Recommendation for a COUNCIL RECOMMENDATION endorsing the national medium-term fiscal-structural plan of Croatia
Date: 2024-11-26
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Croatia, budget deficit, coordination of EMU policies, economic reform, fiscal policy, investment, macroeconomics, national planning, public debt, structural adjustment

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   EUROPEAN COMMISSION  Strasbourg, 26.11.2024  COM(2024) 729 final  Recommendation for a COUNCIL RECOMMENDATION endorsing the national medium-term fiscal-structural plan of Croatia  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

endorsing the national medium-term fiscal-structural plan of Croatia 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 121 thereof, 

Having regard to Regulation (EU) 2024/1263, and in particular Article 17 thereof, 

Having regard to the recommendation from the European Commission, 

Whereas: 

GENERAL CONSIDERATIONS 

(1) A  reformed  EU  economic  governance  framework  entered  into  force  on  30  April  2024. 
Regulation  (EU)  2024/1263  of  the  European  Parliament  and  of  the  Council  on  the 
effective  coordination  of  economic  policies  and  on  multilateral  budgetary  surveillance1, 
together  with  the  amended  Regulation  (EC)  No  1467/97  on  the  implementation  of  the 
excessive  deficit  procedure2,  and  the  amended  Council  Directive  2011/85/EU  on  the 
budgetary  frameworks  of  Member  States3  are  the  core  elements  of  the  reformed  EU 
economic  governance  framework.  The  framework  aims  at  ensuring  public  debt 
sustainability  and  sustainable  and  inclusive  growth  through  reforms  and  investments.  It 
promotes  national  ownership  and  has  a  medium-term  focus,  combined  with  an  effective 
and coherent enforcement of the rules. 

(2) The  national  medium-term  fiscal-structural  plans  that  Member  States  submit  to  the 
Council  and  to  the  Commission  are  at  the  centre  of  the  new  economic  governance 
framework. The plans are to deliver on two objectives: i) ensuring that, by the end of the 
adjustment  period,  general  government  debt  is  on  a  plausibly  downward  trajectory,  or 
stays at prudent levels, and that the government deficit is brought and maintained below 
the reference value of 3% of GDP over the medium term, and ii) ensuring the delivery of 
reforms and investments responding to the main challenges identified in the context of the 

1  

2  

3  

Regulation 

(EC)  No 

Regulation  (EU)  2024/1263  of  the  European  Parliament  and  of  the  Council  of  29  April  2024  on  the 
effective  coordination  of  economic  policies  and  on  multilateral  budgetary  surveillance  and  repealing 
Council 
ELI: 
ttp://data.europa.eu/eli/dir/2024/1265/oj). 
Council  Regulation  (EU)  2024/1264  of  29  April  2024  amending  Regulation  (EC)  No  1467/97  on 
speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit  procedure  (OJ  L,  2024/1264, 
30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1264/oj). 
Council Directive (EU) 2024/1265 of 29 April 2024 amending Directive 2011/85/EU on requirements 
(OJ  L,  2024/1265,  30.4.2024,  ELI: 
for  budgetary 
http://data.europa.eu/eli/dir/2024/1265/oj). 

the  Member  States 

frameworks  of 

2024/1265, 

30.4.2024, 

1466/97 

(OJ 

L, 

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European  Semester  and  addressing  the  common  priorities  of  the  EU.  To  that  end,  each 
plan  is  to  present  a  medium-term  commitment  to  a  net  expenditure4  path,  which 
effectively establishes a budgetary constraint for the duration of the plan, covering four or 
five years (depending on the regular term of legislature in a Member State). In addition, 
the  plan  is  to  explain  how  the  Member  State  will  ensure  the  delivery  of  reforms  and 
investments  responding to  the main challenges identified in  the context of the European 
Semester,  in  particular  in  the  country-specific  recommendations  (including  those 
pertaining to the macroeconomic imbalances procedure (MIP), if applicable), and how the 
Member  State  will  address  the  common  priorities  of  the  Union.    The  period  for  fiscal 
adjustment covers a period of four years, which may be extended by up to three years if 
the  Member  State  commits  to  delivering  a  set  of  relevant  reforms  and  investments  that 
satisfies the criteria set out in Regulation (EU) 2024/1263. 

(3) Following  the  submission  of  the  plan,  the  Commission  is  to  assess  whether  it  complies 

with the requirements of Regulation (EU) 2024/1263.  

(4) Upon  a  recommendation  from  the  Commission,  the  Council  is  to  then  adopt  a 
recommendation  to  set  the  net  expenditure  path  of  the  Member  State  concerned  and, 
where  applicable,  endorses  the set  of  reform and investment  commitments underpinning 
an extension of the fiscal adjustment period. 

