.963.951.647.343.5..Gross non-performing debt (% of total debt instruments and total loans and advances) (1)..8.63.72.7...Corporations, net lending (+) or net borrowing (-) (% of GDP)-4.71.22.24.1-0.9...Corporations, gross operating surplus (% of GDP)18.320.320.522.122.6...Households, net lending (+) or net borrowing (-) (% of GDP)1.00.32.91.60.4...Deflated house price index (y-o-y)9.8-4.92.94.93.23.7..Residential investment (% of GDP)3.73.52.73.63.43.5..Current account balance (% of GDP), balance of payments-7.4-3.61.91.0-2.81.10.90.9Trade balance (% of GDP), balance of payments-8.6-4.2-0.9-2.7-6.1-2.0..Terms of trade of goods and services (y-o-y)1.40.60.3-2.1-4.84.20.8-0.3Capital account balance (% of GDP)0.00.11.22.42.42.9..Net international investment position (% of GDP)-70.0-77.6-59.0-32.3-25.3-21.6..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2)-32.5-38.6-19.510.713.416.5..IIP liabilities excluding non-defaultable instruments (% of GDP) (2)75.174.477.065.159.772.9..Export performance vs. advanced countries (% change over 5 years)..6.68.315.919.5..Export market share, goods and services (y-o-y)-0.1-5.81.215.010.3-4.0-0.9-0.5Net FDI flows (% of GDP)-4.8-2.9-2.3-5.1-5.3-1.9..General government balance (% of GDP)-3.2-5.8-2.3-2.50.1-0.7-2.6-2.6Structural budget balance (% of GDP)..-1.4-2.7-1.2-1.8-3.6-3.4General government gross debt (% of GDP)39.155.278.677.567.863.059.559.1forecast 
 
 
 
  
 
 
 
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS 

This  annex  assesses  fiscal  sustainability 
risks for Croatia over the short, medium and 
long  term. 
It  follows  the  multi-dimensional 
approach  of  the  European  Commission’s  2023 
Debt Sustainability Monitor, updated based on the 
Commission 2024 spring forecast. 

of 

9% 

GDP 

1  –  Short-term  risks  to  fiscal  sustainability 
low.  The  Commission’s  early-detection 
are 
indicator  (S0)  does  not  point  to  any  major  short-
term  fiscal  risks  (Table A21.2) (167).  Government 
gross  financing  needs  are  expected  to  amount  to 
2024-2025 
around 
(Table A21.1, Table 1). 
markets’ 
perceptions of sovereign risk continued to improve 
in recent years, as confirmed by the spread vis-à-
vis  the  bund,  which  has  declined  to  similar  levels 
compared to euro area peer countries from Central 
and  Eastern  Europe.  Croatia’s  credit  rating  is 
deemed  as  investment  grade,  with  the  outlook 
revised  from  stable  to  positive  by  all  three major 
rating agencies in 2023. 

Financial 

in 

2  –  Medium-term  fiscal  sustainability  risks 
appear medium.   

The DSA baseline shows that the government 
debt  ratio  is  expected  to  increase  in  the 
medium term to around 71% of GDP in 2034 
(Graph 1, Table 1) (168). The debt increase relies on 
the  assumption  of  a  structural  primary  deficit  of 
2.0%  of  GDP  as  of  2024.  Compared  to  historical 
data,  this  appears  plausible.  Indeed,  59%  of  past 
fiscal  positions  were  more  stringent  than  the  one 

(167) The S0 is a composite indicator of short-term risk of fiscal 
stress. It is based on a wide range of fiscal and financial-
competitiveness indicators that have proven to be a good 
predictor of emerging fiscal stress in the past.  

(168) The assumptions underlying the Commission’s ‘no-fiscal 

policy change’ baseline include in particular: (i) a structural 
primary deficit, before ageing costs, of 2.0% of GDP from 
2024 onwards; (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 
ahead); (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 2024 spring 
forecast, followed by the EPC/OGWG ‘T+10 methodology 
projections between T+3 and T+10 (average of 2.0%); (v) 
ageing costs in line with the 2024 Ageing Report (European 
Commission, Institutional Paper 279, April 2024). For 
information on the methodology, see the 2023 Debt 
Sustainability Monitor (European Commission, Institutional 
Paper 271, March 2024). 

assumed  in  the  baseline  (Table  A21.2) (169).  The 
debt  increases  notwithstanding  a  still  favourable 
but, in absolute terms, declining snowball effect of 
around  -0.6%  of  GDP  annually  on  average  over 
2025-2034.  

