COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Croatia Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Croatia
Date: 2025-06-04
Institutions: European Commission, Reform and Investment Task Force
Subjects: Croatia, budget policy, economic policy, economic recovery, economic reform, employment policy, energy policy, labour market, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 4.6.2025  SWD(2025) 211 final  COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Croatia Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Croatia {COM(2025) 211 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC DEVELOPMENTS AND KEY POLICY 
CHALLENGES 

Strong economic momentum 
continues  

The  Croatian  economy  continues  to  grow 
strongly.  Since  its  accession  to  the  euro  in 
January 2023, Croatia’s real GDP expanded by 
3.3%  in  2023  and  3.9%  in  2024,  driven  by 
domestic  demand.  Significant  growth  in  real 
wages  and  employment,  along  with  strong 
credit  activity,  fuelled  household  consumption 
in  this  period.  At  the  same  time,  a  surge  in 
construction,  underpinned  by  EU  transfers, 
boosted 
investment,  while  public  wages 
expenditure drove government consumption. In 
2024,  the  rise  in  domestic  demand  led  to  a 
rise  in  imports  and  a  decrease  in  net  exports. 
Given  the  rise  in  prices  of  tourism-related 
services (which accounted for 11.3% of GDP in 
2022 (1)), the sector has now lost some of its 
export  price 
this 
contributed to a decline in exports of services. 
Economic  growth  is  expected  to  slow  down 
slightly to 3.2% in 2025 and 2.9% in 2026, as 
growth in domestic demand gradually slows. 

competitiveness,  and 

to  be  comparatively 

The  impact  of  US  tariffs  on  Croatia  is 
expected 
low. 
Croatia’s  gross  exports  of  goods  to  the  US 
amounted to 3.4% of its total goods exports in 
2024.  The  share  of  domestic  value  added  in 
goods exported to the US accounted for about 
0.5%  of  GDP  in  2022,  roughly  equally  split 
between  direct  and  indirect  exposure  through 
other countries. In the same year, the share of 
domestic  value  added  in  services  exported  to 
the  US  was  equivalent  to  0.6%  of  GDP  –  the 
lowest  in  the  EU.  Two  thirds  of  this  services 

exposure  stems  from  indirect  effects  through 
other countries.  

Inflation  remains  high.  Croatia’s  output  is 
estimated  to  be  above  its  potential.  This 
creates price pressures, which are easing only 
slowly. Inflation, measured by the Harmonised 
Index  of  Consumer  Prices  (HICP),  decelerated 
from 8.4% in 2023 to 4% in 2024, still above 
the  euro  area  inflation  rate  of  2.4%.  Inflation 
has  been  particularly  high  for  services, 
especially those related to tourism. Inflation is 
now  expected  to  slow  down  to  3.4%  in  2025 
and 2% in 2026. 

Job  creation  has  been  sustained,  leading 
to  new  employment  records  and  labour 
shortages.  In  2024,  the  unemployment  rate 
declined  to  5%,  compared  with  5.9%  for  the 
EU,  and  the  employment  rate  reached  a  new 
high  at  73.6%,  further  narrowing  the  gap  to 
the  EU  average  of  75.8%.  Increases  in  both 
employment  and  labour  force  participation 
were  particularly  strong  for  women,  but  the 
female  employment  rate  –  at  70.6%  –  lags 
behind  that  of  men.  The  continued  inflow  of 
non-EU  workers  (estimated  at  206 000  in 
2024,  from  172 000  in  2023)  contributed 
substantially  to  employment  growth,  with 
nearly two thirds of these workers employed in 
construction,  catering  and  tourism  services. 
However,  labour  shortages,  also  caused  by 
skills mismatches, remain prevalent and are a 
significant  barrier  to  growth  and  investment. 
The tightness of the labour market contributed 
to  the  sharp  wage  increases  of  15%  in 
nominal  terms  and  10.5%  in  real  terms  for 
2024 (2), raising living standards and boosting 
consumption. This was especially the case for 
public sector wages following a reform of the 
public wage-setting system. 

(1)  Croatian  Bureau  of  Statistics  (2025), “Tourism  satellite 
account for the Republic of Croatia 2022”, First Release, 
Year: LXI., Zagreb, 26 March 2025. 

(2)  Average monthly gross wages per person in paid 

employment in legal entities. Source: Croatian Bureau 
of Statistics (CBS). Deflated by HICP. 

2 

 
 
 
 
its 

continues 

convergence 
Croatia 
towards  EU  average  living  standards. 
From Croatia’s EU accession in 2013 to 2024, 
real  expenditure  per  capita  (in  purchasing 
power  standards)  rose  from  61%  to  77%  of 
the  EU  average,  with  11  pps  of  this  progress 
achieved  after  2020.  While  initial  productivity 
growth was not as strong as among EU peers, 
it accelerated rapidly after 2020, although this 
growth  was  characterised  by  pronounced 
regional  differences. 
In  parallel,  Croatia’s 
population  was  declining  due  to  natural 
decrease  coupled  with  net  migration  outflows 
before 2022, with a reduction in population of 
367 000 
total  population) 
between  2013  and  2022  (3).  This  trend 
stopped  in  2023,  as  immigration  accelerated, 
and emigration decreased thanks to rising real 
incomes and employment opportunities. 

(8.7%  of 

the 

the 

transition 

income, 
has 

Sustained  productivity  growth  will  hinge 
on 
to  higher-value 
activities.  Although the tourism  industry is  a 
significant driver of economic activity, tourism-
dependence creates significant distortions and 
may  not  be  sustainable  in  the  long  term. 
including 
Overreliance  on  tourism 
several 
accommodation, 
rental 
disadvantages. For example, it: (i) discourages 
labour-market  participation,  especially 
in 
coastal  areas;  (ii)  crowds-out  investment  and 
business  development  in  higher-value-added 
activities;  (iii)  hinders  housing  affordability; 
and  (iv)  exposes  the  domestic  economy  to 
external  shocks.  While  the  recovery  and 
resilience  plan  (RRP)  contains  several  reforms 
and investments to improve the sustainability, 
resilience  and  efficiency  of 
the  sector, 
tourism’s  potential  to  contribute  to  future 
Investments  and 
growth  seems 
reforms  to  diversify  the  economy  toward 
higher-value-added  activities  will  be  needed 
for  sustained  productivity  growth.  Making  the 
National  Productivity  and  Competitiveness 
Board  operational  (it  was  set  up  in  2020  but 
has  not  yet  begun  work)  would  also  make  it 
easier to identify reforms to boost productivity 
and achieve sustainable economic growth. 

limited. 

(3)  Croatian Bureau of Statistics, end-year population 

estimate. 

3 

Public finances remain sound  

Croatia  is  in  a  relatively  strong  fiscal 
position.  The general government deficit was 
2.4%  of  GDP  in  2024,  and  the  debt-to-GDP 
ratio  was  57.6%.  The  deficit  is  expected  to 
increase to 2.7% in 2025 and slightly decrease 
to  2.6%  in  2026,  while  debt  is  forecast  to 
stabilize  above  56%.  In  recent  years,  strong 
growth  in  tax  revenue  has  been  underpinned 
favourable 
by 
employment  trends,  while  expenditure  was 
driven by: (i) public investments fuelled by the 
high level of EU funds; (ii) higher public sector 
wages; and (iii) an increase in social assistance 
benefits. 

solid  GDP  growth  and 

Croatia’s net expenditure growth is above 
In  2024,  net 
the  recommended  path. 
expenditure (4) in  Croatia grew by  17.4% (see 
Annex 1). This increase is mainly driven by the 
growth in expenditure related to public wages 
and social benefits – in particular pensions. In 
2025,  net  expenditure  is  forecast  by  the 
Commission  to  grow  by  7.9%,  which  is  above 
the  maximum  growth  rate  recommended  by 
the  Council(5).  Drivers  of  the  growth  in  net 
expenditure  are  (i)  a  continued  rise  in  public 
wages  due  to  carry  over  effects  of  the  new 
public  wage  act  that  entered  into  force  in 
2024; 
in 
particular  related  to  pensions,  due  to  the 
change in indexation formula; and (iii) a strong 
increase in investments due to a pick-up in the 
RRF  implementation.  The  cumulative  growth 
rate  of  net  expenditure  in  2024  and  2025 
taken together is projected at 26.6%, which is 
above  the  maximum  rate  recommended  by 
the Council. The projected deviation is allowed 

(ii)  social  benefits 

increases, 

(4)  Net expenditure is defined in Article 2(2) of Regulation 
(EU) 2024/1263 as government expenditure net of (i) 
interest expenditure, (ii) discretionary revenue 
measures, (iii) expenditure on programmes of the Union 
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-off 
and other temporary measures. 

(5)  Council Recommendation of 21 January 2025 

endorsing the national medium-term fiscal-structural 
plan of Croatia (OJ C, C/2025/638, 10.2.2025, ELI: 
http://data.europa.eu/eli/C/2025/638/oj). 

 
 
 
under  the  conditions  of  the  national  escape 
clause  on  current  projections  for  defence 
spending. 

Seizing the  economic momentum  to  build 
buffers  would  help  tackle  the  challenges 
ahead.  Croatia  embarked  on  a  procyclical 
expansionary  fiscal  policy  in  2024.  In  the 
coming years, an ageing population, the green 
transition,  and increased  spending  on  defence 
are likely to create pressure on public finances. 
For  this  reason,  it  is  warranted  for  Croatia  to 
purse:  (i)  further  improvements  in  the  quality 
and  efficiency  of  public  spending;  (ii)  debt 
management;  and  (iii)  the  prioritisation  of 
growth-enhancing investments. 

help 

could 

Reforming  and  simplifying  the  taxation 
system 
support 
competitiveness, labour participation and 
the green transition.  Croatia’s tax mix relies 
strongly  on 
taxes,  which 
consumption 
accounted  for  nearly  half of  the  tax  revenues 
in  2023  (Annex  2),  with  tourism  playing  a 
significant  role.  Although  the  tax  reform 
introduced in January 2025 increased taxation 
on secondary property and short-term rentals, 
revenues  from  both  taxes  are  expected  to 
remain  below  the  EU  average.  The  effective 
level  of  carbon  pricing  is  also  low,  and  the 
redistributive  effect  of  Croatia’s  tax-benefits 
system remains limited. At the same time, tax 
compliance  is  regarded  as  burdensome  by 
businesses,  weighing  on  competitiveness. 
Croatia  could  simplify  tax  compliance  and 
its 
facilitate 
corporate  tax-administration  procedures  with 
EU  best  practice.  In  particular,  it  would  be 
beneficial 
to 
simplifying  capital-gains  taxation  paid  by 
individuals  to  incentivise  retail  participation  in 
the capital market. Redesigning the taxation of 
labour  income  to  minimise  disincentives  for 
‘second  earners’  to  join  the  labour  market 
could  help  ease  current  labour  shortages. 
Reviewing  tax  expenditures  that  undermine 
carbon-pricing  signals  could  also  help  make 
the  taxation  system  more  supportive  of  the 
green transition. 

tax  collection  by  aligning 

special  attention 

to  pay 

The  mandate,  capacity  and  independence 
of Croatia’s Fiscal Policy Committee (FPC) 
could be improved. Due to obstacles related 

4 

to  the  recruitment  process  (including  wage 
levels and eligibility criteria), the Committee is 
facing  challenges  in  attracting  personnel  and 
performing 
its  analytical  and  outreach 
functions,  resulting  in  limited  interaction  with 
Parliament, government and other institutions. 
(Annex 1).   

High inflation and labour costs 
weigh on price competitiveness  

Inflation  has  been  higher  in  Croatia  than 
in the euro area since 2021. This has been 
fuelled  by  strong  post-pandemic  demand, 
increasing  wages,  rising  employment,  strong 
credit  activity,  and  specific  price  shocks  in 
energy  and  food.  The  Croatian  central  bank 
has  announced  the  introduction  in  July  2025 
of  borrower-based  measures  that  should 
mitigate  credit-financed  consumption.  Price 
pressures  from  foreign  tourists  are  now 
weakening  as  demand  for  tourism  services 
stabilised  in  2024  following  sustained  price 
increases.  

Inflation  for  some  goods  in  Croatia  may 
partly  be  due  to  weak  competitive 
pressures.  For  some  groups  of  products, 
primarily  processed  food  (including  alcohol 
and  tobacco),  consumer  prices  have  been 
increasing  more  rapidly  than  producer  prices 
of  closely  comparable  groups  of  goods.  While 
this excess growth of consumer over producer 
prices  of  processed  food  has  accelerated 
recently,  it  has  been  consistently  recorded 
since  2012, 
including  when  consumption 
declined (Graph 1.1) (6). At the same time, the 
profitability  of  Croatian  retail  companies  has 
been  higher  than  retail  companies  elsewhere 
in  the  euro  area  and  continues  to  increase. 
Along with some regulatory market restrictions 
indicate  weak 
(see  Section  2),  this  may 
competitive  pressures  at 
retail  or 
the 
wholesale stages of the supply chains. 

(6)  There  have  been  similar  episodes  in  some  other 
Member  States,  but  they  were  milder  and  shorter. 
Consumer  price  growth  for  Croatia  also  surpassed  the 
growth of export prices of producers of processed food 
in the main euro area trade partners. 

 
 
Graph 1.1: Consumer vs producer price indices 
of processed food 

(1) HICP: consumer prices of processed food (incl. alcohol 
and tobacco); PPI domestic: domestic market producer 
prices of food products; beverages and tobacco products; 
Trade partners PPI: export market producer prices of the 
same products, of the four main euro area trade partners 
(average). Retail profits: aggregate for firms (excl. SMEs) 
in food retail sector (NACE Rev.2 classes 47.11 and 47.2). 
The lower aggregate profits in Croatia during 2016-2018 
are mainly due to reduced profits of Croatia’s largest 
food retailer at the time. 
Source: Eurostat and ORBIS, retrieved in March 2025. 

of 

remains 

deterioration 

price 
The 
competitiveness 
contained 
despite  strongly  rising  wages.  The  sharp 
wage  growth  in  Croatia  in  2023  and  2024 
resulted  in  a  strong  appreciation  of  the  real 
effective  exchange  rate  (REER)  deflated  by 
the 
unit 
appreciation of the REER deflated by consumer 
(HICP) and producer prices (PPI) has been more 
contained over this period (Graph 2).  

(ULC).  However, 

labour  costs 

Nevertheless,  the  sustained  price  growth  of 
tourism-related services contributed to weaker 
real exports in 2024.  

Productivity-enhancing  investments  are 
key  to  offset  the  impact  of  increasing 
labour  costs  on  profitability.  Rising  wages 
lowered  profitability 
in  parts  of  Croatia’s 
manufacturing industry that were facing more 
stagnant  external  demand  and  less  scope  for 
price increases due to stronger competition. If 
labour  costs  continue  to  outpace  productivity 
growth, some exporters may be forced to exit 
the  market.    Although  appropriately  targeted 
policies could facilitate the restructuring of the 
economy toward higher-value-added activities, 
there  is  a  risk  that  the  tradable  sector  will 
shrink if cost pressures become excessive. 

Graph 1.2: Real effective exchange rates 

(1) Real effective exchange rates of Croatia vis-à-vis the 
euro area and the broadest available group of trade 
partners, deflated by HICP, ULC and PPI, four quarters 
moving averages. 
Source: ECB. 

Box 1: 
: 

UN Sustainable Development Goals (SDGs) 

Croatia is improving on all SDGs related to macroeconomic stability, productivity and fairness. However, 
it  is  deteriorating  on  three  SDGs  related  to  environmental  sustainability  (SDGs 6,  13  and  14)  where 
Croatia’s performance is nevertheless still better than the EU average on SDG 6 and 14. 

Although  Croatia  is  improving  on  most  SDGs,  on  many  (12  out  of  the  17  SDGs)  the  country  is 
performing  below  the  respective  EU  average.  The  biggest  gap  is  recorded  on  SDG  9  –  Industry, 
innovation  and  infrastructure,  due  to  low  levels  of  expenditure  on  R&D  and  the  lower  share  of 
households with high-speed internet connections (see Annex 15). The RRP has a component dedicated to 
supporting R&D development and reforms/investments to strengthen digital connectivity. 