CONSIDERATIONS  CONCERNING  THE  NATIONAL  MEDIUM-TERM  FISCAL-
STRUCTURAL PLAN OF CROATIA 

(5) On 14 November 2024, Croatia submitted its national medium-term fiscal-structural plan 
to the Council and to the Commission. The submission took place following an extension 
of  the  deadline  set  out  in  Article  36  of  Regulation  (EU)  2024/1263,  as  agreed  with  the 
Commission. The reason for the delayed submission was to ensure that MTFSP and DBP 
are  complementary  and  consistent  with  the  National  Budget  2025-2027  that  was 
scheduled to be adopted on 14 November 2024, making full use of data released with the 
benchmark statistical revision. On 21 November 2024, Croatia submitted an addendum to 
revise the net expenditure growth path of the plan to apply a conservative approach in the 
fiscal  (expenditure)  policy  planning  over  the  adjustment  period,  and  ensure  that  the 
projected general government debt remains plausibly at prudent levels. 

Process prior to the submission of the plan 

4  

Net expenditure as defined in Article 2 of Regulation (EU) 2024/1263, namely government expenditure 
net  of  (i)  interest  expenditure,  (ii)  discretionary  revenue  measures,  (iii)  expenditure  on  Union 
programmes fully matched by revenue from Union funds,  (iv) national expenditure on co-financing of 
programmes funded by the Union, (v) cyclical elements of unemployment benefit expenditure and (vi) 
one-offs and other temporary measures.  

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(6) Prior  to  the  submission  of  its  plan,  Croatia  requested  technical  information5,  which  the 
Commission  provided  on  21  June  2024  and  published  on  14  November6.  The  technical 
information indicates the level of the structural primary balance in 2028 that is necessary 
to  ensure  that  the  general  government  deficit  is  maintained  below  3%  of  GDP  over  the 
medium term and that the general government debt remains below 60% of GDP over the 
medium term, in the absence of further budgetary measures beyond the 4-year adjustment 
period. The medium term is defined as the ten-year period after the end of the adjustment 
period.  The  technical  information  was  prepared  and  transmitted  to  the  Member  State 
under  two  scenarios:  a  scenario  including  consistency  with  the  deficit  resilience 
safeguard7, in line with Article 9(3) of Regulation (EU) 2024/126, and a scenario without 
this safeguard. 
The technical information for Croatia sets out that, in order to comply with the applicable 
fiscal  rules  over  an  adjustment  period  of  4  years,  and  based  on  the  Commission’s 
assumptions, the structural primary balance should amount to at least -0.4% of GDP at the 
end of the adjustment period (2028; scenario without the deficit resilience safeguard), as 
per the following table. For information, considering also the deficit resilience safeguard, 
the structural primary balance should amount to at least  -0.4% of GDP at the end of the 
adjustment period (2028). However, the deficit resilience safeguard is  not  a requirement 
for Croatia, which is eligible for technical information. 

Table 1: Technical information provided by the Commission to Croatia 

Final year of the adjustment period 

Minimum value of the structural primary balance (% of GDP), scenario without the deficit 
resilience safeguard 
For information only: Minimum value of the structural primary balance (% of GDP), scenario 
with the deficit resilience safeguard 

2028 

-0.4% 

-0.4% 

Source: Commission’s calculations. 

(7) In  line  with  Article  12  of  Regulation  (EU)  2024/1263,  Croatia  and  the  Commission 
engaged  in  a  technical  dialogue  from  September  to  November  2024.  The  technical 
dialogue took stock of the technical information provided by the Commission, and centred 
on discussing the tax reform that will enter into force in 2025 and the envisaged delivery 
of reforms and investments responding to the main challenges identified in the context of 
the European Semester and the common priorities of the Union in fair  green and digital 

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Prior  guidance  transmitted  to  the  Member  States  and  Economic  and  Financial  Committee  includes 
technical information i) with and without an extension of the adjustment period (covering 4 and 7 years, 
respectively), and ii) with/without deficit resilience safeguard. 
https://economy-finance.ec.europa.eu/economic-and-fiscal-governance/national-medium-term-fiscal-
structural-plans_en#Croatia 
The deficit resilience safeguard established in Article 8 of Regulation (EU) 2024/1263 establishes that 
the annual improvement in the structural primary balance is of 0.4 percentage points of GDP (or 0.25 
percentage points of GDP in case of an extension of the adjustment period) until the structural deficit is 
lower than 1.5% of GDP. 

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transition,  social  and  economic  resilience,  energy  security  and  the  build-up  of  defence 
capabilities. 

(8) In  November  2024,  in  line  with  Article  11(3)  and  36(1),  point  (c),  of  Regulation  (EU) 
2024/1263,  Croatia  engaged  in  a  consultation  process  with  civil  society,  social  partners 
and  other  relevant  stakeholders.  The  national  medium-term  fiscal-structural  plan  was 
discussed  at  the  Economic  and  Social  Council,  which  includes  trade  unions,  the 
employers' association and representatives of the Government. 

(9) The Fiscal  Policy Commission  delivered an opinion on the macroeconomic forecast  and 
the macroeconomic assumptions underpinning the multi-annual net expenditure path. The 
Fiscal Policy Commission concluded that the projected sizes of the real GDP growth rates, 
the  implicit  GDP  deflator  and  the  national  price  index  are  adequate  and  that  the 
macroeconomic  projections  are  broadly  the  same  or  slightly  more  positive  than  the 
currently  available  projections  of  the  other  relevant  institutions.  The  Fiscal  Policy 
Commission endorsed the macroeconomic projections for the period up to 2028 prepared 
by the Ministry of Finance and  pointed out that the projections are within an acceptable 
range and provide a good basis for drawing up the national medium-term fiscal-structural 
plan. 