the 

four 

interest-growth 

The  baseline  projections  are  stress-tested 
against 
deterministic 
alternative 
scenarios to assess the impact of changes in 
key  assumptions  relative  to  the  baseline 
(Graph 1).  Under  the  historical  structural  primary 
balance  (SPB)  scenario  (i.e.  the  SPB  returns  to  its 
historical  15-year  average  of  -0.4%  of  GDP)  the 
debt ratio would be lower than under the baseline 
by  about  13 pps.  in  2034.  However,  under  the 
adverse  interest-growth  rate  differential  scenario 
differential 
(i.e. 
deteriorates by 1 pp. compared with the baseline), 
the  debt  ratio  would  be  higher  than  under  the 
baseline  by  around  5 pps.  in  2034.  Under  the 
rates 
financial  stress  scenario 
temporarily  increase  by  1 pp.  compared  with  the 
baseline)  the  government  debt  ratio  would  be 
higher by 0.5 pp. in 2034. Finally, under the lower 
the 
structural  primary  balance  scenario 
projected  deterioration  in  the  SPB  from  2023  to 
2024 is increased by 50%) the debt ratio would be 
higher than under the baseline by around 9 pps. in 
2034. 

interest 

rate 

(i.e. 

(i.e. 

The  stochastic  projections  indicate  medium 
risk,  pointing  to  moderate  sensitivity  of 
these  projections  to  plausible  unforeseen 
events (170). These stochastic simulations indicate 
a 47% probability that the debt ratio will be higher 
in  2028  than  in  2023,  implying  medium  risks.  In 
addition,  the  uncertainty  surrounding  the  baseline 
debt  projections  (as  measured  by  the  difference 
between  the  10th  and  90th  debt  distribution 
percentiles,  reaching  around  29%  of  GDP  in  five 
years’ time) also indicates medium risks (Graph 2).  

(169) This assessment is based on the fiscal consolidation space 

indicator, which measures the frequency with which a tighter 
fiscal position than assumed in a given scenario has been 
observed in the past. Technically, this consists in looking at 
the percentile rank of the projected SPB within the 
distribution of SPBs observed in the past in the country, 
taking into account all available data from 1980 to 2023. 

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

10 000 different shocks affecting the government’s 
budgetary position, economic growth, interest rates and 
exchange rates. This covers 80% of all the simulated debt 
paths and therefore excludes tail events. 

80 

 
 
 
 
 
3  –  Long-term  fiscal  sustainability  risks 
appear overall low. This assessment is based on 
the  combination  of  two  fiscal  gap  indicators, 
capturing  the  required  fiscal  effort  to  stabilise 
debt  (S2  indicator)  and  bring  to  60%  of  GDP  (S1 
indicator) over the long term (171). This assessment 
is  driven  by  a  relatively  unfavourable  initial 
budgetary  position  partly  offset  by  a  projected 
decrease in ageing costs.  

indicator  points  to 

The  S2 
low  fiscal 
sustainability  risks.  The  indicator  shows  that, 
relative  to  the  baseline,  the  SPB  would  need  to 
improve  by  1.5  pps.  of  GDP  to  ensure  debt 
stabilisation  over  the  long  term.  This  result  is 
underpinned  by  a  relatively  unfavourable  initial 
budgetary position (contribution of 2.5 pps.) partly 
offset  by  a  projected  decrease  in  ageing-related 
costs 
(contribution  of  -1 pp.).  Ageing  costs’ 
developments  are  driven  by  a  projected  decrease 
(-1.3  pps.)  and  education 
in  public  pension 
expenditure  (-0.4 pp.),  partially  mitigated  by  a 
projected increase in healthcare (0.6 pp.) and long-
term care spending (0.1 pp.) (Table 21.1, Table 2).  

the recent increase in interest rates, relatively high 
levels of short-term loans at variable interest rate, 
Croatia’s  relatively low  pension  adequacy  and  the 
country’s  negative  net  international  investment 
position (NIIP). The share of non-performing loans 
has  gone  down  substantially  in  recent  years, 
though it remains significant in comparative terms 
with  other  EU  Member  States.  Overall,  contingent 
liability  risks  linked  to  the  banking  sector  appear 
limited  in  view  of  the  high  capitalization  and 
provisioning.  On  the  other-hand,  risk-mitigating 
factors 
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. 
the  NIIP  excluding  non-
defaultable instruments continued to improve and 
reached  +16.5%  of  GDP  in  2023.  Moreover, 
financing  sources  have  been  relatively  stable  and 
were further diversified  with the introduction of a 
retail  bond.  Further  government  bond  issuances 
directly to retail investors, including for bonds with 
longer  maturity,  would  be  beneficial 
(see 
Chapter 1).  