5 

012345678990100110120130140150160131415161718192021222324EBITDA / turnover, in %index, 2013 = 100HR retail profits (rhs)EA20 retail profits (rhs)HR HICPEA20 HICPHR PPI domesticEA20 PPI domesticTrade partners PPI859095100105110115201920202021202220232024index, 2018 = 100HICP-based (EA20)HICP-based (broad)ULC-based (EA20)ULC-based (broad)PPI-based (EA20)PPI-based (broad) 
  
   
 
 
of 

the 

labour 

continue 

shortages, 

productivity 

to  navigate 
processes,  with 

factors  are  holding  back 
Several 
Croatia’s 
and 
competitiveness. Croatia trails behind its EU 
peers  on  innovation  (Section  2  and  Annex  3), 
and skills mismatches continue to be  a major 
cause 
low 
employment  rate  and  sluggish  productivity 
growth  (Section  4  and  Annex  10).  Croatian 
businesses  have  limited  access  to  non-bank 
finance  due  to  both  the  limited  availability  of 
diverse sources of financing. Businesses in the 
complex 
country 
limited 
administrative 
to  encourage 
mechanisms 
the 
in  place 
participation  of  SMEs 
in  public  contract 
bidding.  Croatian  firms  are  also  integrating 
into  the  EU’s  single  market  more  slowly  than 
the  EU  average,  largely  due  to  delays  in 
transposing single market directives (Section 2 
and  Annex  4).  High  electricity  prices,  in  part 
due  to  the  limited  uptake  of  solar  energy, 
weigh on the price competitiveness of industry 
and business (Section 3 and Annex 8).  Croatia 
is  increasing  its  efforts  to  mitigate  these 
challenges, 
reforms  and 
investments  under  the  RRP  and  recent  policy 
initiatives.  Nevertheless,  there  is  scope  for 
further  progress,  especially  in  fostering  the 
single 
business 
market 
the 
rollout of renewable energy.  

integration,  and  accelerating 

including  with 

environment, 

promoting 

Other macroeconomic and 
competitiveness challenges  

a 

for 

the 

decreased 

Strong  house  price  increases  and  low 
affordability 
key 
remain 
macroeconomic  challenge.  House  prices 
grew  by  10.4%  in  2024,  following  growth  of 
11.9% in 2023, hindering housing affordability 
and  posing  potential  risks  to  the  stability  of 
the  financial  sector.  Rental  prices  grew  by 
4.4% in 2024, down from 6.3% in 2023, with 
9%  of  the  population  living  in  a  rented 
dwelling.  However,  the  number  of  sales 
transactions  for  real  estate,  including  by  non-
second 
residents, 
consecutive  year  in  2024,  and  the  number  of 
issued  building  permits  remains high.  Housing 
supply  should  also  be  incentivised  by:  (i)  the 
newly  introduced  taxation  of  vacant  housing 
units;  (ii)  stronger  taxation  of  income  from 
short-term rentals;  and (iii)  instruments in the 
recently  adopted  national  housing  policy  plan 
until  2030  (see  Section  4).  But  despite  policy 
efforts and the recent rise in incomes, housing 
affordability  remains  comparatively  low,  also 
labour  mobility.  Nevertheless, 
constraining 
several  factors  mitigate  the  potential  risks  to 
financial  stability  from  the  housing  sector. 
Firstly,  household  debt 
is 
comparatively  low,  at  30.3%  of  GDP  and 
consisting mostly of bank credit. Secondly, the 
banking  sector 
is  profitable,  well 
capitalised,  and very  liquid.  Thirdly,  new  loans 
for  house  purchases  slightly  decreased  as  a 
share  of  GDP  in  2024,  as  interest  rates 
remained  stable  and  are  now  higher  than  for 
the  euro  area.  Fourthly,  the  stock  of  housing 
credit  remained  broadly  unchanged  at  13.9% 
of  GDP  in  2024  given  strong  nominal  GDP 
growth.  Finally,  the  Croatian  central  bank 
announced  the  introduction  in  July  2025  of 
borrower-based  measures  that  limit  debt-
service-to-income  ratios,  loan-to-value  ratios, 
and 
the  maximum  maturity  of  housing 
loans (7),  all  of  which  should  further  mitigate 
housing market risks. 

in  Croatia 

itself 

(7)  https://www.hnb.hr/en/-/priopcenje-o-donosenju-odluke-

o-kriterijima-kreditiranja-potrosaca. 

6 

 
 
 
 
 
 
 
 
Box 2: 

Barriers to private and public investment 

Investment  has  been  a  significant  driver  of  growth  in  Croatia  in  recent  years,  helped  by  the 
absorption of EU funds. However, several barriers contribute to holding back private and public 
investment. These include: 

• 

Labour and skills shortages. Labour force gaps, particularly in services and industry, are 
a  very  significant  barrier  to  investment,  with  over  90%  of  firms  citing  them  as  a  major 
constraint.  

•  A  fragmented  R&I  system.  Fragmentation,  low  R&D  intensity,  and  weak  technology-
transfer  mechanisms  continue  to  hinder  Croatia’s  ability  to  commercialise  research  and 
foster innovation.  

• 

Limited access to non-bank finance. Businesses face limited access to diverse funding 
sources,  with  heavy  reliance  on  bank  loans  and  frontier  capital  markets  restricting 
investment, particularly for start-ups and SMEs.  

•  Regulatory and administrative barriers. Complex regulations, slow permitting processes 
and delays in implementing EU directives discourage both domestic and foreign investment.   

Croatia  has  taken  significant  steps  to  strengthen  its  financial  system  and  improve 
the  environment  for  investment.  The  country  benefits  from  a  stable  and  resilient  banking 
sector, and the authorities are increasing their efforts to  deepen the country’s  capital  markets 
and  promote  the  role  of  non-bank  financial  institutions.  Public  policy  has  started  to  address 
structural investment gaps through strategic planning, regulatory reforms and targeted support 
for  innovation  and  capital-market  development.  Nonetheless,  key  barriers  to  effective 
investment planning, financing and execution persist. For example:  

•  Small  and  underdeveloped  capital  markets.  Equity  market  capitalisation  in  Croatia 
remains significantly below the EU average, and market liquidity is low. The limited range of 
investment products and exit opportunities continues to hinder the development of venture 
and  growth  capital.  The  participation  of  retail  and  institutional  investors  in  private  capital 
markets remains narrow.  

•  Underutilisation  of  domestic  savings.  Despite  a  structurally  positive  net  savings 
position, a large  share of Croatia’s household and institutional savings is invested abroad. 
The  availability  of  domestic  capital  for  productive  investment  is  restricted  by:  (i)  high 
holdings of cash and deposits (46.4% of household assets); (ii) a preference for real estate 
investment; and (iii) limited direct retail participation in capital markets.  

•  Conservative  investment  strategies  of  institutional  investors.  The  portfolios  of 
Croatian  pension  funds  and  insurers  remain  heavily  skewed  towards  government  bonds. 
This  limits  the  availability  of  long-term  risk  capital,  particularly  for  innovative  enterprises 
and  start-ups.  Pension  fund  commitments  to  private  equity  and  venture  capital  remain 
among the lowest in the EU.  

•  A  fragmented  innovation  finance  ecosystem.  Croatia’s  venture  capital  and  private 
equity  activity  remains  low,  leaving  early-stage  firms  without  sufficient  access  to  growth 
financing. Despite some initiatives taken by the government in recent years to address this 
problem, the depth of the innovation finance ecosystem is insufficient to meet the needs of 
high-potential firms. 

7 

 
 
 
 
The  implementation  of  Croatia’s  RRP  is  well  underway.  At  present,  Croatia  has  fulfilled 
36%  milestones  and  targets  in  its  RRP.  However,  the  implementation  of  investment  projects 
under  the  RRP  remains  hampered  by  administrative  capacity  constraints,  complex  public 
procurement procedures, protracted permitting processes and coordination inefficiencies. Croatia 
has also strengthened its public investment framework through a high-level strategy and a new 
standardised project assessment methodology, improving planning and alignment with priorities. 
However,  external  quality  assurance  remains  largely  confined  to  EU-funded  projects,  while 
systematic ex post evaluations are still lacking. 

important  to  accelerate  the 

It  remains 
implementation  of  cohesion  policy 
programmes.  The  mid-term  review  offers  opportunities  to  speed  up  progress  and  better 
address EU strategic priorities related to competitiveness, defence, housing, water resilience and 
the  energy  transition.  While  Croatia  has  signalled  interest  in  leveraging  the  Strategic 
Technologies  for  Europe  Platform  under  cohesion  policy,  Croatia  can  further  support  the 
development  or  manufacturing  of  critical  technologies  in  the  areas  of  digital  and  deep  tech, 
clean and resource efficient technologies, and biotechnologies. 

8 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INNOVATION, BUSINESS ENVIRONMENT AND 
PRODUCTIVITY 

Transforming research into 
innovation  

Croatia’s  R&I  system  is  improving  but 
weaknesses  persist.  Despite  improvements 
in innovation performance in recent years and 
ambitious  investment  and  reforms,  Croatia 
remains  an  emerging  innovator,  with  low 
innovation  performance  but  the  potential  for 
(8).  Structural  weaknesses 
further  growth 
continue  to  hinder  its  ability  to  commercialise 
research and increase competitiveness.   

of 

the 

regional 

efficiency 

variations  and 

Croatia’s  fragmented  public  R&D  sector 
weakens 
public 
investment  in  research.  Croatia’s  public 
R&D  system  includes  over  25  public  research 
institutes  and  8  universities,  with  more  than 
faculties.  This  dilutes 
110  autonomous 
resources  and 
limits  collaboration.   R&D 
intensity  is  growing  but  is  characterised  by 
stark 
remains 
substantially  below  the  EU  average.  This 
highlights  the  need  to  ensure  continuous 
increases  in  public  R&D  investment  (Annex  3 
and 17). The recovery and resilience plan (RRP) 
supports  Croatia’s 
innovation  ecosystem 
through  reforms  in  R&I,  including  funding  to 
merge  universities  and  research  institutions, 
offering an opportunity to improve institutional 
efficiency.  However further effort in this area 
is  required.  Addressing  this  fragmentation 
through  analytically  grounded  consolidation 
efforts, including incentives for mergers, could 
improve coordination and maximise the impact 
of Croatia’s R&I. 

Despite  progress  in  recent  years,  private 
remains 
sector 

investment 

R&D 

constraints  on 

substantially  below  the  EU  average.  The 
main bottlenecks to private sector R&D include 
the  fragmentation  of  the  research  landscape, 
relevant 
ineffective  coordination  between 
technology 
players,  and 
transfer.  There  is  also  a  need  to  increase 
Croatia’s  R&D  expenditure  and 
innovation 
activity  in  the  private  sector  and  promote  the 
digitalisation  of  SMEs.  Patent  applications 
remain  limited,  reflecting  weak  incentives  for 
knowledge. 
the 
Furthermore,  despite  recent 
improvements, 
Croatia  lags  behind  other  Member  States  in 
venture  capital  investment,  and  this  limits 
funding  for  high-growth  start-ups  and  deep-
tech innovation.   A continuous increase in R&D 
expenditure, both public and private, is needed 
to close the gap with the EU average. 

creation  of  proprietary 

for 

rather 

financing 

Business-science  ties  are  improving,  but 
is  key.  Despite  many 
steady  support 
collaborative 
available 
programmes 
rely  on 
research,  many  Croatian  SMEs 
than 
traditional  bank 
innovation  partnerships.  And,  even  with  a 
strong public-private co-publication rate, these 
public-private  collaborations  often  fail  to  lead 
to  commercial  applications  (9)  due  to  weak 
technology-transfer  mechanisms.  Croatia’s 
system  for  licensing  research  outputs  and 
remains 
facilitating 
-  and 
lacklustre. 
knowledge-transfer  mechanisms  are  being 
strengthened  to  improve  commercialisation, 
including  via  the  RRP  and  cohesion  policy, 
Technology-transfer 
weaknesses 
offices  (TTOs)  face  project-based  funding 
constraints  that  complicate  staff  retention, 
while the lack of a robust technology-transfer 
culture diminishes buy-in from universities and 
trust  from beneficiaries (Annex  3). To address 
these  issues,  a  system  for  continuous  and 

spin-offs 
technology 

university 
 Although 

remain. 

(8)  European Innovation Scoreboard, Croatia, 2024. 

(9)  European Innovation Scoreboard, Croatia, 2024. 

9 

 
 
 
 
permanent  funding  for  TTOs  should  be 
developed, accompanied by efforts to embed a 
culture  of  knowledge  and  technology  transfer 
across academic and research institutions. 

Graph 2.1: Number of patent applications per 
million inhabitants, 2023 

(1) Patent applications to the European Patent Office by 
applicants' country of residence 
Source: Eurostat 

the 

and 

continuous, 

Better  R&I  performance  needs  improved 
governance. The implementation of Croatia’s 
new  R&I  governance  system  experienced 
significant delays with the National Innovation 
Council  established  only  in  April  2025,  while 
work  at  the  technical  level  remains  limited. 
Collaboration  between 
three  main 
ministries  (Ministry  of  Science,  Education  and 
Youth,  Ministry  of  the  Economy,  and  Ministry 
of Regional Development and EU Funds), while 
permanent 
be 
strengthened  to  increase  the  potential  to 
design 
comprehensive  support  measures 
levels.  To 
across  all  technology  readiness 
overcome  these  barriers,  and  ensure  more 
effective  policy  design  and  delivery,  it  would 
be  beneficial  for  Croatia 
(i)  further 
operationalise  the  S3  governance  system;  (ii) 
improve  coordination  between  academia, 
industry  and  government  (including 
inter-
ministry  coordination)  through  a  continuous 
entrepreneurial  discovery  process;  and  (iii) 
design  programmes  and  calls 
target 
consortia of stakeholders. 

could 

to: 

to 

Unlocking diversified sources of 
financing  

the 

over 

financing 

landscape 

Croatia’s 
lacks 
diverse  sources  of  funding.  Businesses 
primarily  rely  on  bank  loans  (representing 
31.6% of all funding sources for non-financial 
corporations,  16.9%  of  all  firms’  funding 
source)  and  own  funds,  while  market-based 
finance  is  limited.  The  predominance  of  bank 
options 
market-based 
finance 
underscores 
limited  availability  of 
alternative  funding  sources  for  businesses, 
particularly those whose needs are less suited 
to  traditional  financing,  such  as  start-ups  and 
scale-ups.  In  addition,  despite  the  banking 
sector’s high liquidity  and resilience, there are 
signs  that  bank  lending  to  corporates,  while 
increasing, remains below potential  (Annex  5). 
In  2024,  a  slightly  higher  share  of  Croatian 
SMEs  reported 
late  payments  from  both 
private and public entities than the EU average 
(Annex  4).  In  addition,  persistent  payment 
delays – reported by a growing share of SMEs 
–  can  exacerbate  cash  flow  pressures  and 
increase the need for short-term financing.  

institutional 

As  a  frontier  market,  Croatia's  capital 
market  is  evolving  but  requires  further 
to 
to  broaden  access 
development 
finance.  Equity  market  participation 
is 
considerably  lower  than  the  EU  average,  as 
reflected  in  low  trading  volumes  and  stock 
listings.  This  constrains  the  ability  of Croatian 
businesses  to  access  long-term  investment 
from  domestic  sources,  particularly  from 
households  and 
investors.  A 
significant  share  of  Croatian  net  savings 
continues  to  be  invested  abroad,  as  reflected 
in 
to 
foreigners,  with  net  lending  to  foreigners 
averaging  2.3%  of  GDP  over  the  past  decade 
and peaking at 3.9% in 2019 (Annex 5). At the 
same  time,  domestic  capital  markets  provide 
limited  opportunities  for  channelling  these 
funds  into  productive  business  investment. 
Investment  funds  and  insurance  undertakings 
in  Croatia  do  not  play  a  significant  role  as 
institutional  investors,  while  pension  funds 
mainly  invest  in  sovereign  bonds.  The  lack  of 
diversified financing options hinders economic 

structurally  positive  net 

lending 

10 

0100200300400500600LUSEDKFINLDEATBEIEFREUMTITSICYEELTESPTCZPLELLVHRHUSKBGRO 
  
and  medium-sized 

innovation,  particularly  for 
expansion  and 
small 
enterprises. 
Moreover,  there  is  scope  to  increase  support 
for  early-stage 
through 
venture  capital  and  private  equity  (Annexes  3 
and 5).  