Other related processes 

(10)  On 14 November 2024, Croatia submitted its Draft Budgetary Plan for the year 2025. 
The Commission adopted an opinion on this Draft Budgetary Plan on [26 November]8. 

(11) 

 On  21  October  2024,  the  Council  addressed  to  Croatia  a  series  of  country-specific 

recommendations (CSRs) in the context of the European Semester9. 

SUMMARY OF THE PLAN AND THE COMMISSION’S ASSESSMENT THEREOF 

(12) 

In  line  with  Article  16  of  Regulation  (EU)  2024/1263,  the  Commission  assessed  the 

plan as follows: 

Context: Macroeconomic and fiscal situation and outlook 

(13)  Economic activity in  Croatia grew by 3.3% in  2023, driven by all GDP components 
except  for  inventories,  with  largest  positive  contributions  coming  from  investment  and 
household consumption. According to the European Commission Autumn 2024 Forecast, 
the  economy  is  expected  to  grow  by  3.6%  in  2024,  on  the  back  of  expanding  domestic 
demand,  primarily  household  consumption  and  investment,  and  with  a  negative 
contribution from net exports. In 2025, real GDP is set to increase by 3.3%, as domestic 
demand  growth  decelerates.  In  2026,  real  GDP  is  expected  to  increase  by  2.9%,  as 
domestic  demand  continues  decelerating,  and  the  contribution  of  net  exports  becomes 
neutral.  Over the forecast  horizon, potential GDP growth  in  Croatia is expected to  grow 

8  
9  

Commission Opinion on the Draft Budgetary Plan of Estonia, 26.11.2024, C(2024)90XX final 
Council Recommendation on economic, budgetary, employment and structural policies of  Croatia, not 
yet published. 

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by 4.2% in 2024, 3.6% in 2025 and 3.3% in 2026, driven by capital accumulation, total 
factor productivity and labour contribution, with the latter declining visibly toward 2026, 
amid  a  decreasing  working  age  population  and  despite  higher  labour  participation  rates. 
The  unemployment  rate  stood  at  6.1%  in  2023,  and  is  projected  by  the  Commission  to 
amount  to  5.1%  in  2024  and  4.7%  in  2025  and  4.6%  in  2026.  In  2024,  inflation  (GDP 
deflator) is projected to decrease from 11.7% in 2023 to 6.6% in 2024, and to reach 3.2% 
in 2025 and 2.1% in 2026. 

(14)  Regarding  fiscal  developments,  in  2023  Croatia’s  general  government  deficit 
amounted  to  0.9%  of  GDP.  According  to  the  European  Commission  Autumn  2024 
Forecast, it is set to reach 2.1% of GDP in 2024 and to remain at 2.1% of GDP in 2025 
and, on a no-policy change basis, to decline to 1.9% in 2026. The European Commission 
Autumn  2024  Forecast  does  not  yet  include  Croatia’s  draft  budget  for  2025  that  the 
government proposed to the national parliament in November. However, the Commission 
forecast includes the Budgetary Framework for the period 2025 – 2027 that was adopted 
by the government on 31 October.  General government debt was 61.8% of GDP at end-
2023.  According  to  the  European  Commission  Autumn  2024  Forecast,  the  debt  ratio  is 
expected to decline to 57.3% of GDP at end-2024. It is projected to decline to 56.0% of 
GDP at end-2025 and the ratio is expected to remain at 56.0% at the end-2026. The fiscal 
forecast  by  the  Commission  does  not  consider  the  policy  commitments  in  the  medium-
term  plans  as  such  until  they  are  underpinned  by  credibly  announced  and  sufficiently 
specified concrete policy measures. 

Net expenditure path and main macroeconomic assumptions in the plan 

(15)  Croatia’s national medium-term fiscal-structural plan covers the period 2025-2028 and 

presents a fiscal adjustment over four years. 

(16)  The  plan  contains  all  information  required  by  Article  13  of  Regulation  (EU) 

2024/1263.  

(17)  The  plan,  as  complemented  by  the  addendum,  commits  to  the  net  expenditure  path 
indicated in Table 2, corresponding to an average net expenditure growth of 4.8% over the 
years through 2028. 
The  technical  information  (assuming  a  linear  adjustment  path)  is  consistent  with  an 
average net expenditure growth of 4.0% over the adjustment period (2025-2028).  The net 
expenditure  path  committed  to  in  the  plan  is  reported  to  lead  to  a  structural  primary 
balance of -0.2% of GDP at the end of the adjustment period (2028)10. This is higher than 
the minimum level of the structural primary balance of -0.4% of GDP in 2028 provided by 
the Commission in the technical information on 21 June 202411. 

10  

11  

This does not reflect the addendum submitted on 21 November 2024 and its  conservative approach to 
the net expenditure path.  
In the scenario without the deficit resilience safeguard. 