include  most  notably 

In  addition, 

indicator  points  to 

The  S1 
low  fiscal 
sustainability risks. The indicator shows that the 
country  needs  to  improve  its  fiscal  position,  with 
an  upfront  adjustment  of  the  SPB  of  1.3  pps.  of 
GDP,  to  reduce  its  debt  to  60%  of  GDP  by  2070. 
This  result  is  mainly  driven  by  the  relatively 
position 
unfavourable 
(contribution  of  2.1 pps.)  partly  offset  by  a 
projected  decrease  in  age-related  public  spending 
(-0.7 pp.). (Table 21.1, Table 2).  

budgetary 

initial 

4  –  Finally,  several  additional  risk  factors 
need to be considered in the assessment.  On 
the one hand, risk-increasing factors are related to 

(171)The S2 fiscal sustainability indicator measures the 

permanent SPB adjustment in 2025 that would be required 
to stabilise public debt in the long term over an infinite 
horizon. It is complemented by the S1 indicator, which 
measures the permanent SPB adjustment in 2025 needed to 
bring the debt ratio to 60% by 2070. The impact of the 
drivers of S1 and S2 may differ due to the infinite horizon 
component considered in the S2 indicator. 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 % of GDP, ‘medium risk’ if it is 
between 2% and 6% of GDP, and ‘low risk’ if the effort is 
negative or below 2% of GDP. The overall long-term risk 
classification combines the risk categories derived from S1 
and S2. S1 may notch up the risk category derived from S2 if 
it signals a higher risk than S2. See the 2023 Debt 
Sustainability Monitor for further details. 

81 

 
 
 
Table A21.1:Debt sustainability analysis - Croatia 

Source: Commission services. 

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

Source: Commission services 

82 

Table 1. Baseline debt projections20212022202320242025202620272028202920302031203220332034Gross debt ratio (% of GDP)77.567.863.059.559.359.961.262.563.764.966.267.669.070.5Changes in the ratio-8.6-9.7-4.8-3.5-0.20.61.31.31.21.21.31.41.41.5of whichPrimary deficit1.0-1.5-1.01.01.11.31.71.91.91.91.81.81.71.7Snowball effect-10.0-9.3-5.5-3.6-1.3-0.8-0.4-0.5-0.7-0.6-0.5-0.4-0.3-0.2Stock-flow adjustments0.51.11.8-0.90.00.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)14.76.111.58.79.810.411.011.511.912.212.612.913.313.6S1S2Overall index  (pps. of GDP)1.31.5of which Initial budgetary position2.12.5Debt requirement0.0Ageing costs-0.7-1.0of which    Pensions-0.9-1.3     Health care0.50.6     Long-term care0.10.1    OthersEducation-0.4-0.4Table 2. Breakdown of the S1 and S2 sustainability gap indicators3040506070809020212022202320242025202620272028202920302031203220332034Graph 1. Deterministic debt projections Historical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioBaseline% of GDPp10p20p40p60p80p9030405060708020212022202320242025202620272028% of GDPGraph 2. Stochastic debt projections 2024-2028MedianBaselineBaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallMEDIUMLOWMEDIUMMEDIUMMEDIUMMEDIUMDebt level (2034), % GDP70.557.879.775.971.0Debt peak year20342024203420342034Fiscal consolidation space59%48%78%59%59%Probability of debt ratio exceeding in 2028 its 2023 level47%Difference between 90th and 10th percentiles (pps. GDP)29.4(1)Debtlevelin2034.Green:below60%ofGDP.Yellow:between60%and90%.Red:above90%.(2)Thedebtpeakyearindicateswhetherdebtisprojectedtoincreaseoveralloverthenextdecade.Green:debtpeaksearly.Yellow:peaktowardsthemiddleoftheprojectionperiod.Red:latepeak.(3)Fiscalconsolidationspacemeasurestheshareofpastfiscalpositionsinthecountrythatweremorestringentthantheoneassumedinthebaseline.Green:highvalue,i.e.theassumedfiscalpositionisplausiblebyhistoricalstandardsandleavesroomforcorrectivemeasuresifneeded.Yellow:intermediate.Red:low.(4)Probabilityofdebtratioexceedingin2028its2023level.Green:lowprobability.Yellow:intermediate.Red:high(alsoreflectingtheinitialdebtlevel).(5)thedifferencebetweenthe90thand10thpercentilesmeasuresuncertainty,basedonthedebtdistributionunder10000differentshocks.Green,yellowandredcellsindicateincreasinguncertainty.(Forfurtherdetailson the Commission's multidimensional approach, see the 2023 Debt Sustainability Monitor)LOWMEDIUMLOWLOWLOWShort termMedium term - Debt sustainability analysis (DSA)Long termOverall                               (S0)Overall Deterministic scenariosStochastic projectionsS2S1Overall(S1 + S2)