innovative  firms 

in 

than 

rather 

Croatian  households  hold  a  significant 
portion  of  their  assets  in  cash  and 
deposits 
financial 
instruments.  While  the  share  of  household 
financial  assets  allocated  to  pension  and 
investment funds has grown in recent years, it 
remains  below 
the  EU  average.  Retail 
participation  in  financial  markets,  both  direct 
and through intermediaries, has also increased 
but  still  lags  behind  European  levels,  further 
limiting financing opportunities for businesses. 
Although  Croatia’s  capital  gains  tax  is  lower 
the 
than 
lack  of 
administrative 
digitalisation  of 
system  may 
disincentivise  retail  participation in  the  capital 
markets. 

comparable  markets, 
complexity  and 

the 

tax 

in 

through 

Croatia  aims  to  boost  capital  market 
development 
regional 
integration, digitalisation,  and  regulatory 
reforms.  As  part  of  the  RRP,  the  Ministry  of 
Finance,  in  cooperation  with  the  Croatian 
Financial  Services  Supervisory  Agency  and 
other stakeholders (Annex 5), have prepared a 
Strategic  Framework  for  the  development  of 
the  capital  market  in  the  Republic  of  Croatia 
2025  –  2030.The  framework  and  the  action 
plan  focus  on:  (i)  regional  integration;  (ii) 
furthering  the  digitalisation  of  services  for 
investors,  through  tools  such  as  onboarding 
platforms; 
corporate 
governance;  (iv)  improving  the  liquidity  of  the 
capital market; and (v) developing the offering 
of financial instruments. A strong response by 
retail investors to offerings of sovereign bonds 
and 
e-
government  platform,  further  strengthens  the 
case  for  prioritising  digitalisation.  Regulatory 
streamlining is a general enabler for attracting 
It  also  plays  an 
investors 
important  role 
increasing  cross-border 
investment  flows.  The  regulatory  streamlining 
initiative strengthens Croatia’s commitment to 
advancing  the  EU’s  Savings  and  Investments 
Union and its own overall competitiveness. 

in  this  area. 
in 

facilitated  by 

treasuries, 

advancing 

the 

(iii) 

reforms 

is  advancing  financial 
Croatia’s  RRP 
sector 
to  diversify  capital 
markets,  support  innovative  SMEs,  and 
promote sustainable finance. As part of the 
RRP,  the  country  dedicates  resources  to 
financial  sector  reforms,  with  a  focus  on 
diversifying  capital  markets  and  improving 
access  to  alternative  financing.  A  dedicated 
financial  instrument  supports  venture  capital 
and private equity for the start-up and growth 
stages  of 
innovative  and  scale-up  SMEs, 
complemented  by  cohesion  policy  measures. 
Further reforms in the RRP will strengthen the 
role  of  Croatia’s  financial  sector’s  role  in 
economic  development  through  support  for 
sustainable  finance  and  green 
transition 
efforts.  These  reforms  provide  a  structured 
roadmap  for  improving  access  to  finance  and 
fostering a more dynamic capital market. 

Expanding  access  to  diversified  sources 
of  financing  will  support  sustainable 
growth and strengthen financial stability. 
is  creating  a  stronger  regulatory 
Croatia 
framework that fosters capital market growth, 
encourages  alternative  financing  solutions, 
and  improves  financial  literacy.  Aligning  its 
policies  with  broader  EU  financial  integration 
efforts  should  improve  investor  confidence, 
attract  foreign  capital,  and  create  a  more 
balanced  and  resilient  financial  system.  By 
through 
to 
expanding 
diversified  channels,  Croatia  can  support 
sustainable  economic  growth  and  strengthen 
its overall financial stability. 

finance 

access 

Nurturing the business 
environment 

Significant  structural  challenges  hinder 
Croatia’s  business  environment,  with 
workforce  shortages.  Labour  and  skills 
shortages  are  among  the  most  pressing 
investment  and 
constraints  on  business 
expansion.  Croatian  employers 
increasingly 
report difficulties in finding qualified staff, and 
this  is  limiting  their  production  capacity  and 
the 
competitiveness,  particularly  outside 
capital  region  of  Zagreb  (Annex  17).  This 
challenge  is  compounded  by  demographic 

11 

 
trends and the emigration of skilled workers to 
other  EU  countries.  Wage  increases  in  recent 
years,  while  supporting  incomes,  have  also 
raised  concerns  among  businesses  about 
potential impacts on cost competitiveness. 

to 

to 

labour  market 

Regulatory complexity and administrative 
inefficiencies 
create 
continue 
obstacles for Croatian businesses. Despite 
recent  improvements,  firms  perceive  business 
rules  as 
regulations  and 
significant  barriers 
investment,  with 
requirements  often  exceeding 
compliance 
those  of  other  EU  Member  States.  Improving 
the  regulatory  framework  could  alleviate  the 
challenges  of  meeting  seasonal  demands  in 
tourism and related services. Increasing delays 
in  transposing  EU  directives  into  national 
legislation  further  complicate  the  business 
environment.  Additionally,  disproportionate 
regulatory  restrictions  on  certain  professions, 
continue  to  limit  competition  and  market 
efficiency  (Annex  4).   Improvements  in  both 
the  availability  of  digital  public  services  for 
businesses  and  the  efficiency  of  the  justice 
system  would  help  strengthen  the  country’s 
business environment. 

The  RRP  contains  several  measures  to 
help  digitalise  the  public  administration. 
These include: (i) the new functionalities of the 
public  employee  management  system;  (ii)  a 
new  system  for  monitoring  and  implementing 
wages;  (iii)  the  introduction  –  coupled  with  IT 
support  –  of  remote  and  hybrid  work  models; 
(iv)  the  digitalisation  of  strategic  planning 
processes;  and  (v)  an  IT  platform  to  support 
local  government  units  that  are  undergoing 
mergers.  The  RRP  also  contains  several 
measures to expand the capacity of the state 
‘cloud’ and enable more users to benefit from 
its  services  and 
these 
measures  will  help  improve  the  efficiency  of 
the public administration, Croatia could further 
promote  the  use  of  these  new  tools  and 
functionalities  and  provide  training  where 
needed. 

features.  While 

In the retail sector, regulatory barriers to 
competition  remain  high.    According  to  the 
OECD indicators on Product Market Regulation 

(10),  regulatory  barriers  to  competition 
in 
Croatia  are  the  eighth  highest  in  the  EU  and 
the  highest  of  small  EU  countries  (11).    While 
such  barriers  can  hinder  the  daily  operations 
of  shops,  they  alone  do  not  provide  a 
sufficient  explanation 
the  growing 
divergence  between  consumer  and  producer 
prices  in  Croatia  (Section  1).  An  additional 
factor  causing  this  divergence  could  be  the 
presence  of  territorial  supply  constraints  that 
may  reduce  price  competition  for  branded 
products,  as  retailers  and  wholesalers 
in 
Croatia have reported difficulties in bypassing 
local exclusive distributors (12). 

for 

to 

inquiry 

The authorities have taken some steps to 
increase  competition.  Croatia’s  national 
competition  authority  (AZTN)  has  reacted  to 
the  need  to  step  up  competition  enforcement 
by  prioritising  the  retail  sector  in  2025  and 
into  vertical 
launching  a  sector 
relations between suppliers and retailers in the 
food  and  non-food  supply  chain.  Croatia  also 
improve  price 
introduced  measures 
transparency  and  comparison  possibilities  for 
consumers by requiring retailers to publish the 
prices  of  all  their  products  online  from  mid-
May  2025  (13).  However,  to  limit  inflationary 
pressures,  Croatia  adopted 
the  Act  on 
Exceptional  Price  Control  Measures, which 
entered  into  force  on  8  March  2025.  This  Act 
stipulates that price control measures may be 
introduced  exceptionally 
the 
negative  consequences  of  price  changes, 
mitigate inflation, prevent monopolistic pricing, 
and in other extraordinary circumstances.  The 
government  also  widened  the  scope  of  price-
capped  food  products  from  30  to  70.  Such 
price-control  measures  may  undermine  free 
access  by  traders  to  the  Croatian  market  in 

to  prevent 

(10)  OECD, 2024, Product Market Regulation Country note – 

Croatia. 

(11)  There are no product-market regulation scores for 

Romania. Small EU countries include all 12 EU countries 
with a population below 6 million. 

(12)  Study on territorial supply constraints in the EU retail 

sector - Publications Office of the EU. 

(13)  Similar mandatory price disclosure measures have led 
to reduced price levels in supermarkets in Israel. Ater 
and Rigbi (2018), The Effects of Mandatory Disclosure 
of Supermarket Prices. 

12 

 
 
conditions of effective competition and disturb 
the entire supply chain (14).  

in 

support 

Territorial  fragmentation  of  the  public 
administration  affects  its  efficiency  and 
results 
to 
suboptimal 
businesses.  The  responsibilities  and  tasks  of 
the local government units often do not match 
their  administrative  and  financial  capacities. 
This  results  in  an  uneven  provision  of  public 
services  for  both  citizens  and  businesses 
across  financially  strong  and  financially  weak 
local units. At the same time, this hinders their 
capacity  to  implement  policy  and  adequately 
use  EU  funding.  The  RRP  includes  reforms  to 
address  the  situation  by  introducing  the  legal 
framework,  coupled  with  a  financial  incentive 
system  as  well  as  an  IT  support  system,  to 
encourage  either  mergers  of 
functions 
between  local  government  units  or  actual 
mergers,  however,  while  there  is  appetite  for 
functional mergers, there is limited interest to 
undergo  actual  mergers  and  reduce  the 
number  of  local  government  units.  Further 
measures to improve the uptake by bolstering 
financial  incentives  or  introducing  additional 
legislative requirements could be beneficial to 
to 
services 
improve  deliver  of  public 
businesses and citizens at the local level.  

(14)  CJEU, case C-557/23 SPAR v Hungary paragraph 47. 

13 

 
 
 
 
 
 
DECARBONISATION, ENERGY AFFORDABILITY AND 
SUSTAINABILITY 

the  lack  of  necessary  regulatory  framework. 
For  example,  the  national  energy  regulator 
(HERA) has yet to set updated grid connection 
fees.  This  creates  uncertainty  for  potential 
investors,  some  of  which  have  decided  to 
cease  operations  in  Croatia.  Currently,  around 
45  projects  with  the  potential  to  add  more 
than  2600 MW  of  new  renewable  energy 
capacity  remain  blocked  and  are  unable  to 
secure  financing  and  continue  with 
the 
permitting process. 

Increased  investment  in  the  electricity 
grid  will  be  crucial  to  unlock  Croatia’s 
renewable  energy  potential.  The  Croatian 
Recovery  and  Resilience  Plan  (RRP)  includes 
reforms  and  investments  with  a  focus  on  the 
220/110  kV  electricity  grid.  However,  to  fully 
access Croatia’s solar and wind potential in the 
south  of  the  country,  significant  investment 
will  be  required  in  the  400  kV  electricity  grid 
connecting  Dalmatia  on  the  south  coast  with 
the  north  of  the  country.  Cost  estimates  for 
this grid expansion range from EUR 500 m for 
the  connection  of  selected  projects 
to 
EUR 1 billion  for  the  entire  network.  Potential 
funding  arrangements  for  grid  development 
to  strike  a  balance  between 
will  need 
contributions 
future 
current  and 
renewables  investors,  consumers,  and  public 
funding. While high-voltage network upgrades, 
to  materialise, 
may 
incentivising  hybrid  storage  and  renewable 
energy  projects,  especially  in  the  southern 
region  could,  in  the  short  term,  support  the 
integration  of  new  renewable  energy  capacity 
without straining the grid. 

take  10-15  years 

from 

to 

contributing 

Expanding 
clean-tech  manufacturing 
would  support  Croatia’s  competitiveness 
while 
resilient 
decarbonisation  of  the  EU.  Croatia  has 
for  net-zero 
limited  production  capacity 
technologies  and  does  not  fully  exploit  its 
potential in manufacturing and exporting these 
technologies (Annex 7). Despite some progress 

the 

Unlocking Croatia’s renewable 
potential to reduce electricity 
prices 

High  electricity  prices  for  business  and 
competitiveness. 
industry  hold  back 
Croatia had the third highest electricity price in 
the  EU  for  business/industrial  consumers  in 
the  first  half  of  2024.  This  continued  to  hold 
back  the  cost  competitiveness  of  Croatian 
companies (15). Households were shielded from 
high  electricity  prices  through  government 
subsidies.  However,  household  consumers  still 
paid 3.3  times more  per unit  for  of electricity 
than they did for gas in the first half of 2024, 
in  part  due  to  higher  taxation  on  electricity, 
effectively  disincentivising  electrification  (16). 
On  the  wholesale  market,  high  electricity 
prices  were  driven  by  a  mix  of  factors  that 
affected  both  demand  and  generation,  as 
prolonged  summer  heatwaves  and  a  colder 
winter in the region led to higher consumption, 
while 
reserves  and 
limited  non-fossil-fuel  flexibility  exacerbated 
the supply-demand gap (Annex 8).  

reduced  hydropower 

Faster  roll-out  of  new  renewable  energy 
capacity,  especially  solar,  and  non-fossil 
flexibility  solutions  could  help  reduce 
price 
record 
levels.  Croatia  added  a 
397 MW of  solar  capacity  in  2024  (Annex  8), 
but  the  share  of  solar  energy  in  electricity 
generation  remains  low,  at  less  than  6%. 
However, 
large-scale 
increased  uptake  of 
renewables,  including  solar,  is  hampered  by 

(15)  Statistics | Eurostat  

(16)  Source: Eurostat, S1 2024 energy price data 

(consumption band is DC for electricity and D2 for gas, 
which refer to medium-sized consumers and provide an 
insight into affordability) 

14 

 
 
 
in recent years (including the adoption up of a 
dedicated  strategy  for  hydrogen  in  2022), 
Croatia  lacks  a  robust  policy  framework  to 
develop 
clean-tech  manufacturing.  Main 
bottlenecks  include  long  waits  for  industrial 
permits to be granted, a lack of incentives for 
private investment, and skills shortages.   

in 
combined  with 
decarbonisation of the sector (Annex 9). 

investments 

the 

Phasing out fossil fuel subsidies 

their 

optimise 

demand 

response 

and 
Increasing 
consumer  empowerment  could  improve 
electricity  affordability.  Dynamic  contracts 
(according  to  which  prices  vary  depending  on 
the  time  of  day  or  on  weather  patterns)  help 
consumers 
consumption 
patterns  and  can  help  reduce  demand  and 
price  peaks.  However,  the  uptake  of  these 
contracts  in  Croatia  is  held  back  by  a  rather 
low share of installed smart meters. Only 24% 
of  household  consumers  had  smart  meters 
installed  in  2023,  up  from  19%  in  2022  but 
significantly  less  than  the  EU  target  of  80% 
(Annex  8).  The  RRP  is  providing  significant 
funding  for  the  roll-out  of  smart  meters,  but 
further investments are necessary to empower 
consumers  and  increase  flexibility.  Generally, 
active  market  participation  by  consumers 
seems  still  limited,  with  electricity  consumers 
switching  to  new  providers  at  a  rate  of  less 
than  2%  a  year.  In  addition,  the  number  of 
registered  energy  communities  remains  low, 
mostly  due 
registration 
to  cumbersome 
requirements. Moreover, none of the registered 
energy  communities  is  currently  in  operation 
as the distribution-system operator is working 
on  the  software  needed  to  implement  energy 
sharing.  

Energy  savings  in  Croatian  industry  and 
business  could  help  lower  energy  costs. 
The energy renovations in residential and – to 
a larger extent  – public buildings continued in 
2024, with significant support from EU  funds, 
including  the  Recovery  and  Resilience  Facility 
(RRF).  However,  funding  support  for  energy 
savings  in  industry  and  businesses  remained 
low in 2024. Additional efforts to address the 
industry  and 
energy-savings  potential 
business 
Croatia’s 
competitiveness by lowering energy costs. This 
in  turn  could  help  further  reduce  the  high 
of 
greenhouse-gas-emissions 
Croatia’s  manufacturing  sector  if  it  is  also 

in 
support 

intensity 

could 

Croatia  records  sizeable  relevant  fossil 
fuel  subsidies  without  a  planned  phase-
out before 2030.  Scaling  down  and  phasing 
out these subsidies, which represent 0.63% of 
Croatia’s GDP  is in  line  with  EU  commitments 
and  can  contribute  to  easing  limits  of  fiscal 
space.  Fossil  fuel  subsidies  that  address 
neither  energy  poverty  in  a  targeted  way  nor 
respond  to  genuine  energy  security  concerns, 
hinder  electrification  and  are  not  crucial  for 
industrial competitiveness could be considered 
for priority phase-out. Nevertheless, it is noted 
that  in  Croatia  the  combination  of  national 
energy  and  carbon  taxes  and  EU  Emissions 
Trading  leads  in  Industry  to  disincentives  for 
fossil  fuel  use  which  are  slightly  higher  than 
the EU average. The following remaining fossil 
in  Croatia  are  particularly 
fuel  subsidies 
damaging 
and 
an 
environmental  perspective  (Annex  8):  (i)  the 
ongoing  emergency  price  cap  on  petroleum 
products;  and  (ii)  partial  refunds  of  excise 
duties for diesel in commercial transport.  

economic 

from 

Accelerating circular material use  

Despite positive trends, Croatia is trailing 
behind its EU peers in the transition to a 
circular  economy.  The  use  of  circular 
materials  stands  at  6.2%,  still  significantly 
below  the  EU  average  of  11.8%.  Croatia 
remains  one  of 
lowest  performing 
the 
countries  in  the  EU  for  sustainable  waste 
management,  with  a  recycling  rate  of  only 
36% (17) (Annex 7).  