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The plan assumes potential GDP growth to decrease to 2.5% in 2028 (from 4.5% in 2024). 
In addition,  the plan expects  the growth  rate of the GDP deflator to  decrease to  2.2% in 
2028 (from 6.7% in 2024). 

Table 2: Net expenditure path and main assumptions in Croatia’s plan 

2024 

2025 

2026 

2027 

2028 

Average over the 
period of validity of 
the plan 
2025-2028 

Net expenditure 
growth 
(annual, %) 
Net expenditure 
growth 
(cumulative, from 
base year 2023, %) 
Potential GDP 
growth (%) 
Inflation (GDP 
deflator growth) (%) 

18.6 

6.4 

4.9 

4.1 

3.7 

18.6 

26.2 

32.3 

37.8 

42.9 

4.5 

6.7 

4.0 

3.7 

3.5 

2.6 

2.9 

2.4 

2.5 

2.2 

4.8 

n.a. 

3.2 

2.7 

Source: Medium-term fiscal-structural plan of Croatia and Commission calculations 

Implications of the plan’s net expenditure commitments for general government debt 

(18) 

If the net  expenditure path  committed to  in the plan and the underlying assumptions 
materialise,  general  government  debt  would,  according  to  the  plan,  gradually  decrease 
from 57.3% of GDP in 2024 to 53.1% at the end of the adjustment period in 2028, as per 
the following table. Over the medium term, the general government debt to GDP level is 
expected to gradually decline to reach 49% in 2038. While these figures do not reflect the 
addendum  submitted  on  21  November,  its  conservative  approach  to  the  net  expenditure 
path  ensures  that  the  projected  general  government  debt  remains  plausibly  at  prudent 
levels.  

Table 3: General government debt and balance developments in Croatia’s plan 

Government debt 
(% of GDP) 
Government balance 
(% of GDP) 

2023 

61.8 

2024 

57.3 

2025 

55.8 

2026 

54.9 

2027 

54.1 

2028 

53.1 

2038 

49.0 

-0.9 

-2.1 

-2.3 

-1.9 

-1.8 

-1.5 

-1.4 

Source: Medium-term fiscal-structural plan of Croatia 

Thus,  according  to  the  plan,  general  government  debt  would  stay  below  the  Treaty 
reference value of 60% of GDP over the medium term. 

Therefore, based on the plan’s policy commitments and macroeconomic assumptions, the 
net expenditure path put forward in the plan is consistent with the requirement for debt as 
set out in Article 16(2) of Regulation (EU) 2024/1263. 

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Implications  of  the  plan’s  net  expenditure  commitments  for  the  general  government 
balance 

(19)  Based  on  the  plan’s  net  expenditure  path  and  assumptions,  the  general  government 
deficit would increase from 2.1% of GDP in 2024 to 2.3% in 2025 and gradually decrease 
to  1.5%  in  2028.  While  these  figures  do  not  reflect  the  addendum  submitted  on  21 
November  2024,  its  conservative  approach  to  the  net  expenditure  path,  ensures  that  the 
projected  general  government  deficit  is  maintained  below  3%  of  GDP  over  the  medium 
term. 

Thus, according to the plan, the general government balance would not exceed the 3% of 
GDP reference value at the end of the adjustment period (2028). 
In  addition,  in  the  ten  years  following  the  adjustment  period  (i.e.  until  2038),  the 
government deficit would not exceed 3% of GDP. 

Therefore, based on the plan’s policy commitments and macroeconomic assumptions, the 
net  expenditure  path  put  forward  in  the  plan  is  consistent  with  the  requirement  for  the 
deficit as set out Articles 6, point (b), and 16(2) of Regulation (EU) 2024/1263. 

Macroeconomic assumptions of the plan 

(20)  The  plan  is  based  on  a  set  of  assumptions  which  differs  from  the  Commission’s 
assumptions  transmitted  to  Croatia  on  21  June.  In  particular,  the  plan  uses  different 
assumptions  for  four  variables  namely:  the  starting  point  (structural  primary  balance), 
potential  GDP  growth,  GDP  deflator  growth,  nominal  implicit  interest  rate.  A  careful 
assessment  of  these  differences  in  assumptions  is  necessary,  especially  as  average  net 
expenditure  growth  in  the  plan  is  higher  than  implied  by  the  technical  information.  An 
assessment of these differences in assumptions is provided below. 

The  differences  in  assumptions  with  the  most  significant  impact  on  average  net 
expenditure  growth  are  listed  below,  together  with  an  assessment  of  each  difference 
considered in isolation.  
• 

The  plan  uses  more  up-to-date  data  and  assumes  a  better  initial  position 
compared  to  the  Commission’s  assumptions  transmitted  on  21  June.  In  the 
prior  guidance,  the  structural  primary  balance  for  2024  was  -2%  of  GDP 
while  the  plan  assumes  -1.5%  of  GDP,  the  same  as  in  the  European 
Commission Autumn 2024 Forecast. The higher structural primary balance is 
due  to  a  significant  revision  of  the  data  released  after  the  prior  guidance 
transmission. This contributes to higher average net expenditure growth over 
the adjustment period than according to the Commission’s assumptions. This 
assumption is deemed to be duly justified. 
The  plan  assumes  potential  GDP  growth  to  gradually  decrease  from  an 
estimated 4.5% in 2024 to 2.5% by 2028 and to moderate further to 1.6% by 
2038, averaging at 3.2% over the adjustment period. In the prior guidance of 
the  Commission,  potential  output  is  projected  to  grow  by  2.6%  on  average 
over  the  same  period.  Beyond  the  adjustment  period,  the  plan  assumes  the 

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same potential growth as in the prior guidance. In the European Commission 
Autumn 2024 forecast, average potential growth over the adjustment period is 
2.9%, reflecting the data updates and new assumptions since the Spring 2024 
forecast.  The  difference  between  the  plan  and  the  prior  guidance  during  the 
adjustment  period  is  only  partly  justified  by  the  revised  data  and  the  new 
assumptions. The remaining difference is largely related to high employment 
growth assumption in the plan. Overall, this contributes to higher average net 
expenditure growth over the adjustment period in the plan than according to 
the Commission’s assumptions.  Consequently, this assumption is  deemed to 
be not duly justified. 
The  plan  assumes  the  GDP  deflator  to  reach  6.7%  in  2024,  3.7%  in  2025, 
2.6%  in  2026,  2.4%  in  2027  and  2.2%  in  2028.  In  the  Commission’s  prior 
guidance,  the  assumed  GDP  deflator  in  2024  was  5.5%,  coming  down  to 
2.2%  in  2025  and  2026,  and  slightly  increasing  to  2.3%  in  2027  and  2028. 
The  European  Commission’s  Autumn  2024  forecast  assumes  higher  GDP 
deflator in 2024 and 2025 than assumed in the prior guidance, set at 6.6% and 
3.2%, reflecting the data updates and new assumptions since the Spring 2024 
forecast. The Commission projects the GDP deflator to reach 2.1% in 2026. 
Thus, the GDP deflator assumed in the plan is higher than the Commission’s 
assumptions,  by  0.5  percentage  points  both  in  2025  and  2026,  reflecting 
higher  private  and  public  consumption  deflators.  This  contributes  to  higher 
average  net  expenditure  growth  over  the  adjustment  period  in  the  plan  than 
according  to  the  Commission’s  assumptions.  Consequently,  this  assumption 
is deemed to be not duly justified. 
The plan assumes nominal implicit interest rates to reach 2.9% in 2024 and to 
gradually  decrease  to  2.6%  in  2028.  This  contributes  to  higher  average  net 
expenditure growth over the adjustment period in the plan than according to 
the  Commission’s  assumptions.  The  Commission’s  prior  guidance  assumed 
nominal implicit interest rates of 2.8% in 2024 gradually increasing to 3.1% 
in 2028. The plan's lower implicit nominal interest rates reflect lower market 
interest  rates  following  the  upgrades  of  credit  rating  for  Croatia  by  relevant 
credit  rating  agencies.  Overall,  the  plan’s  assumption  is  deemed  to  be  duly 
justified by the use of more recent market data. 

• 

• 

Overall,  all  the  differences  in  assumptions  taken  together  could  lead  to  an  average  net 
expenditure growth in the plan that is considerably higher than the average net expenditure 
growth  implied by the technical  information. However, Croatia’s plan,  as complemented 
by the addendum, includes a more prudent  net  expenditure path  that leads to  an average 
net expenditure growth which still exceeds the average net expenditure growth implied by 
the technical information but only by an amount that can be explained through differences 
in assumptions that are considered as duly justified. 

The Commission will take into account the above assessment of the plan’s assumptions in 
future assessments of compliance with the net expenditure path. 

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Fiscal strategy of the plan 

(21)  According  to  the  indicative  fiscal  strategy  in  the  plan,  the  commitments  on  net 
expenditure  are  to  be  delivered  through  both  expenditure  restraint  and  discretionary 
revenue increases. To achieve the fiscal targets, the plan mentions that certain expenditure 
categories, that are under the control of the government, will have a limited growth (ex: 
expenditure on compensation of employees is expected to decrease from 13.0% of GDP in 
2025 to 12.6% in 2028). According to the plan, discretionary revenue measures, linked to 
the  tax  reform  that  will  enter  into  force  in  2025,  are  to  bring  additional  revenues 
amounting to 0.4% of GDP over the entire adjustment period.  At the same time there are 
also  measures  that increase government  expenditure linked to implementing the pension 
reform  (increasing  the  pension  indexation  formula)  and  implementing  new  social  policy 
measures like affordable housing.  

The specification of the policy measures to be adopted is to be confirmed or adjusted and 
quantified in the annual budgets. At the same time, there are risks to the implementation 
of the indicative fiscal strategy in the plan, which stem from risks to the macroeconomic 
assumptions underpinning the plan, delays in public procurement process that could slow 
downs investments and further setbacks in implementing the structural reforms.   

The Draft Budgetary Plan  for 2025  specifies the  policy measures through which the net 
expenditure commitment for 2025 will be achieved12. 