The  Croatian  RRP  includes  reforms  and 
investments  to  accelerate  the  circular 

(17)

https://ec.europa.eu/eurostat/databrowser/view/sd

g_11_60/default/table. 

15 

 
 
 
(i) 

grants 

include: 

transition.  Examples  of  these  reforms  and 
investments 
to 
entrepreneurs  in  the  tourism  industry;  (ii) 
vouchers for training for green skills, including 
green  skills  related  to  circularity;  and  (iii) 
investments  in  infrastructure  for  improved 
waste  management.  Croatia 
introduced  a 
landfilling  tax  as  an  economic  incentive  to 
make  waste  recycling  and  prevention  more 
competitive. However, the effectiveness of this 
tax  will  depend  on  its  implementation  and 
enforcement.    Cohesion  policy  programmes 
for 
provide  support 
innovative solutions and training (Annex 7).  

to  Croatian  SMEs 

(i) 

from 

could 

reducing, 

benefit 
circular 

Croatia 
a 
economy 
comprehensive 
strategy.  Croatia  could  increase  resource 
efficiency  by: 
re-using  and 
recycling  key  materials  and  products;  (ii) 
creating  market  demand 
for  secondary 
materials; 
(iii)  promoting  circularity  from 
design  to  the  end-of-life  of  products;  and  (iv) 
completing infrastructure investments (such as 
waste  management  centres).  These  actions 
would  also  have  the  additional  benefits  of 
creating  green  jobs  and  reducing  Croatia’s 
raw 
dependency  on 
materials (Annex 7). 

imports  of  critical 

Building resilience to climate risks  

the 

2020, 

implementation 

remains  highly  exposed 

to 
Croatia 
several  adverse  climate  risks.  Although  a 
Climate Change Adaptation Strategy is in place 
since 
and 
monitoring  of  adaptation  policies  and 
measures  need  to  accelerate  at  all  levels  in 
Croatia.  Nature-based  solutions  and  climate 
proofing  needs  to  be  more  systematically 
is  an 
applied  across  sectors,  and  there 
especially  acute  need  to  climate  proof  the 
country’s  strategic  infrastructure.  Economic 
losses  and  budgetary  impacts  from  floods 
the 
could  be  alleviated  by 
availability  and  affordability  of 
insurance 
policies to cover climate hazards (Annex 9).  

improving 

Croatia’s  economic  resilience  depends  on 
the 
its 
environmental  resources.  The  country’s 

sound  management 

of 

resilience  needs  to  be  strengthened to  ensure 
a  clean  and  sufficient  water  supply,  which 
could  preserve  the  long-term  competitiveness 
of  economic  sectors  depending  on  resilient 
water  resources  such  as  agriculture,  tourism 
and  renewable  energy.  Croatia  also  needs  to 
improve  the  quality  and  availability  of  its 
environmental  infrastructure.  Investments  in 
water  infrastructure,  mostly  supported  by  EU 
funds, 
including  the  RRF,  are  helping  to 
refurbish  and  extend  water  infrastructure. 
Nevertheless, the investment gap in the water-
management sector is large and water losses 
in  the  water-supply  network  remain  high. 
Croatia 
its 
is 
obligations  under 
the  Urban  Wastewater 
Treatment  Directive.  Only  7%  of  Croatia’s 
wastewater 
line  with  EU 
legislation (18). 

lagging  behind 

in  meeting 

treated 

in 

is 

Fostering sustainable transport  

Croatia  faces  significant  challenges  in 
terms of transport sustainability. Having a 
severely underdeveloped railway infrastructure 
for  both  passenger  and  freight  transport.,  the 
country  is  also  lagging  in  terms  of  TEN-T 
investments.  Road  transport 
is  the  most 
represented  mode  of  transport  in  Croatia,  for 
both  domestic  and  tourist  travellers.  This  not 
only  keeps  greenhouse-gas  emissions  high, 
but it also puts pressure on urban mobility and 
affects  the  local  population.  Investments  in 
the 
rail  network  and  sustainable  urban 
mobility  through  a  more  coordinated  and 
comprehensive approach could help Croatia to 
reduce  its  reliance  on  road  transport  and 
foster a more sustainable economy. 

In  2023,  the  share  of  renewables  in 
transport in Croatia was the lowest in the 
EU (0.9% vs 10.8% EU average). The drop 
in the share of renewables could be addressed 
by revising rules on the blending and mixing of 
reforms  and 
biofuels.  The  RRP 
investments  aiming to promote  renewables in 

includes 

(18)  Croatia | WISE Freshwater. 

16 

 
 
transport, but these are yet to gain ground and 
cannot yet be considered sufficient.  

The uptake of electric vehicles in Croatia 
remains one of the lowest in the EU. Less 
than  5%  of  newly  registered  cars  in  2023 
(19).  The  unpredictability  of 
were  electric 
incentive schemes has reduced interest among 
potential  owners  of  electric  cars.  However,  in 
the  next  two  years,  investments  focusing  on 
boosting the demand for – and improving the 
availability  of  –  charging  infrastructure  could 
speed  up  electrification  if  it  is  also  combined 
with  the  phasing  out  of  fossil  fuel  subsidies 
(Annex 7). 

Graph 3.1: Share of renewable energy sources 
in transport, 2023 

Source: Eurostat 

(19)  EEA, 2024,  

https://www.eea.europa.eu/en/analysis/indicators/new-
registrations-of-electric-vehicles/newly-registered-
electric-cars?activeTab=6fbd444d-c422-4a78-8492-
fd496bd61b7a 

17 

05101520253035SEFINLATBEESDEPTEUDKMTITFRSISKLUEEBGROIEHUCYLTPLCZELLVHR 
  
 
SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS 

training  coverage  gap  in  the  labour  market, 
particularly given the significant recent inflows 
of non-EU workers. 

Graph 4.1: Labour shortages in Croatia in 2024 

(1) Percentage of companies which reported shortages of 
workers as the main factor limiting production. 
Source: DG ECFIN Business Consumer Survey 

(the  gap  between 

Activating underrepresented groups could 
help build a more inclusive labour market 
and  foster  robust  economic  growth. 
Despite  an  overall  improving  labour  market, 
some  vulnerable  groups  –  particularly  older 
people,  low-skilled  workers  and  persons  with 
disabilities  –  face  persistent  challenges  in 
accessing  quality  employment.  The  disability 
employment  gap 
the 
employment  rate  of  people  with  a  disability 
and people  without a disability) has  increased 
significantly in recent years and  reached 41.0 
pps  in  2024.  This  is  worrying  considering  the 
already  higher  risk  of  poverty  faced  by  this 
group.  Further  improvements  in  the  labour 
market will be limited unless the effectiveness 
through  greater 
of  ALMPs 
increased 
targeting 
in: 
investment  and  effort 
vulnerable  groups;  (ii)  providing  professional 
coaching  services  and  upskilling  and  reskilling 
measures;  and  (iii)  more  actively  involving 
social  partners  in  the  planning  of  training 
activities. These targeted measures would also 
help  better  address  the  risk  of  poverty  and 
social exclusion.  

(i) 

is 

Meeting labour-market needs 

for  by 

Croatia’s  labour  market  continues  to 
improve,  yet  persistent  structural  and 
regional 
hinder 
challenges 
competitiveness  and  economic  growth 
potential.  Since  its  EU  accession  in  2013, 
Croatia  has  experienced  a  significant  loss  of 
population  and  labour  force.  This  has  only 
partially  been  compensated 
the 
immigration  of  mostly  low-skilled  workers  in 
recent  years.  The  employment  rate  remains 
below  the  EU  average,  despite  improvements 
in  recent  years.  Labour  and  skills  shortages 
are  reported  in  many  sectors,  while  certain 
vulnerable  groups  remain  inactive  or  face 
challenges in finding employment. This in turn 
risk  of  poverty  or  social 
increases 
exclusion among these vulnerable groups (see 
Annex  10).  Participation  in  adult  learning  is 
very limited (Annex 13), especially outside the 
capital region. 

the 

Addressing  labour  shortages  and  skills 
mismatches  could  boost  competitiveness 
while  ensuring  social  fairness.  Croatia  is 
increasing  its  efforts  to  tackle  labour-market 
challenges. These increased efforts include: (i) 
amending  the  legislation  to  better  integrate 
foreign  workers  into  the  labour  market;  (ii) 
implementing  active  labour-market  policies 
(ALMPs  –  policies  to  help  people  find  work  or 
training);  and  (iii)  providing  upskilling  and 
reskilling  programmes.  Many  of  these  actions 
are  part  of  the  recovery  and  resilience  plan 
(RRP) and/or are being funded by the European 
Social  Fund  Plus.  Nevertheless,  more  focus  is 
needed  on  increasing  the  effectiveness  of 
ALMPs  by  better  targeting  vulnerable  groups 
and facilitating their labour market activation. 
To  achieve  this,  it  will  be  necessary  to:  (i) 
increase  participation  in  adult  learning;  (ii) 
improve the overall level of  basic and  labour-
market  relevant  skills;  and  (iii)  reduce  the 

18 

05101520253035404550IndustryServicesConstructionIn %HREUEA 
 
  
Stronger education for a more 
competitive and resilient economy 

social  partners,  while  also  targeting  upskilling 
and  reskilling  policies  at  vulnerable  and 
underrepresented groups. 

interest 

attainment, 

in  science, 

High-quality  education  at  all  levels  is 
essential  to  ensure  the  competitiveness, 
resilience  and  fairness  of  the  Croatian 
economy.  Challenges  at  various  levels  of 
education result in low basic skills, low tertiary 
education 
and  mismatches 
between  people’s  skills  and  the  needs  of  the 
jobs  market.  The  rate  of  participation  in  early 
childhood education and care (ECEC) in Croatia 
is one of the lowest in the EU, mainly due to a 
lack  of  infrastructure  and  teacher  shortages. 
Further  efforts  are  needed  to  better  equip 
students  with  basic  skills,  in  particular  in 
increasing 
mathematics,  as  a  basis  for 
technology, 
students’ 
engineering,  and  mathematics  (STEM).  The 
results  of 
international  education  surveys 
(PISA) show that Croatia underperforms – and 
low  rates  of  top  performance  –  in 
has 
mathematics.  This  poor  performance 
is 
aggravated by: (i)  the  shortage  of  teachers  in 
mathematics  and  physics;  and  (ii)  high  levels 
of  underachievement  in  basic  digital  skills 
(ICILS). Enrolment in STEM studies in Croatia is 
low  and  insufficient  to  meet  the  growing 
labour  market  demand  for  high-skilled  ICT 
and 
specialists 
investments under the RRP and cohesion policy 
aim to: (i) increase access to ECEC; (ii) improve 
learning  outcomes 
in  primary  schools  by 
extending the numbers of teaching hours; and 
(iii)  increase  students’  enrolment  in  general 
secondary education.  

Reforms 

(Annex 

12). 

the 

labour-market 

Broader  participation  in  labour-market-
relevant  upskilling  and  reskilling  would 
help  reduce  skills  shortages.  Croatia  is 
relevance, 
increasing 
quality  and  attractiveness  of  adult  education 
and  vocational  education  and  training  (VET), 
including  with 
the  RRP. 
Nevertheless,  participation  in  adult  education 
remains  limited  and  is  insufficient  to  address 
skills  shortages.  More  effort  is  needed  to 
develop  high-quality  curricula 
in  higher 
education,  VET  and  adult  learning  that  are 
relevant  to  the  labour  market.  It  would  be 
beneficial to do this in closer cooperation with 

reforms  under 

the 

Further investments in individual learning 
accounts  (ILAs)  are  important  to  make 
adult  learning  more  attractive.  Croatia’s 
successful  experience  with 
training-
vouchers  scheme  implemented  under  the  RRP 
could  form  a  good  basis  for  improving  ILAs. 
Key  points  to  address  include  widening  the 
scope  of the training offer and expanding the 
scheme  by  ensuring  sustainable  funding, 
including through private funding components. 
An  important  aspect  of  this  work  will  be 
ensuring  the  transferability  and  accumulation 
of training entitlements.  

These  findings  are  consistent  with  the 
second-stage  analysis  of  the  EU’s  Social 
Convergence  Framework.  The  analysis 
points  to  challenges  related  to:  (i)  low  and 
decreasing  rates  of  participation  in  adult 
learning;  and  (ii)  the  underrepresentation  in 
the  labour  market  –  and  the  comparably  low 
employment  rate  –  of  older  people,  the  low-
skilled  and  persons  with  disabilities.  However, 
the  analysis  does  not  point  to  overall  social 
convergence  challenges  for  Croatia,  also  in 
light  of 
implemented  or 
planned (20). 

the  measures 

Making housing more affordable 

Affordable  housing  remains  a  challenge 
in  some  regions  in  Croatia.  The  issue  is 
more  pronounced  in  the  main  urban  and 
touristic coastal areas (Annex 17). Croatia has 
one  of 
its 
population 
in  overcrowded  housing 
(31.7%  in  2024)  in  the  EU,  and  one  of  the 
highest  average  ages  of  people  leaving  the 
parental  home  in  the  EU  (31.3  years).  At  the 
same  time,  a  large  share  of  dwellings  in  the 

the  highest  percentages  of 

living 

(20)  European  Commission,  SWD(2025)95.  The  analysis 
relies  on  all  the  available  quantitative  and  qualitative 
evidence  and  the  policy  response  undertaken  and 
planned. 

19 

 
 
is  vacant 

recorded 
country 
substantial  increases  in  housing  prices  in 
recent years, and this trend continues.  

(21).  Croatia 

(ii) 

The  new  2030  national  housing  policy 
plan  seeks  to  address  these  challenges. 
The  plan  and  its  first  action  plan  include 
measures  to:  (i)  improve  the  legal  framework 
increase  the  supply  of 
for  housing; 
affordable  units;  (iii)  encourage  long-term 
the  number  of 
renting; 
households 
(v) 
implement  targeted  financial  support  related 
to  real  estate  transactions  (22).  One  target  in 
the  plan  is  that  all  large  local  government 
units  (23)  should  have  drawn  up  local  housing 
programmes by 2030. 

renovated  units;  and 

increase 

(iv) 

in 

Recent  tax  reforms  should  also  help 
increase  the  supply  of  housing  for 
In  January  2025, 
principal  residences. 
Croatia introduced recurrent taxation of vacant 
housing  units  and  increased  the  taxation  of 
income  from  short-term  rental  properties, 
especially in high tourism areas. Nevertheless, 
both  these  tax  rates  remain  low  compared 
with  equivalent  taxes  elsewhere  in  the  euro 
increase 
area.  These  measures  will  help 
housing supply by shifting some of the vacant 
dwellings and tourist rentals toward long-term 
occupation,  thus  alleviating  price  pressures 
and improving housing affordability. 

The  lack  of  a  comprehensive  national 
urban  planning  policy  negatively  affects 
both  the  real  estate  market  and  housing 
availability  (24).  Close  cooperation  between 
government  departments  and 
local  and 
regional  authorities  should  be  ensured  to 
to  develop  and 
increase 
implement  affordable  and  social  housing 
projects  and  bring  long-term  stability  to  the 

their  capacity 

(21)  OECD Economic Surveys: Croatia 2023. 

(22)  50% of the VAT on the purchase of a first property for 
young people is returned to the purchaser under certain 
conditions,  and  the  purchaser  is  also  exempt  from  the 
real estate transaction tax. 