Reforms and investments responding to the main challenges identified in the context of 
the European Semester and addressing the common priorities of the Union  

(22)  The plan describes policy intentions concerning reforms and investments to respond to 
the  main  challenges  identified  in  the  context  of  the  European  Semester,  especially  the 
CSRs,  and  to  address  the  common  priorities  of  the  EU.  The  plan  contains  290  planned 
reforms  and  investments  measures,  out  of  which  209  are  financially  supported  by  the 
Recovery  and  Resilience  Facility  and  81  are  newly  identified  measures  and  measures 
under other EU programs, including  cohesion policy. Overall,  the national  recovery  and 
resilience  plan  (RRP)  measures  were  tailored  to  contribute  to  implementing  the  existing 
CSRs. The new measures added in the MTP further contribute to implementing the past 
years CSRs and the new CSRs issued in 2024. 

(23)  Concerning  the  common  priority  of  a  fair  green  and  digital  transition,  including  the 
climate  objectives  set  out  in  Regulation  (EU)  2021/1119,  the  plan  includes  a  set  of 
measures to support climate neutrality and address climate adaptation challenges. To step 
up efforts towards the 2030 target and implementation of the Integrated National Energy 
and  Climate  Plan,  a  planning  framework  for  the  implementation  of  the  Low-Carbon 
Development  Strategy  will  be  established,  including  a  proposal  for  binding  sectoral 
emission  reduction  targets  for  the  most  difficult  to  decarbonise  sectors  and  setting  up 

12 See Commission Opinion of 26 November 2024 on the Draft Budgetary Plan of Croatia. 

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structures  needed  for  the  roll  out  the  Social  Climate  Fund.  To  strengthen  climate 
resilience, an Action Plan together with indicators will be adopted in order to speed up the 
implementation of the Climate Adaptation Strategy. These actions relate to the 2023 CSRs 
on  effective  absorption  of  EU  Funds  and  the  2023  CSR  on  reducing  overall  reliance  on 
fossil fuels.  The plan contains RRP measures supporting the strengthening of the public 
administration,  judiciary  and  state  assets  through  digitalisation  and  simplification  of 
administrative and judicial processes, enhancing the state ICT infrastructure, widening the 
network of digital services, and expanding the broadband and 5G access for households. 
Reforms and investments in state ICT infrastructure and digital services relate to the 2020 
CSRs  on  increased  access  to  digital  infrastructure  and  services,  promoting  skills 
acquisition,  and  increasing  the  efficiency  and  capacity  of  the  public  administration  to 
design  and  implement  public  projects  and  policies  at  central  and  local  level.  The  plan 
includes  measures  beyond  the  RRP  aiming  to  enhance  cybersecurity,  further  digitise 
public services  and  strengthen  data management  within the public administration. These 
measures concern the 2019 and 2020 CSRs linked to improving electronic communication 
in  courts,  improving  the  efficiency  of  judiciary  and  increasing  access  to  digital 
infrastructure and services. In addition, the plan includes important reforms to improve the 
attractiveness of research careers in the ICT field  related to the 2019 and 2020 CSRs on 
increased access to digital infrastructure and services as well as on focusing investment on 
the  green  and  digital  transition.  The  plan  also  includes  a  set  of  RRP  measures  in  the 
transport sector, addressing, inter alia, CSRs on increasing access to digital infrastructure 
and  services,  fostering  the  green  and  digital  transition,  reducing  energy  demand  and 
reliance  on  fossil  fuels  in  transport  and  promoting  sustainable  transport  solutions. 
Moreover,  the  plan  includes  measures  on  energy  and  post-earthquake  renovation  of 
buildings,  seismological  data  network  development,  circular  use  of  construction  waste 
from buildings with the status of a cultural good and development of green urban renewal 
strategies,  addressing  CSRs  on  energy  efficiency,  green  transition,  reducing  reliance  on 
fossil fuels and continuing RRF implementation. 

(24)  Concerning  the  common  priority  of  social  and  economic  resilience,  including  the 
European  Pillar  of  Social  Rights,  the  plan  includes  a  comprehensive  reform  of  the 
education system aiming to widen access to early childhood education and care and higher 
education,  and  improve  the  quality  of  primary  and  higher  education,  including  by 
introducing one-shift teaching and preparing the transition to whole-day school in primary 
education.  The  reform  of  the  education  system  relates  to  the  2019  CSR  on  improving 
access to, quality and labour market relevance of education and training, the 2020 CSR on 
promoting  skill  acquisition,  the  2024  CSR  on  reducing  skill  shortages  by  strengthening 
basic skills and enhancing upskilling and reskilling, and the CSRs from 2023 and 2024 on 
continuing the steady implementation of the RRP. The plan also includes important labour 
market  reforms  to  improve  the legal  framework  and  increase  employment  by improving 
the accessibility and quality of vocational education and adult learning, providing targeted 
active labour market policies, and strengthening the system of inclusion and monitoring of 
vulnerable  groups.  These  reforms  concern  the  2019  and  2020  CSRs  on  strengthening 
labour market measures and institutions, improving their cooperation with social services, 

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improve 

the  plan 

to  further 

includes  measures 

and improving the adequacy of unemployment and minimum guaranteed benefits. In the 
area  of  social  resilience,  the  plan  includes  a  reform  of  the  pension  system  to  increase 
pension adequacy, as well as comprehensive reforms of the social welfare system aiming 
to  reduce  the  risk  of  poverty  and  social  exclusion  of  vulnerable  groups  by  integrating 
social  benefits  and  improving  quality,  accessibly  and  availability  of  deinstitutionalised 
community-based  social  services,  in  particular  long-term  care.  These  social  welfare 
reforms  relate  to  the  2019  CSR  on  consolidating  social  benefits  and  improving  their 
impact on poverty reduction, the 2020 CSR on improving the adequacy of unemployment 
benefits  and  minimum  guaranteed  benefits,  and  the  2024  CSR  on  reducing  labour  and 
skills  shortages  by  facilitating  access  to  formal  long-term  care  at  home  and  in  the 
community.  The  plan  also  contains  multiple  measures  protecting  children  at  risk  of 
poverty and social exclusion  within the framework of the European Child Guarantee.  In 
addition, 
the  performance  and 
competitiveness  of  public  research,  development  and  innovation  by  reducing  the 
fragmentation of public research institutes and higher education institutions, and providing 
grants  to  research  projects  under  a  new  programme  framework,  in  line  with  the  2019 
CSRs on focusing investment-related economic policy on research and innovation,  and on 
improving the capacities of national authorities to design public projects and policies, with 
the 2020 CSR on increasing the efficiency and capacity of public administration to design 
and implement public projects, and with the 2024 CSRs on continuing the implementation 
of the RRP, and on improving competitiveness through addressing the high fragmentation 
of  public  research  institutions.  In  addition,  the  plan  includes  reforms  to  improve  the 
functioning  of  the  public  administration  through  improving  the  capacities  of  public 
servants,  in  line  with  the  2020  CSR  on  increasing  the  efficiency  and  capacity  of  public 
administration to design and implement public projects, with the 2022 and 2024 CSRs on 
continuing  the  implementation  of  the  RRP,  and  with  the  2024  CSR  on  reducing  skill 
shortages. Moreover, the plan includes  RRP measures under the renovation of buildings 
components, focusing on the development of skills for post-earthquake reconstruction and 
energy  renovation  and  introducing  new  adult  learning  programmes  in  construction  for 
non-EU workers which concerns the CSRs on promoting the acquisition of skills for green 
transition, ensuring effective absorption of funds and continuing the RRP implementation. 

(25)  Concerning  the  common  priority  of  energy  security,  the  plan  includes  key  RRP 
investments aiming to upgrade electricity networks, increase liquefied natural gas (LNG) 
regasification  capacity,  and  expand  cross-border  gas  transportation  infrastructure. 
Additionally, it incorporates measures supporting the uptake of renewable energy sources, 
energy  renovation  of  buildings,  energy  efficiency  in  industry,  and  sustainable  zero-
emission  transportation,  while  addressing  energy  poverty.  These  measures  relate  to  the 
2019  CSRs  on  focusing  investment  policy  on  energy  efficiency,  renewables  and 
environmental infrastructure, the 2020 CSR on focusing investment on green and digital 
transitions,  in  particular  on  environmental  infrastructure,  clean  and  efficient  production 
and  use  of  energy,  the  2022  CSRs  on  diversifying  imports  of  fossil  fuels  and  reducing 
overall  reliance  on  fossil  fuels  and  on  accelerating  the  deployment  of  renewables,  the 
2022, 2023 and 2024 CSRs on continuing the implementation of the  RRP, and the 2023 

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CSR  on  reducing  reliance  on  fossil  fuels  by  accelerating  the  deployment  of  renewable 
energy. 

(26)  Concerning  the  common  priority  of  defence  capabilities,  the  plan  does  not  include 

details about the investments or reforms addressing this common priority.  

(27) 