(23)  The  city  of  Zagreb,  19  county  seats  and  5  large  cities 
(Vinkovci, Pula, Velika Gorica, Kaštela and Samobor). 

housing market. The Tourism Act, introduced at 
the beginning of 2024 will: (i) further improve 
cooperation between local government, central 
government,  and  stakeholders;  and  (ii)  help 
alleviate  unsustainable  increases  in  demand 
for short-term accommodation in high tourism 
regions. 

Accelerating  the  modernisation  of  the 
property  cadastre  would  help  ensure  the 
effective 
implementation  of  housing 
policy.  Croatia  is  undertaking  actions  under 
the RRP to increase the volume and quality of 
linked data between the land registry and  the 
cadastre in the Land Data Database (BZP), but 
there is scope for further improvements in this 
domain (25).  

A more effective healthcare 
system  

rates 

system 

(Annex  14).  Mortality 

faces 
The  Croatian  health 
significant  challenges,  resulting  in  poor 
health outcomes. Life expectancy at birth is 
from 
low 
cardiovascular  disease  and  cancer  are  among 
the  highest  in  the  EU.  This  reflects  both  a 
limited  focus  on  disease  prevention  and  the 
limited  accessibility  of  the  healthcare  system. 
In  addition,  high  rates  of  treatable  and 
indicate  significant 
preventable  mortality 
shortcomings 
system’s 
the 
effectiveness.  A  strong  policy  focus  on  both 
preventing  disease  and  promoting  healthy 
living 
the  high 
prevalence of chronic conditions.  

is  essential 

to  address 

health 

in 

Health  expenditure  per  capita  in  Croatia 
is  among  the  lowest  in  the  EU,  with 
suboptimal  resource  allocation.  This  is 
evident in  both the  geographical  disparities  in 
access  to  healthcare  (Annex  17)  and  the  low 
uptake  of  digitalisation  in  the  healthcare 
system.  The  share  of  the  population  using 
online  health  services  (excluding  the  phone) 
instead  of  in-person  consultations  is  one  of 

(24)  IMF,  Republic  of  Croatia  –  Selected 

issues, 

(25)  IMF,  Republic  of  Croatia  –  Selected 

issues, 

28 June 2024. 

28 June 2024. 

20 

 
 
 
complementing 

the  lowest  in  the  EU.  The  RRP  supports 
telemedicine  services  in  remote  and  island 
areas, 
policy 
investments  in  helicopter  emergency  medical 
services.  Nevertheless,  a  concerted  effort  is 
needed  to  increase  equal  access  to  primary 
care 
care, 
especially in rural areas.  

outpatient/ambulatory 

cohesion 

and 

Croatia  faces  a  shortage  of  healthcare 
professionals.  General  practitioners  as  a 
percentage  of  all  doctors  is  low  in  Croatia 
(16%  vs an EU average of  21%). The country 
also has one of the lowest densities of nurses 
in  the  EU  (2.4  per  1 000  population  in  2022, 
well below the EU average of 7.6) (Annex 14). 
The  uneven  distribution  of  doctors  is  a  major 
barrier  to  access  to  care  in  remote/rural 
regions.  Addressing  workforce 
shortages 
requires bold initiatives to both: (i) expand the 
healthcare  labour  force;  and  (ii)  improve  the 
training, 
of 
healthcare  workers,  especially  considering 
geographical  disparities.  Limited  actions  have 
been  taken  within  the  RRP  to  address  these 
issues,  namely  funding  the  specialisations  of 
primary care doctors and training programmes 
for nurses. 

retention  and 

recruitment 

Strengthening fairness and 
inclusion 

living 

improving 

standards, 
Despite 
income inequality in Croatia is increasing. 
Although  employment  is  on  the  rise,  the 
number of people at risk of poverty and social 
exclusion  is  slowly  increasing,  with  continued 
regional  disparities  (Annex  17).  In  addition, 
certain  groups,  such  as  older  people  and 
persons  with  disabilities,  face  higher  and 
increasing  poverty  rates  (Annex  11).  The 
adequacy  and  coverage  of  Croatia’s  social 
protection system is insufficient. The impact of 
social 
(excluding  pensions)  on 
poverty  reduction  is  among  the  lowest  in  the 
EU (a 21.6% reduction in poverty vs 34.4% in 
the  EU  on  average 
in  2024)  and  has 
significantly declined in the last decade. This is 
due  to  low  levels  of  spending  on  social 
protection  and  the 
limited  coverage  and 
adequacy  of  benefits.  Pension  adequacy  also 

transfers 

low, 

important 

leaving  older  people  at  a 
remains 
particularly  high  risk  of  poverty  (26).  In  the 
context of increasing employment and wages, 
this  has  contributed  to  a  rise  in  economic 
inequality.  Croatia  has  improved  the  social 
policy  framework  with 
reform 
measures  included  in  the  Social  Welfare  Act, 
the 
the 
Inclusive  Allowance  Act  and 
amendments  to  the  Pension  Insurance  Act. 
However,  better  effectiveness,  adequacy  and 
coverage  of  social  benefits,  particularly  the 
guaranteed  minimum  income  scheme  and 
unemployment  benefits,  would  help  improve 
the  living  standards  of  people  at  risk  of 
poverty and avoid their social exclusion.  

The  availability  and  quality  of  long-term 
care  (LTC)  remains  a  key  challenge. 
Although  Croatia’s  new  national  LTC  strategic 
framework is a significant step forward, it has 
yet  to  be  adopted  by  the  government  and  its 
impact  will  need  to  be  assessed.  Due  to  low 
expenditure,  shortages  of  qualified  staff,  and 
the  underdeveloped  LTC  system,  access  to 
formal, community-based LTC is currently very 
limited. This has adverse effects on the labour 
market,  as  informal  care  responsibilities  are 
preventing carers, mostly women, from taking 
up full and quality paid employment. With the 
support  of  the  European  Social  Fund  Plus, 
Croatia’s  new  LTC  strategy  is  an  important 
milestone  for  future  increased  investment  in 
good  quality,  adequate  and  accessible  home-
based and community-based LTC. 

There  is a  substantial rural-urban  digital 
connectivity  gap  that  Croatia  needs  to 
address  as  a  top  priority.  Low  perceived 
demand  deters  commercial  providers  from 
investing in connectivity infrastructure in areas 
with  low  population  density,  resulting  in  a 
significant  investment  gap  in  underserved 
rural areas.     

(26)  With  unchanged  policy,  public  pension  spending  would 

decline by 1.5 pps of GDP by 2070 (Annex 1). 

21 

 
 
KEY FINDINGS 

To  boost  competitiveness,  sustainability  and 
social fairness, Croatia would benefit from: 

REPowerEU 

•  accelerating the implementation of the 
recovery  and  resilience  plan,  including 
swiftly 
the 
implementing 
taking 
advantage  of  the  opportunities  under  the 
mid-term  review  and  making  optimal  use 
of  EU  instruments,  including  InvestEU  and 
STEP, to improve competitiveness; 

cohesion  policy, 

chapter, 

regulatory 

complexity 

inefficiencies; 

•  nurturing the business environment by: 
(i)  tackling  shortages  of  skilled  labour;  (ii) 
and 
reducing 
administrative 
(iii) 
maintaining momentum in the digitalisation 
of  public  administration  and  government-
to-business 
addressing 
barriers  to  competition  in  the  retail  sector; 
and  (v)  encouraging  actual  or  functional 
mergers of local government units; 

services; 

(iv) 

•  unlocking 

industry/businesses  by 

renewable 
Croatia’s 
potential  to  reduce  electricity  prices 
for 
setting 
connection  fees,  increasing  investments  in 
the 
electricity  grid,  and  addressing 
bottlenecks in the permitting process;  

•  accelerating  the  green  transition  by 
taking  concrete  steps  to  phase  out  fossil 
fuel subsidies; 

(i) 

implementing 

•  strengthening  Croatia’s 
by: 

innovation 
the 
system 
governance  system  set  out  in  the  S3;  (ii) 
improving  coordination  among  relevant 
players; (iii) providing incentives for further 
research 
mergers  of  universities  and 
institutes; 
technology 
(iv) 
transfers;  and 
(v)  ensuring  continuous 
increases 
in  public  and  private  R&D 
expenditure; 

supporting 

•  unlocking  non-bank  finance  by: 

(i) 
ensuring  effective  implementation  of  the 
2030  strategic  framework  for  capital 
(ii)  aligning 
market  development  and; 
policies  with 
financial 
focusing  on  both 
integration  efforts, 
effective 
of 
integration 
infrastructures,  and  incentives  for  investor 
participation, including digitalisation; 

cross-border 

broader 

EU 

•  accelerating 
the  circular  economy 
transition 
the 
supporting 
and 
development of net-zero industry by: (i) 
taking concrete steps to promote circularity 
from design to  the end-of-life of products; 
and  (ii)  designing  a  comprehensive  clean 
tech  policy  framework  that  would  reduce 
administrative  burden,  accelerate  permit-
granting  processes  and  ensure  a  skilled 
workforce; 

through 

resilience 

•  fostering  climate  adaptation  and 
water 
swift 
implementation  and  close  monitoring  of 
sustainable  water-
adaptation 
management  policies  at  all  levels,  more 
systematic  deployment  of  nature-based 
solutions  and  climate-proofing  linked  to 
infrastructures; 
investments 
and increasing insurance coverage; 

in  strategic 

and 

in 

the 

•  making  transport  sustainable  by:  (i) 
investing 
rail  network  and 
sustainable  urban  mobility;  (ii)  promoting 
the  use  of  renewables  in  transport;  (iii) 
incentivising the uptake of electric vehicles; 
and (iv) taking concrete steps to phase out 
fossil fuel subsidies; 

•  easing labour and skills shortages by (i) 
tackling  challenges  within  the  education 
system,  in  particular  with  basic  skills  and 
(ii) better targeting upskilling, reskilling and 
ALMP to vulnerable groups; 

22 

 
 
•  making  housing  more affordable  by:  (i) 
coordinated 
ensuring 
effective 
implementation  of 
the  2030  national 
housing policy plan; and (ii) accelerating the 
modernisation of the cadastre; 

and 

•  to support upward social convergence, 
promoting  more  effective  health  and 
(i) 
social  protection  systems  by: 
addressing shortages of healthcare workers 
and  the  uneven  geographical  allocation  of 
resources;  (ii)  improving  the  adequacy  and 
coverage  of  social  transfers  and  pension 
benefits; and (iii) broadening the availability 
of  adequate  home-  and  community-based 
LTC. 

23 

 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Fiscal 

A1.  Fiscal surveillance and debt sustainability 

A2.  Taxation 

Productivity 

A3. 

Innovation to business 

A4.  Making business easier 

A5.  Capital markets, financial stability and access to finance 

A6.  Effective institutional framework 

Sustainability 

A7.  Clean industry and climate mitigation 

A8.  Affordable energy transition 

A9.  Climate adaptation, preparedness and environment 

Fairness 

A10.  Labour market 

A11.  Social policies 

A12.  Education and skills 

A13.  Social Scoreboard 

A14.  Health and health systems 

Horizontal 

A15.  Sustainable development goals 

A16.  CSR progress and EU funds implementation 

A17.  Competitive regions 

LIST OF TABLES 

General government balance and debt 
Net expenditure growth 
Net expenditure (outturn and forecasts), annual and cumulated deviations vis-à-vis the recommendation 
Defence expenditure and the national escape clause 

A1.1. 
A1.2. 
A1.3. 
A1.4. 
A1.5.  Macroeconomic developments and forecasts 
A1.6. 
A1.7. 
A1.8. 
A1.9. 

General government budgetary position 
Debt developments 
RRF – Grants 
RRF - Loans 

27 

30 

30 

37 

40 

40 

45 

50 

58 

63 

63 

70 

76 

83 

83 

87 

91 

95 

96 

99 

99 

102 

109 

31 
31 
32 
32 
33 
33 
34 
34 
35 

 
 
 
A1.10.  Projected change in age-related expenditure in 2024-2040 and 2024-2070 
A1.11.  Fiscal Governance Database Indicators 
A2.1. 
Taxation indicators 
A3.1. 
Key innovation indicators 
A4.1.  Making Business Easier: indicators. 
A5.1. 
A6.1. 
A6.2. 
A7.1. 
A8.1. 
A9.1. 
A13.1.  Social Scoreboard for Croatia 
A14.1.  Key health indicators 
A16.1.  Selected EU funds with adopted allocations - summary data (million EUR) 
A16.2.  Summary table on 2019-2024 CSRs 
A17.1.  Selection of indicators at regional level in Croatia 

Financial indicators 
Croatia. Selected indicators on administrative burden reduction and simplification 
Key Digital Decade targets monitored through the Digital Economy and Society Index 
Key clean industry and climate mitigation indicators: Croatia 
Key Energy Indicators 
Key indicators for progress on climate adaptation, preparedness and environment 

LIST OF GRAPHS 

A2.1. 
A2.2. 

A2.3. 
A3.1. 
A3.2. 

Tax revenue shares in 2023, Croatia and EU 
Environmental taxes in % of total tax revenues (left) and effective carbon rate in tonnes of CO2 equivalent (right), Croatia 
and the EU, 2023 
Tax wedge for single and second earners, % of total labour costs, 2024 
Top 10% most cited publications in relation to public R&D expenditure 
Patent applications filed under the Patent Cooperation Treaty per billion of GDP (in purchasing power standards/PPS €) in 
2022 

Retail energy price components for household and non-household consumers, 2024 

A4.1.  Making Business Easier: selected indicators. 
A5.1. 
Net savings-investment balance in Croatia 
A5.2. 
International investment position of Croatia 
A5.3. 
Capital markets and financial intermediaries in Croatia 
A5.4. 
Composition of NFC funding as % of GDP 
A5.5. 
Composition of household financial assets per capita and as % of GDP 
A6.1. 
Trust in justice, regional / local authorities and in government 
A6.2. 
Indicators of Regulatory Policy and Governance (iREG) 
A6.3. 
Proportion of laws adopted within 30 days 
A7.1. 
GHG emission intensity of manu-facturing and energy-intensive sectors, 2022 
A7.2. 
Greenhouse gas emissions in the effort sharing sectors, 2005 and 2023 
A7.3.  Municipal waste treatment 
A8.1. 
A8.2.  Monthly average day-ahead wholesale electricity prices and European benchmark natural gas prices (Dutch TTF) 
A8.3. 
A9.1. 
A9.2. 
A10.1.  Key rates: activity, unemployment, long-term unemployment, youth unemployment, NEET 
A10.2.  Young people: in education and training, employment rate, unemployment rate, unemployment-to-population ratio, NEET 
A10.3.  Employment by type (permanent, temporary, self-employed), year-on-year changes 
A11.1.  At-risk-of-poverty or social exclusion rate and its components (AROP, SMSD, LWI) 
A11.2.  At-risk-of-poverty or social exclusion rate, age groups 
A12.1.  Development of underachievement in mathematics, reading and science in PISA 2012 - 2022 (%) 
A14.1.  Life expectancy at birth, years 
A14.2.  Treatable mortality 
A15.1.  Progress towards the SDGs in Croatia 
A16.1.  Distribution of RRF funding in Croatia by policy field 
A16.2.  Distribution of cohesion policy funding across policy objectives in Croatia 
A17.1.  Labour productivity per hour 

Croatia's installed renewable capacity (left) and electricity generation mix (right) 
Direct dependency(1) on ecosystem services(2) of the gross value added generated by economic sector in 2022 
Investment needs and gaps in EUR million, in 2022 constant prices 

35 
36 
38 
44 
49 
56 
59 
60 
69 
75 
82 
95 
97 
105 
106 
110 

37 

38 
39 
41 

42 
46 
50 
51 
51 
53 
54 
58 
58 
59 
65 
66 
67 
70 
70 
73 
79 
80 
83 
84 
86 
87 
88 
94 
96 
96 
99 
103 
103 
109 

28 

 
 
 
LIST OF MAPS 

A17.1.  House prices relative to income, 2019 

112 

29 

 
 
 
 
FISCAL 
ANNEX 1: FISCAL SURVEILLANCE AND DEBT SUSTAINABILITY 

This  Annex  contains  a  series  of  tables  relevant  for  the  assessment  of  the  fiscal  situation  in  Croatia, 
including  how  Croatia  is  responding  to  Council  recommendations  issued  under  the  reformed  Economic 
Governance Framework. 