In  addition,  the  plan  includes  other  policy  measures  going  beyond  the  common 
priorities of the EU, including to improve the management of state assets by reducing the 
number of SOEs, improving their governance, including by aligning national standards to 
international  best  practices,  and  strengthening  human  capacity  to  monitor  corporate 
governance  in  SOEs.  These  measures  relate  to  the  2019  CSR  to  improve  corporate 
governance of SOEs and step up the sale of SOEs and inactive assets. In addition, the plan 
further includes the liberalisation of the services markets, administrative and fiscal burden 
relief,  and  the  strengthening  of  the  support  for  the  growth  of  start-ups.  These  measures 
concern the 2019 CSR on excessive product and services market regulation and reducing 
the  most  burdensome  parafiscal  charges;  and  the  2020  CSRs  on  further  reducing 
parafiscal  charges  and  regulatory  constraints  on  goods  and  services  markets,  and 
promoting  private  investment  to  foster  economic  recovery.  The  plan  also  includes 
measures such as providing loans and interest rate subsidies to micro, small and medium-
sized enterprises, supporting projects  in  mid-caps and large enterprises,  and investing in 
equity and quasi-equity instruments, relating to the 2020 CSR on maintaining measures to 
provide  liquidity  to  small  and  medium-sized  enterprises,  and  the  2024  CSR  on 
accelerating  investments  supported  by  EU  funds.  Measures  to  foster  a  more  efficient 
functioning of capital markets are also included, in line with, most recently, the 2024 CSR 
on  increasing  access  to  diverse  sources  of  funding  and  promoting  capital  markets.  The 
plan  also  includes  RRP  measures  on  modernisation  of  seaports,  adaptation  of  fully 
autonomous  and  electric vehicles and infrastructure to  the needs of disabled passengers, 
further  addressing  the  2020  CSR  on  increasing  access  to  digital  infrastructure  and 
services.    Moreover,  the  plan  includes  the  RRP  measures  on  energy  renovation  of 
buildings with a status of a cultural good, integration of seismic data into expert bases for 
spatial  plans  and  adoption  of  guidelines  for  the  application  of  a  model  for  monitoring 
energy consumption in multi-dwelling buildings, addressing, inter alia, the 2020 CSR on 
increasing  access  to  digital  infrastructure  and  services.  Furthermore,  the  plan  aims  to 
strengthen  the  resilience  of  the  health  system  by  expanding  access  to  services  through 
innovative models, investment in cutting-edge equipment and infrastructure, as well as in 
the  digitalisation  of  the  medicine  pathway,  while  enhancing  the  quality  of  care  through 
harmonised  clinical  guidelines  and  specialist  trainings.  These  efforts  aim  to  address  key 
health  challenges,  such  as  oncology  and  waiting  lists,  while  also  enhancing  waste  and 
resources  management  within  health  facilities,  thus  supporting  the  2020  CSRs  on 
improving health system resilience and on promoting balanced healthcare distribution and 
eHealth, and the 2021 CSR on fiscal reforms for sustainable healthcare. Training-related 
aspects  are also tied to the 2020  CSR on promoting skills acquisition. Outside the RRP, 
Croatia is implementing measures including the development of eHealth, palliative care, 

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and  health  technology  assessment,  as  well  as  promoting  healthy  lifestyles  and  disease 
prevention.  

(28)  The  plan  provides 

information  on 

the  consistency  and,  where  appropriate, 
complementarity  with  the  cohesion  policy  funds  and  Croatia’s  RRP.  The  investments 
under  cohesion  policy  targeting  the  strengthening  of  research  and  innovation  capacities 
are  complementary  to  investments  and  reforms  under  RRP  aiming  to  improve 
performance  of  public  research  sector  as  well  as  innovation  output  of  enterprises. 
Investments in education facilities covering all level of education are complementing RRP 
investments and contribute to widening access to early childhood education and care and 
higher education, and improving the quality of primary education.  

(29)  The plan provides an overview of the public investment needs of Croatia related to the 
common  priorities  of  the  EU  with  the  exception  of  the  4th  priority  related  to  defence 
capability building. The plan aims to contribute to meeting the public investment needs of 
Croatia regarding the common priorities of the EU. For the first common priority related 
to  just,  green  and  digital  transitions,  including  compliance  with  the  European  Climate 
Law, the plan describes the investment needs for 79 measures. The measures are related, 
among others, to green and hydrogen investment, energy efficiency and promoting clean 
energy,  investments  in  sustainable  urban  and  rail  transport,  digitalising  the  public 
administration and justice system, supporting and promoting R&D. For the priority linked 
to social and economic resilience, including the European Pillar of Social Rights, the plan 
describes the investment needs for 24 measures. These relate, among others, to measures 
improving the access to affordable housing, adult learning programmes, vouchers for re-
skilling and up-skilling, active labour market policies, constructing and upgrading ECEC 
facilities,  primary  and  secondary  schools,  including  to  complete  the  transition  to  single-
shift in primary schools, and demographic revitalisation measures to support families with 
children and prevent depopulation. In relation to the priority linked to energy security, the 
plan describes the investment needs for 15 measures, related, among others, to improving 
energy  efficiency 
through 
developing  hydrogen  production  capacity  and  charging  stations,  and  upgrading  the 
electricity transmission grid. 

through  building  renovation,  promoting  clean  energy 

Conclusion of the Commission’s assessment 

(30)  Overall, the Commission is of the view that Croatia’s plan fulfils the requirements of 

Regulation (EU) 2024/1263.  

OVERALL CONCLUSION 

(31) 

In accordance with Article 17 of Regulation (EU) 2024/1263, the net expenditure path 

as set in the plan should be recommended by the Council to Croatia. 

HEREBY RECOMMENDS that Croatia 

1.  Ensure that net expenditure growth does not exceed the maxima established in Annex I to 

this Recommendation. 

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In  addition,  the  Council  invites  Croatia  to  ensure  the  delivery  of  reforms  and  investments 
responding  to  the  main  challenges  identified  in  the  context  of  the  European  Semester,  in 
particular in the country-specific recommendations, and addressing the common priorities of 
the Union.  

ANNEX I 
Maximum growth rates of net expenditure 
(annual and cumulative growth rates, in nominal terms) 
Croatia 

Years 

2025 

2026 

2027 

2028 

Growth 
rates 

(%) 

Annual 

6.4 

4.9 

4.1 

3.7 

Cumulative (*) 

26.2 

32.3 

37.8 

42.9 

(*) The cumulative growth rates are calculated by reference to the base year of 2023. 

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