The  reformed  framework,  which  entered  into  force  on  30  April  2024  (27),  aims  to  strengthen  debt 
sustainability  and  promote  sustainable  and  inclusive  growth  through  growth-enhancing  reforms  and 
priority investments. The medium-term fiscal-structural plans (hereinafter, MTPs or  plans) constitute the 
cornerstone  of  the  framework,  setting  the  budgetary  commitment  of  Member  States  over  the  medium 
term. The latter is defined in terms of net expenditure growth, which is the single operational indicator for 
fiscal surveillance.  

The  assessment  of  the  implementation  of  the  Council  Recommendation  endorsing  the  Croatia’s  plan  is 
carried out on the basis of outturn data from Eurostat and the Commission’s Spring 2025 Forecast and 
taking  into  account  the  Annual  Progress  Report  (APR),  that  Croatia  submitted  on  22  May  2025. 
Furthermore, given Croatia’s request to activate the National Escape Clause (28) following the Commission 
Communication  of  19  March  2025  (29),  the  assessment  also  considers,  as  appropriate,  the  projected 
increase in defence expenditure based on the Commission Spring 2025 Forecast.  

The Annex is organised as follows. First, developments in government deficit and debt are presented 
based  on  the  figures  reported  in  Table  A1.1.  Then,  the  assessment  of  the  implementation  of  the 
Council  Recommendation  endorsing  the  plan  follows,  based  on  the  relevant  figures  presented  in 
Tables A1.2 to A1.9, including data on defence expenditure. The Annex also provides information on the 
cost of ageing and the national fiscal framework. Fiscal sustainability risks are discussed in the Debt 
Sustainability Monitor 2024. (30) 

Developments in government deficit and debt  

Croatia’s government deficit amounted to 2.4% of GDP in 2024. Based on the Commission Spring 2025 
Forecast,  it  is  projected  to  increase  to  2.7%  of  GDP  in  2025.  The  government  debt-to-GDP  ratio  has 
declined  by  more  than  ten  percentage  points  since  2022,  amounting  to  57.6%  at  the  end  of  2024. 
According to the Commission, it is projected to stabilise at above 56% at the end of 2025 and 2026.  

(27)  Regulation (EU) 2024/1263 of the European Parliament and of the Council (EU) on the effective coordination of economic policies 
and on multilateral budgetary surveillance, together with the amended Regulation (EC) No 1467/97 on the implementation of the 
excessive deficit procedure, and the amended Council Directive 2011/85/EU on the budgetary frameworks of Member States are the 
core elements of the reformed EU economic governance framework. 

(28)  On 27 May 2025, Croatia requested to the Commission and to the Council the activation of the National Escape Clause. On this 
basis, the Commission adopted a Recommendation for a Council Recommendation allowing Croatia to deviate from, and exceed, the 
net expenditure path set by the Council COM/2025/607. 

(29)  Communication  from  the  Commission  accommodating  increased  defence  expenditure  within  the  Stability  and  Growth  Pact of  19 

March 2025, C(2025) 2000 final. 

(30)  European Commission (2025) ‘Debt Sustainability Monitor 2024,’ European Economy-Institutional Papers 306. 

30 

 
 
 
 
 
Table A1.1:  General government balance and debt 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

Developments in net expenditure  

The  net  expenditure  (31)  growth  of  Croatia  in  2025  is  forecast  by  the  Commission  (32)  to  be  above  the 
recommended  maximum,  corresponding  to  a  deviation  of  0.6%  of  GDP.  Considering  2024  and  2025 
together,  the  cumulative  growth  rate  of  net  expenditure  is  also  projected  above  the  recommended 
maximum cumulative growth rate, corresponding to a deviation of 0.2% of GDP. The Commission forecast 
differs  from  the  forecast  in  Croatia’s  Annual  Progress  Report  mainly  due  to  different  total  expenditure 
growth  and  EU  funded  expenditure,  but  also  minor  differences  in  estimates  related  to  the  budgetary 
impact  of  discretionary  revenue  measures  and  national  expenditure  on  co-financing  of  programmes 
funded by the Union. 

Table A1.2:  Net expenditure growth 

* The cumulative growth rates are calculated by reference to the base year of 2023. 
Source: Council Recommendation endorsing the national medium-term fiscal-structural plan of Croatia (Rec.), Annual Progress 
Report (APR) and Commission's calculation based on Commission Spring 2025 Forecast (COM). 
Source:  

The assessment of the net expenditure growth and in particular the comparison with the recommended 
net expenditure path considers that Croatia has requested the activation of the national escape clause to 
facilitate transitioning to a higher level of defence expenditure. General government defence expenditure 
in  Croatia  amounted  to  1.0%  of  GDP  in  2021,  1.0%  of  GDP  in  2022  and  1.3%  of  GDP  in  2023.  (33) 
According to the Commission 2025 Spring Forecast, expenditure on defence is projected at 1.4% of GDP in 
2024 and 1.5% of GDP in 2025. Based on current projections for defence spending, the deviation that is 
projected for Croatia is within the flexibility provided by the national escape clause. 

(31)  Net expenditure is defined in Article 2(2) of Regulation (EU) 2024/1263 as government expenditure net of (i) interest expenditure, 
(ii) discretionary revenue measures, (iii) expenditure on programmes of the Union 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-off and other temporary measures.  

(32)  Commission Spring 2025 Forecast, European Economy-Institutional paper 318, May 2025. 

(33)  Eurostat, government expenditure by classification of functions of government (COFOG). 

31 

2024OutturnAPRCOMAPRCOM1General government balance% GDP-2.4-2.9-2.7n.a.-2.62General government gross debt% GDP57.656.956.3n.a.56.4Variables20252026RECAPRCOMRECAPRCOM2024n.a.17.5%17.4%n.a.n.a.n.a.20256.4%7.6%7.9%26.2%26.5%26.6%20264.9%n.a.4.9%32.3%n.a.32.8%AnnualCumulative*Growth rates 
 
                         
 
 
                         
 
 
Table A1.3:  Net expenditure (outturn and forecasts), annual and cumulated deviations vis-à-vis the 
recommendation 

* The growth rate for 2024 is not a recommendation but serves to anchor the base, as the latest year with outturn data when 
setting the net expenditure path is year 2023.  
Source: Commission Spring 2025 Forecast and Commission's calculation.  

Table A1.4:  Defence expenditure and the national escape clause 

Source: Eurostat (COFOG), Commission Spring 2025 Forecast and Commission's calculation. 

32 

2023202420252026OutturnOutturnCOMCOM1Total expenditurebn NAC36.541.145.247.92Interest expenditurebn NAC1.31.31.41.43Cyclical unemployment expenditurebn NAC0.00.00.00.04Expenditure funded by transfers from the EUbn NAC2.51.82.63.05National co-financing of EU programmesbn NAC0.40.20.20.36One-off expenditure (levels, excl. EU funded)bn NAC0.00.00.00.07=1-2-3-4-5-6Net nationally financed primary expenditure (before discretionary revenue measures, DRM)bn NAC32.337.841.143.38Change in net nationally financed primary expenditure (before DRM)bn NAC5.53.32.29DRM (excl. one-off revenue, incremental impact)bn NAC-0.10.30.210=8-9Change in net nationally financed primary expenditure (after DRM) bn NAC5.63.02.011Outturn / forecast net expenditure growth% change17.36%7.9%4.9%12Recommended net expenditure growth*% change18.6%6.4%4.9%13=(11-12) x 7Annual deviationbn NAC-0.40.60.014 (cumulated from 13)Cumulated deviationbn NAC-0.40.20.215=13/17Annual balance% GDP-0.50.60.016=14/17Cumulated balance% GDP-0.50.20.217p.m. Nominal GDP  bn NAC78.185.692.297.4Variables1Total defence expenditure% GDP1.01.01.31.41.51.22of which: gross fixed capital formation% GDP0.10.10.40.50.60.33Flexibility from increases in defence expenditure% GDP0.50.24Cumulated balance after flexibility% GDP-0.3-0.1 
 
                         
 
 
 
                         
 
 
Table A1.5:  Macroeconomic developments and forecasts 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR). 
Note: APR numbers reflect forecasts of inflation measured by the national consumer price index (CPI).  

Table A1.6:  General government budgetary position 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR). 

33 

2024OutturnAPRCOMAPRCOM1=7+8+9Real GDP% change3.93.33.2n.a.2.92Private consumption% change5.63.93.8n.a.3.43Government consumption expenditure% change7.04.13.9n.a.2.94Gross fixed capital formation% change9.95.24.3n.a.3.25Exports of goods and services% change0.92.32.3n.a.2.66Imports of goods and services% change5.34.63.8n.a.3.3Contributions to real GDP growth 7- Final domestic demandpps6.94.44.1n.a.3.48- Change in inventoriespps-0.50.10.0n.a.0.09- Net exportspps-2.5-1.3-0.9n.a.-0.510Output gap% pot GDP2.21.51.4n.a.0.711Employment % change6.13.32.6n.a.1.112Unemployment rate%5.04.74.6n.a.4.513Labour productivity% change-2.0n.a.0.6n.a.1.814HICP % change4.02.93.4n.a.2.015GDP deflator% change5.53.24.3n.a.2.616Compensation of employees per head% change11.27.78.8n.a.5.317Net lending/borrowing vis-à-vis the rest of the world% GDP0.7n.a.1.4n.a.1.620252026Variables2024OutturnAPRCOMAPRCOM1=2+3+4+5Revenue45.646.346.4n.a.46.6of which:2- Taxes on production and imports19.219.119.1n.a.19.13- Current taxes on income, wealth, etc.7.57.47.5n.a.7.54- Social contributions11.512.011.9n.a.12.15- Other (residual)7.47.87.8n.a.7.98=9+16Expenditure 48.049.249.1n.a.49.2of which:9- Primary expenditure46.547.847.6n.a.47.7of which:10- Compensation of employees 13.013.513.3n.a.13.311- Intermediate consumption7.67.57.5n.a.7.512- Social payments15.015.915.5n.a.15.813- Subsidies1.61.41.4n.a.1.314- Gross fixed capital formation5.15.45.4n.a.5.215- Other4.24.14.5n.a.4.616- Interest expenditure1.51.41.5n.a.1.518=1-8General government balance-2.4-2.9-2.7n.a.-2.619=1-9Primary balance-0.8-1.5-1.2n.a.-1.120Cyclically adjusted balance-3.3n.a.-3.3n.a.-2.921One-offs0.00.00.0n.a.0.022=20-21Structural balance-3.3-3.6-3.3n.a.-2.923=22+16Structural primary balance-1.8-2.2-1.8n.a.-1.4Variables (% GDP)20252026 
 
                         
 
 
 
                         
 
 
 
Table A1.7:  Debt developments 

* End of period.  
** The 'snow-ball' effect captures the impact of interest expenditure on accumulated general government debt, as well as the 
impact of real GDP growth and inflation on the general government debt-to-GDP ratio (through the denominator). The stock-flow 
adjustment includes differences in cash and accrual accounting (including leads and lags in Recovery and Resilience Facility grant 
disbursements), accumulation of financial assets, and valuation and other residual effects. 
Source: Commission Spring 2025 Forecast and Commission's calculation (COM), Annual Progress Report (APR). 

Table A1.8:  RRF – Grants 

Source: Annual Progress Report 

34 

2024OutturnAPRCOMAPRCOM1Gross debt ratio* (% of GDP)57.656.956.3n.a.56.42=3+4+8Change in the ratio (pps. of GDP)-4.3-0.7-1.3n.a.0.1Contributions**3Primary balance0.81.51.2n.a.1.14≈5+6+7'Snow-ball' effect-3.9-2.2-2.6n.a.-1.5of which:5- Interest expenditure1.51.41.5n.a.1.56- Real growth effect-2.2-1.8-1.7n.a.-1.57- Inflation effect-3.2-1.8-2.4n.a.-1.48'Stock-flow' adjustment-1.20.00.2n.a.0.520252026VariablesRevenue from RRF grants (% of GDP)20202021202220232024202520261RRF grants as included in the revenue projectionsn.a.0.00.30.70.91.61.62Cash disbursements of RRF grants from EUn.a.1.42.10.90.91.11.220202021202220232024202520263Total current expenditure0.00.00.10.10.30.30.34Gross fixed capital formation0.00.00.00.30.30.70.75Capital transfers0.00.00.20.30.40.70.66=4+5Total capital expenditure0.00.00.20.50.61.41.320202021202220232024202520267Reduction in tax revenue0.00.00.00.00.00.00.08Other costs with impact on revenue0.00.00.00.00.00.00.09Financial transactions0.00.00.00.10.00.10.0Expenditure financed by RRF grants (% of GDP)Other costs financed by RRF grants (% of GDP) 
 
                         
 
 
 
                         
 
 
Table A1.9:  RRF - Loans 

Source: Annual Progress Report 

Cost of ageing  

Total age-related spending in Croatia is projected to decrease from about 20% of GDP in 2024 
to  around  19%  by  2070  (see  Table  A1.10).  The  overall  decrease  by  2070  is  driven  by  pension  and 
education spending, which together more than offset  the expected increase in healthcare spending. The 
pension expenditure-to-GDP ratio would fall by 1.5 pps, of which 0.7 pps by 2040, from 10.3% of GDP in 
2024  to  8.8%  as  of  2060. As  a  result,  age-related spending  would  be  7  pps of  GDP  lower  than  the  EU 
average in 2070.  

Public healthcare expenditure is projected at 5.7% of GDP in 2024 (below the EU average of 
6.6%) and is expected to increase by 0.4 pps by 2040 and by a further 0.3 pps by 2070 (34). 
Public expenditure on long-term care is projected at 0.5% of GDP in 2024 (well below the EU average of 
1.7%) and is expected to increase by 0.1 pp of GDP by 2040 and by a further 0.1 pp of GDP by 2070. The 
projected increase is due to an ageing population but is relatively low due to underdeveloped long-term 
care services (35).  

Table A1.10:Projected change in age-related expenditure in 2024-2040 and 2024-2070 

Source: 2024 Ageing Report (EC/EPC). 

(34)  Key performance characteristics, recent reforms and investments of the Croatian healthcare system are discussed in Annex 14 

‘Health and health systems’. 

(35)  The adequacy and quality of the Croatian long-term care system are covered in Annex 11 ‘Social policies’.  

35 

Cash flow from RRF loans projected in the Plan (% of GDP)20202021202220232024202520261Disbursements of RRF loans from EUn.a.0.00.00.00.90.92.72Repayments of RRF loans to EUn.a.n.a.n.a.n.a.n.a.n.a.n.a.20202021202220232024202520263Total current expenditure0.00.00.00.00.00.00.04Gross fixed capital formation0.00.00.00.10.40.60.95Capital transfers0.00.00.00.00.20.60.66=4+5Total capital expenditure0.00.00.00.10.61.21.420202021202220232024202520267Reduction in tax revenuen.a.n.a.n.a.n.a.n.a.n.a.n.a.8Other costs with impact on revenuen.a.n.a.n.a.n.a.n.a.n.a.n.a.9Financial transactionsn.a.n.a.n.a.n.a.n.a.n.a.n.a.Expenditure financed by RRF loans (% of GDP)Other costs financed by RRF loans (% of GDP)HR19.8-0.70.40.1-0.4-0.619.2HREU24.30.50.30.4-0.30.925.2EUHR19.8-1.50.80.1-0.5-1.118.7HREU24.30.20.60.8-0.41.325.6EUage-related expenditure 2024 (% GDP)change in 2024-2040 (pps GDP) due to:age-related expenditure 2040 (%GDP)pensionshealthcarelong-term careeducationtotalage-related expenditure 2024 (% GDP)change in 2024-2070 (pps GDP) due to:age-related expenditure 2070 (%GDP)pensionshealthcarelong-term careeducationtotal 
 
                         
 
 
     
 
 
National fiscal framework 

The  Croatian  Independent  Fiscal  Institution  (IFI),  the  Fiscal  Policy  Committee  (FPC),  has  a 
narrow  mandate  and  still  has  room  to  improve  its  capacity  and  independence.  Currently,  FPC 
members are faced with a significant challenge in balancing their dual roles as they simultaneously work 
full-time for their mother institutions. Due to significant legal obstacles, the FPC finds it difficult to attract 
staff  with  an  appropriate  profile  to  its  Secretariat:  The  FPC  can  only  hire  civil  servants  of  Croatian 
nationality recruited via a civil service exam and the pay level is not competitive. On this basis, the FPC 
has yet to develop any significant outreach activities, as underlined by the lack of reference to external 
communication  in  the  tasks  of  the  President.  The  FPC  is  too  recent  to  have  undergone  any  external 
reviews.  Some  interaction  with  the  parliament  has  taken  place  but  the  policy  dialogue  with  the 
government needs to be developed. 

Wide-ranging  reforms,  accelerated  through  the  recovery  and  resilience  plan,  have  the 
potential  to  improve  the  public  investment  management  system.  A  new  long-term  strategy,  the 
national  development  strategy  to  2030  “Croatia  2030”,  was  launched  in  2017  and  accompanied  by  a 
clear monitoring process (36). In January 2024, a new standardised methodology for project assessments 
for all budgetary and extrabudgetary users entered into force and is monitored centrally by the Ministry of 
Finance. Implementation has also been strengthened by new reporting guidelines for line ministries and a 
digital monitoring system shared by all line ministries.  

Table A1.11:Fiscal Governance Database Indicators 

The Country Fiscal Rule Strength Index (C-FRSI) shows the strength of national fiscal rules aggregated at the country level based 
on i) the legal base, ii) how binding the rule is, iii) monitoring bodies, iv) correction mechanisms, and v) resilience to shocks. The 
Medium-Term Budgetary Framework Index (MTBFI) shows the strength of the national MTBF based on i) coverage of the 
targets/ceilings included in the national medium-term fiscal plans; ii) connectedness between these targets/ceilings and the 
annual budgets; iii) involvement of the national parliament in the preparation of the plans; iv) involvement of independent fiscal 
institutions in their preparation; and v) their level of detail. A higher score is associated with higher rule and MTBF strength. 
Source: Fiscal Governance Database 

(36)  Belu Manescu, C. (2024) “The Planning of Public Investments in the EU Member States: Long-Term Strategy, Selection and 

Budgeting Issues”, ECFIN Discussion Paper no 2013. 

36 

2023CroatiaEU AverageCountry Fiscal Rule Strength Index (C-FRSI)13.4614.52Medium-Term Budgetary Framework Index (MTBFI)0.720.73 
 
     
 
 
 
 
ANNEX 2: TAXATION 

This  annex  provides  an 
indicator-based 
overview  of  Croatia’s  tax  system.  It  includes 
information on: (i) the tax mix; (ii) competitiveness 
and  fairness  aspects  of  the  tax  system;  and  (iii) 
tax collection and compliance. 

Croatia’s  recent  personal-income-tax  reform 
will  further  lower  the  already-relatively-
moderate  tax  burden  on  labour.  Overall,  tax 
revenues  were  equivalent  to  37.2%  of  Croatian 
gross  domestic  product  (GDP)  in  2023,  slightly 
below  the  EU  average  of  39%  (see  Table A2.1). 
Croatia’s  tax  mix  already  relies  strongly  on 
consumption taxes, which accounted for 49.6% of 
total  tax  revenues  in  2023,  far  above  the  26.9% 
EU  average  (see  Graph  A2.1).  Taxes  on  labour 
accounted  for  only  34.8%  of  total  tax  revenues, 
well below the EU average of 51.2%. These taxes 
on  labour  were  primarily  derived  from  social-
security  contributions.  Following  the  personal-
took  effect  on 
income-tax 
1 January 2025,  the  maximum  tax  rate  that 
municipalities  and  cities  can  impose  on  personal 
incomes will be  reduced to 20-23% for the lower 
tax bracket and 30-33% for the higher tax bracket. 
The  higher  tax  bracket  will  also  start  at  higher 
incomes than before. Moreover, the basic personal 
allowance and the allowance for dependent family 
members are being increased. However, EUROMOD 
simulations show that the reforms will not reduce 
inequality as measured by the Gini coefficient. (37) 

reform,  which 

Graph A2.1: Tax revenue shares in 2023, Croatia 
and EU 

Source: Data on Taxation Trends, Directorate-General for 
Taxation and Customs Union 

To  incentivise  return  migration,  Croatia  has 
also introduced a preferential tax regime. The 
new  regime,  effective  starting  in  2025,  exempts 
taxpayers from personal income tax for five years 
if  they  have  previously  resided  abroad  for  a 
continuous period of at least two years. Population 
ageing  and  emigration  are  both  putting  pressure 
on labour-supply and dependency ratios in Croatia 
(see also Annex 7). 

fairness  while 

Croatia  reformed  its  property-tax  system  to 
improve 
strengthening 
revenues. Property taxes accounted for only 0.9% 
of GDP in 2023, compared with an EU average of 
1.9%.  Recurrent  property 
taxes,  which  are 
considered  among  the  taxes  least  detrimental  to 
growth,  made  up  only  0.5%  of  GDP  in  2023  (EU: 
0.9%). Effective starting in 2025, the reform aims 
to  rein  in  rising  house  prices  fuelled  by  buoyant 
growth  in  short-term  rentals  for  tourists,  which 
weigh on housing affordability (see also Annex 8). 
Therefore,  owner-occupied  housing  and  housing 
under  long-term  leases  are  exempted  from  the 
property  tax.  The  reform  also  gives  municipalities 
discretion  to  set  rates  at  between  EUR 0.60  and 
EUR 8.00  per  square  metre  per  year.  In  addition, 
the  flat  tax  per  bed  in  short-term  tourist  rentals 
was significantly increased, with the specific range 
depending  on  the  respective  region’s  score  in  the 
tourism-development index. 

Croatia has scope to reduce tax expenditures 
to 
improve  environmental  sustainability. 
Environmental  taxation  revenues  in  Croatia  are 
above  the  EU  average,  and  were  equivalent  to 
3.3%  of  GDP  2023  (EU  average:  2%  of  GDP). 
However,  Croatia’s  effective  carbon  rate,  which 
indicates  how  emissions  are  priced  across  the 
economy (38), stood at EUR 62.30 per tonne of CO2 
equivalent  in  2023,  below  the  EU  average  of 
EUR 84.80 per tonne of CO2 equivalent (see Graph 
A2.2).  Croatia’s  energy  excise  duties  are  among 
the lowest in the EU in certain areas, including for 
diesel  for  commercial  road  transport.  Diesel  for 
agricultural  use  is  fully  exempted  from  excise 
duties. In addition, vehicle-circulation taxes are not 
linked  to  emissions,  and  not  due  for  owners  of 
vehicles older than 10 years, despite older vehicles 
typically  emitting  more  CO2  and  other  pollutants. 

(37)  Estimations  were  performed  by  the  European  Commission, 
Joint  Research  Centre,  with  the  EUROMOD  tax-benefit 
microsimulation model 

(38)  The  effective  carbon  rate  is  the  sum  of  fuel  excise  taxes, 
carbon  taxes  and  ETS  permit  prices.  Electricity  excise  taxes 
are  not  included  as  they  do  not distinguish between  energy 
sources and their carbon content. 

37 

51.226.921.934.849.615.6Tax revenue shares in 2023, Croatia (outer ring) and EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital 
 
       
 
 
 
Table A2.1:  Taxation indicators 

(1) Forward-looking effective tax rate (KPMG).       
(2) A higher value indicates a stronger redistributive impact of taxation. 
(3) The effective carbon rate is the sum of fuel excise taxes, carbon taxes and emissions trading system (ETS) permit prices. 
Electricity excise taxes are not included as they do not distinguish between energy sources and their carbon content. 
(*) EU-27 simple average. 
(**)  For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in 
the EU - 2024 report,  https://data.europa.eu/doi/10.2778/2476549.  
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, OECD 

Moreover,  company-car  expenses,  including  for 
cars  with 
internal  combustion  engines,  are 
deductible up to 100% if they are deemed to be a 
salary component. 

Graph A2.2: Environmental taxes in % of total tax 
revenues (left) and effective carbon rate in 
tonnes of CO2 equivalent (right), Croatia and the 
EU, 2023 

Source: Taxation Trends Data, DG TAXUD; OECD 

Croatia’s  recovery  and  resilience  plan  (RRP) 
addresses  challenges  in  waste  management, 
including by introducing a landfilling tax. Only 
36%  of  municipal  waste  was  recycled  in  2023, 
and  Croatia  is  not  on  track  to  meet  the  2025 
recycling  and  the  2035  landfilling  targets  (see 
Annex  7).  Croatia’s  RRP  includes  measures  to 
invest  in  wastewater  infrastructure  and  reduce 
landfilling, including by: (i) improving waste sorting 
and recycling; and (ii) introducing a landfill fee. The 
landfill fee was adopted at the end of 2024, with 
the  amount  of  the  fee  set  to  gradually  rise 
between 2025 and 2029. 

The  redistributive  effect  of  Croatia’s  tax-
benefit  system  is  limited,  and  the  relatively 
high  tax  wedge  for  second  earners  may 
discourage them from working or looking for 
a  job.  In  2023,  Croatia’s  tax-benefit  system 
reduced  income  inequality 
less  than  the  EU 
average.  The  reduction  in  income  inequality  as 
measured  by  the  Gini  coefficient  was  6.3  points, 
which was below the EU average of 7.7 points. The 
progressivity of labour taxes in Croatia was similar 

38 

5.54.01.70.91.70.237.747.20.03.724.633.90102030405060708090012345678910Croatia -environmentaltaxesEU -environmentaltaxesCroatia - effectivecarbon rateEU - effectivecarbon rateEnergy taxesTransport taxesResource/pollution taxesFuel excise taxesCarbon taxesETS permit priceHRMedian (EU-27)2010202120222023202420102021202220232024Tax structureTotal taxes (including compulsory actual social contributions) (% of GDP)36.336.737.237.237.840.239.739.0Taxes on labour (% of GDP)15.012.812.713.019.820.520.120.0of which, social security contributions (SSC, % of GDP)11.710.910.710.612.913.012.712.7Taxes on consumption (% of GDP)17.018.818.418.410.911.210.910.5of which, value added taxes (VAT, % of GDP)11.213.113.213.46.87.37.47.1Taxes on capital (% of GDP)4.35.16.15.87.18.58.78.5Personal income taxes (PIT, % of GDP)3.43.03.23.58.69.69.49.3Corporate income taxes (CIT, % of GDP)1.92.23.22.92.22.93.23.2Total property taxes (% of GDP)1.01.00.90.91.92.22.11.9Recurrent taxes on immovable property (% of GDP)0.60.60.60.51.11.11.00.9Environmental taxes (% of GDP)3.83.93.43.32.52.42.12.0Effective carbon rate in EUR per tonne of CO2 equivalentsNANANA62.3NA86.0NA84.8Tax wedge at 50% of average wage (single person) (*)na31.331.333.331.233.931.831.531.531.8Tax wedge at 100% of average wage (single person) (*)na38.739.440.440.740.939.939.940.240.3Corporate income tax - effective average tax rates (1) (*)16.514.814.814.821.319.319.118.9Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)9.26.86.26.38.68.27.97.7Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)11.89.435.532.6VAT gap (% of VAT total tax liability, VTTL) (**)10.912.06.67.0CroatiaEU-27Progressivity & fairnessTax administration & complianceBy tax baseSome tax types 
 
  
 
 
  
 
up  to  EUR 1 million  in  annual  revenues)  make  up 
around  90%  of  corporate  income  taxpayers,  and 
pay a reduced 10% rate. A range of tax incentives 
are  available,  with  corporate 
income-tax-rate 
reductions  up  to  100%, depending  on the  type  of 
investment,  the  number  of  jobs  the  investment 
creates, and the size of the company. The take-up 
of tax incentives for R&D, which are governed by a 
specific regime, is low, which may be partly linked 
to  the  complex  procedures  required  to  claim  the 
incentive  (see  also  Annex  1).  This  regime  is  being 
reformed  under  Croatia’s  RRP  to  make  it  more 
increasing  deductible 
including  by 
attractive, 
amounts and simplifying procedures. 

To  reduce  the  high  perceived  administrative 
burden, Croatia is taking steps under its RRP 
to  simplify  tax-compliance  processes.  Total 
enterprise compliance costs for small to medium-
sized  enterprises  in  Croatia  are  estimated  to  be 
above  the  EU  average.  However,  outstanding  tax 
arrears are relatively low and declining (at 9.4% in 
2022,  only  5.6%  of  which 
is  considered 
collectable). The value added tax (VAT) compliance 
gap  stood  at  12.0%  in  2022,  above  the  EU 
average  of  7%,  an  increase  of  1.1  pps  compared 
to 2021. Croatia has not yet put in place pre-filled 
tax  returns,  and  the  rate  of  personal-income-tax 
returns  filed  online  (77.6%  in  2022)  lags  behind 
the  EU  average  (82.3%).  Croatia’s  RRP  includes 
setting  up  a  new  IT  system  and  digitalising  tax-
collection procedures, which should help make tax 
collection  more  efficient,  while  rolling  out  e-
invoicing  for  non-cash  payments  could  also  help 
reduce tax evasion. Moreover, the implementation 
of RRP measures to reduce administrative burdens 
is  progressing,  including  by  streamlining  charges 
and digitalising various procedures. 

to the EU average. In 2024, the labour tax wedge 
(39) was similar to the EU  average for both single 
people  at  various  income  levels  and  only  slightly 
higher than the EU average for second earners at 
67% of the average wage whose spouses earn the 
average  wage  (see Graph  A2.3).  However, the  tax 
wedge for second earners was higher than the tax 
wedge  for  single  people  at  the  same  wage  level 
and this difference was more pronounced than for 
the  EU  average.  This  indicates  inferior  work 
incentives  for  second  earners,  often  women.  The 
general  tax  allowance  for  dependent  family 
members contributes to this effect. 

Graph A2.3: Tax wedge for single and second 
earners, % of total labour costs, 2024 

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

Even  though  the  corporate-tax  burden  in 
Croatia  is  relatively  low,  the  tax  framework 
is  not  fully  conducive  to  innovation  and 
forward-looking 
sustainable 
rate,  which 
average  effective  corporate-tax 
indicates 
for 
burden 
investment (40), was 14.8% in 2023, below the EU 
average of 18.9%. The top statutory tax rate stood 
at  18%,  below  the  EU  average.  Small  firms  (with 

expected 

growth. 

The 

the 

tax 

(39)  The  tax  wedge  is  defined  as  the  sum  of  personal  income 
taxes  and  employee  and  employer 
social-security 
contributions  net  of  family  allowances,  expressed  as  a 
percentage of total labour costs (the sum of the gross wage 
and social-security contributions paid by the employer). 

(40)  Effective  average  tax  rates  measure  the  effect  of  taxation 
on investment projects earning economic rents. This indicator 
is based on a comparison of the net present value of pre-tax 
and  post-tax  cash  flows.  It  is  used  to  analyse  investment 
decisions at the extensive margin, e.g. when a multinational 
enterprise  decides  to  locate  a  plant  in  one  of  many 
jurisdictions (for the first time) or  to make one of a number 
of technology choices. 

39 

31.236.640.743.541.62025303540455050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - HRSingle earner - EU averageSecond earner -  HRSecond earner -  EU average 
   
 
 
PRODUCTIVITY 
ANNEX 3: INNOVATION TO BUSINESS  

The 

2024 

European 

Croatia  is  emerging  as  an  innovator  with 
rising  R&D  investment,  but  its  fragmented 
research  landscape  continues  to  hinder  the 
functioning  and  quality  of  its  public  science 
base. 
Innovation 
Scoreboard (41)  notes  that  Croatia’s  innovation 
performance  has  grown  faster  than  the  EU 
average  since  2017.  Croatia’s  R&D  intensity  (42) 
has increased rapidly (1.39% in 2023 vs 0.95% in 
2018) thanks to major investments from both the 
recovery  and  resilience  plan  (RRP)  and  cohesion 
policy but remains below the EU average (2.24%). 
Further improvements hinge on continuous growth 
of  R&D 
the 
lifespan  of  the  RRP,  strengthened  research  and 
innovation (R&I) governance and most importantly, 
a  reduction  in  fragmentation  of  R&I  performing 
institutions. Croatia has made progress in business 
digitalisation  but  certain  areas,  particularly  the 
digitalisation 
and  medium-sized 
enterprises  (SMEs),  still  need  attention  to  fully 
align with the EU Digital Decade targets (43). 

investment  particularly  beyond 

small 

of 

Science and innovative ecosystems 

Further  increases  in  public  R&D  expenditure 
are  needed  to  reach  the  EU  average.  Public 
R&D  expenditure  as  %  of  GDP  has  grown 
substantially  between  2017  and  2020  (0.44%  vs 
0.65%).  However,  since  then  the 
level  has 
stagnated,  slightly  below  the  EU  average  (0.63% 
vs 0.72% in 2023). Investments from the RRP and 
cohesion  policy  are  contributing  significantly  to 
publicly funded R&I programmes. Going forward, it 
will be crucial to ensure that the higher investment 

(41)  2024 European Innovation Scoreboard, country profile: 

Croatia https://ec.europa.eu/assets/rtd/eis/2024/ec_rtd_eis-
country-profile-hr.pdf. The scoreboard 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). 

(42)  Defined as gross domestic expenditure on R&D as 

percentage of GDP. 

(43)  The Digital Decade policy programme sets out a pathway for 

the EU’s digital transformation, including concrete 
commitments from Member States to commonly achieve 
objectives (e.g. competitiveness, resilience, sovereignty) and 
digital targets by 2030. 

levels  in  R&I  are  sustained  and  further expanded, 
particularly with the RRP ending in 2026. 

improved, 
While  R&D  expenditure  has 
scientific  outputs  are  still  modest.  Scientific 
excellence is low, as illustrated by the share of the 
country’s scientific publications within the top 10% 
most  cited  scientific  publications  worldwide  as  a 
percentage  of  total  scientific  publications  of  the 
country. The share has increased but is well below 
the  EU  average  (4.6%  vs  9.6%),  pointing  to 
remaining  weaknesses  in  the  R&I  system.  One 
contributing factor is the significant fragmentation 
of  public  research  bodies  and  faculties  operating 
with  substantial  autonomy  from  their  universities. 
Croatia 
research 
currently  has  25  public 
institutions and 8 universities, the latter consisting 
of  around  110  faculties,  underlining  the  need  for 
consolidation.  The  performance-based  funding 
model  allocates  a  share  of  public  R&D  funding 
based on institutional achievements but has yet to 
prove  sufficient  in  addressing  fragmentation (44). 
The  model  should  be  adjusted  to  incentivise  the 
consolidation  of  institutions  in  order  to  improve 
impact  of  public  R&D  expenditure (45) 
the 
(see Graph  A3.1),  potentially  based  also  on  a 
the 
of 
comprehensive 
fragmentation 
concrete 
recommendations, to be implemented in the short 
to medium term. 

underpinning 

assessment 

expert 

(44)  European Commission (2023): Policy Support Facility (PSF) to 
support early stages of innovation and science-business 
linkages in Croatia. 

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

40 

 
 
 
 
 
 
Graph A3.1: Top 10% most cited publications in 
relation to public R&D expenditure 

Business innovation  

innovation 
by 

performance 
private 

Croatia’s 
is 
R&D 
growing 
supported 
investment,  but  innovation  outputs  remain 
weak overall. Business enterprise expenditure on 
R&D  as a percentage of GDP has almost doubled 
since 2015 but remains well below the EU average 
(0.76%  vs  1.49%  in  2023).  Croatia’s  private  R&D 
investment is historically concentrated in mid-tech 
sectors  such  as  automotive  and  engineering. 
Although  there  are  some  positive  examples  of 
growing  high-tech  companies,  Croatia’s  research 
capacity  in  the  private  sector  remains  weak 
overall (49).  This  is  visible  in  the  low  number  of 
researchers employed by business per thousand of 
the active population (1.5 in Croatia vs EU average 
of 5.7 in 2023) (50). It is also reflected in the weak 
innovation  outputs,  with  the  number  of  patent 
applications  filed  under  the  Patent  Cooperation 
Treaty per billion of GDP (0.5 vs EU average of 2.8 
in 2022, see also Graph A3.2) at a very low level. 
Croatia  is  revising  its  R&D  tax  incentive  scheme 
based  on  an  evaluation  conducted  as  part  of  the 
RRP.  It  aims  to  double  the  current  tax  base 
reduction  for  R&D  project  costs  (51),  with  the 
increasing  R&D  expenditure  and 
objective  of 
innovation  activity  in  the  private  sector.  To  align 
with 
the 
scheme’s  administrative  burden  must  be  reduced, 
while better accommodating the specific needs of 
start-ups. Additionally, Croatia would benefit from 
participating  in  the  unitary  patent  system  as  it 
offers  key  advantages  in  promoting  innovation 
and  boosting  competitiveness (52),  and  offering 
support 
through  more 
innovation-friendly regulation, e.g. by developing a 
framework for regulatory sandboxes. 

to  young  companies 

recommendations, 

the  evaluation’s 

Source: Based on Eurostat / Science Metrix 

bodies 

government 

Further  improvements  in  R&I  performance 
will  require  close  collaboration  between 
relevant 
and 
strengthened  administrative  capacities.  With 
its  new  smart  specialisation  strategy  (S3)  from 
2023,  Croatia  has  streamlined  R&I  governance 
compared  to  the  previous  programming  period. 
Nevertheless,  implementation  of  the  new  R&I 
governance  has  been  significantly  delayed,  with 
the  governmental  decrees  for  establishing  the 
National Innovation Council, the intergovernmental 
working  group  and  the  S3  delivery  unit  to  be 
adopted only in early 2025. It is of key importance 
to  rigorously  implement  the  governance  model  in 
order  to 
improve  collaboration  between  the 
as 
relevant  ministries 
recommended in external reports (47). Also, to deal 
with  the  multitude  of  ongoing  R&I  initiatives  and 
ensure  collaboration,  ministries  and 
funding 
agencies  require  the  necessary  human  resources 
to implement reforms and investments in a timely 
and proper fashion (48). 

agencies (46), 

and 

(46)  Ministry of Science, Education, and Youth; Ministry of 

Regional Development and European Union Funds; Ministry 
of Economy; HAMAG-BICRO, Croatian Science Foundation. 

(47)  See among others European Commission (2023): Policy 

Support Facility (PSF) to support early stages of innovation 
and science-business linkages in Croatia. 

(49)  The size of the ICT sector is around the EU average (5.26% 

vs 5.5% in gross value added in 2021), and its R&D business 
expenditure amounts to 34.27% of total R&D expenditure. 
See Eurostat, ICT sector size and R&D in ICT sector, all data 
from 2021. 

(50)  Eurostat. 

(51)  Basic research from 200% to 400%, industrial research from 
150% to 300%, experimental development from 125% to 
250% and feasibility study from 150% to 300%.  

(52)  Croatia is expected to sign the Unified Patent Court 

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

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

Agreement, or, as a first step, join the enhanced cooperation 
framework. 

41 

BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISE2468101214160.10.30.50.70.91.1Top 10% highly-cited publicationsPublic expenditure on R&D (as % of GDP), 2023 
       
 
 
Graph A3.2: Patent applications filed under the 
Patent Cooperation Treaty per billion of GDP (in 
purchasing power standards/PPS €) in 2022 

Source: Patstat 

is  steadily 

The adoption of digital technologies by firms 
in  Croatia 
improving,  with 
progress  supported  by  national  measures 
and  EU  funding.  In  2023,  Croatia  outperformed 
the  EU  average  in  cloud  computing  adoption 
(40.7%  vs  38.9%)  and  achieved  the  EU’s  second-
highest  adoption  of  data  analytics  (51.7%  vs 
33.2%).  However,  according  to  2024  data,  the 
country  remains  well  below  the  EU  average  on 
basic digital  intensity  for SMEs  (63.5% vs  72.9%) 
and just below the EU average in advanced digital 
technologies  like  artificial  intelligence  (11.3%  vs 
12.6%).  To  further  drive  digital  transformation, 
Croatia  is  making  use  of  its  RRP.  Key  measures 
include  EUR 27.3  million 
in  grants  for  SME 
digitalisation  and  EUR 9.95  million  for  innovation 
through  digitalisation  vouchers.  Four  European 
Digital  Innovation  Hubs  were  also  established  in 
to  help  businesses  adopt  advanced 
2023 
technological 
implement 
technologies 
innovations.  Croatia 
its  digital 
is 
infrastructure  and 
interoperability  through  EU 
initiatives  like  the  Connecting  Europe  Facility 
Digital  programme  and  the  European  Digital 
Infrastructure  Consortia.  These  efforts  support 
cross-border  data  sharing,  5G  deployment  and 
cloud services. 

improving 

and 

research 

underdeveloped 

Business-science  linkages  are improving, but 
consistency in dedicated support measures is 
pivotal.  These  linkages  have  been  hampered  by 
and 
an 
insufficiently  targeted  programmes  that  promote 
applied 
academic-private 
collaboration.  However,  there  are  some  positive 
signals that indicate improvement. The number of 
public-private  co-publications  as  a  share  of  total 
publications  is  above  the  EU  average  (9.1%  vs 
7.7%), with collaboration between businesses and 

research 

base 

and 

not 

only 

These 

transfer  were  published 

academia  benefiting  from  a  range  of  dedicated 
RRP  and  European  Regional  Development  Fund 
programmes (53). 
target 
collaborative  research  but  also  aim  to  promote 
entrepreneurship,  e.g.  with  the  programme  ‘Start-
up/spin  off  companies  of  young  researchers’. 
Additionally, the national guidelines for technology 
and  knowledge 
in 
2023 (54)  and,  combined  with  more  available 
funding  for  technology  transfer  offices,  provide 
better  guidance  and 
for 
commercialising  research. 
It  will  be  vital  to 
rigorously  assess  the  effectiveness  of  the  new 
policy mix in place, while ensuring funding stability 
in  support (55).  Soft  support 
and  consistency 
measures  such  as  conferences  and  training 
courses  have  also  proven  to  be  successful  in 
connecting  relevant  stakeholders  and  should  be 
continued (56).  

financial  means 

Financing innovation 

Venture  capital  availability  in  Croatia  is 
improving  but  is  still  below  the  EU  average. 
The availability of venture capital (as a percentage 
of GDP) is increasing (57) but remains below the EU 
average (0.028% vs 0.078%). The value of annual 
private  equity  relative  to  nominal  GDP  dropped 
from  0.65%  in  2022  to  0.03%  in  2023  (EU 
average in 2023: 0.41%) (58). Recent reports show 
that Croatia’s financing for innovation remains too 
limited,  and  young  companies  in  particular  find  it 
difficult to obtain funding (59). This is also reflected 

(53)  For example targeted scientific research programmes with 
the aim of supporting collaborative industrial research 
projects. 

(54)  The guidelines contain among other points information on 
intellectual property protection and provide support with 
licensing: https://mzom.gov.hr/vijesti/predlosci-za-transfer-
tehnologije/5975. 

(55)  JRC (2023): Strategic evaluation of the technology transfer 

and IPR protection systems of Bulgaria, Croatia and Romania. 

(56)  European Commission (2023): Policy Support Facility (PSF) to 
support early stages of innovation and science-business 
linkages in Croatia. 

(57)  Croatian start-ups are also supported through the EIF/ERDF 
‘Croatian Venture Capital Initiative 2’: Link and Vesna 
Venture Capital, providing EUR 50 million in venture capital 
backed by the European Investment Fund. 

(58)  European Commission, 2024, Overview of CMU Indicators – 

2024 Update, Indicator 11 

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

42 

012345678SEFIDKDENLATFREU averageBESIITLUIEESHUMTLVPTCZCYEEELHRSKPLLTBGRO 
      
 
Investment  Fund 

in  the  low  number  of  start-ups  and  unicorns 
backed  by  venture  capital  overall (60).  Since  2023, 
start-ups  have  also  been  supported  by  the 
European 
‘Croatian  Venture 
Capital  Initiative  2’ (61)  and  more  specifically  the 
Vesna  Deep  Tech  Venture  Fund,  providing  around 
EUR 40 million  to  deep  tech  start-ups (62).  The 
Croatian  RRP  also  includes  measures  to  support 
the  financing  of  start-ups (63).  While  this  is  a 
promising  signal,  more  work  is  needed  to  bring 
venture capital funding closer to the EU average. 

Innovative talent 

the 

OECD  average  in  creative thinking,  and  only  2.1% 
from  grades  4-8  exhibit  an 
of  students 
‘entrepreneurial  profile’ (64).  Croatia  increased  its 
efforts  to  improve  entrepreneurship  education  by 
introducing 
of 
entrepreneurship  in the  school  education  curricula 
in  2019.  It  also  issued  further  guidance  on 
implementation 
in  2024.  However,  challenges 
remain  due  to  the  lack  of  teacher  preparedness, 
programmes  and 
professional 
practical activities.  

cross-curricular 

development 

topic 

to 

face 

The  growing  number  of  STEM  graduates  is 
encouraging, but continuous effort is needed 
to  build  the  talent  pool  in  R&I.  While  Croatia 
significant  demographic 
continues 
challenges, including population decline and labour 
shortages,  the  number  of  STEM  graduates  is 
encouraging  (see  Annex  12).  The  number  of  new 
graduates in science and engineering per thousand 
of  the  population  aged  25-34  and  those  in  the 
field of computing are close to the EU average and 
increased  between  2017  and  2023.  Further 
improvements  might  follow  the  reforms  and 
investments  included  in  the  RRP.  These  aim  to 
improve  the  quality  of  R&D  careers  in  STEM  and 
ICT fields and investments that support the career 
development  of  young  researchers,  boost  the 
mobility  of 
talent  abroad  and  encourage 
experiences in the private sector. While all this will 
further  help  build  a  stronger  pool  of  innovative 
talent,  continuous  support  is  required  in  light  of 
demographic challenges. 

Despite  increasing  efforts,  there  is  room  to 
improve  and  mainstream  entrepreneurship 
education 
students’ 
entrepreneurial  spirit.  According  to  the  OECD 
Programme  for  International  Student  Assessment 
(PISA)  2022,  Croatian  students  scored  below  the 

increase 

and 

(60)  The World Bank (2023): Croatia – Digital Diagnostic. 

(61)  €80 million for Croatian start-ups through new EIF-managed 

investment programme. 

(62)  https://www.eif.org/what_we_do/equity/news/2024/croatian-
and-slovenian-researchers-gain-innovation-support-with-49-
million-in-eif-led-financing.htm. 

(63)  HR-C[C111]-I[R5-I1]  Investment  in  equity  and  quasi-equity 

financial instruments. 

(64)  Ristić Dedić, Z., Jokić, B., Matić, J., Košutić, I. i Šabić, J. (2017). 
Kakve  su  navike  učenja,  obrasci  pisanja  (prepisivanja) 
domaćih  zadaća  i  percepcija  meritokracije?  -  Populacijska 
perspektiva:  Krapinsko-zagorska,  Međimurska,  Varaždinska  i 
Zagrebačka  županija;  Serija  „O  učenju  2015./2016.“  Zagreb: 
Institut za društvena istraživanja u Zagrebu. 

43 

 
 
 
 
Table A3.1:  Key innovation indicators 

(1) EU average for the last available year or the year with the largest number of country data. 
Source: Eurostat, DG JRC, OECD, Science-Metrix (Scopus database), Invest Europe, European Innovation Scoreboard 

44 

R&D intensity (gross domestic expenditure on R&D as % of GDP)0.740.841.241.241.421.39:2.243.45Public expenditure on R&D as % of GDP0.40.440.650.660.650.63:0.720.64Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 2.93.44.64.6:::9.612.3Researchers (FTE) employed by public sector (Gov+HEI) per thousand active population33.54.14.144.3:4.2:International co-publications as % of total number of publications32.84043.943.644.143.2:55.939.3Business enterprise expenditure on R&D (BERD) as % of GDP0.340.410.590.580.770.76:1.492.70Business enterprise expenditure on R&D (BERD) performed by SMEs as % of GDP0.130.160.230.260.3::0.40.3Researchers employed by business per thousand active population0.711.31.51.81.5:5.7:Patent applications filed under the Patent Cooperation Treaty per billion GDP (in PPS €)0.70.50.50.40.5::2.8:Employment share of high-growth enterprises measured in employment (%)10.915.2512.3::::12.51:SMEs with at least a basic level of digital intensity% SMEs (EU Digital Decade target by 2030: 90%)::::57.79:63.4572.91:Data analytics adoption% enterprises (EU Digital Decade target by 2030: 75%):::::51.68:33.17:Cloud adoption% enterprises (EU Digital Decade target by 2030: 75%):::34.57:40.7338.5538.86:Artificial intelligence adoption% enterprises (EU Digital Decade target by 2030: 75%):::8.74:7.8911.7613.48:Public-private scientific co-publications as % of total number of publications6.68.58.88.68.39.1:7.78.9Public expenditure on R&D financed by business enterprises (national) as % of GDP0.0270.0080.030.0260.017::0.050.02Total public sector support for BERD as % of GDP0.0350.010.0530.0660.073::0.2040.251R&D tax incentives: foregone revenues as % of GDP0.0300.0130.0040.0030.001:0.1020.141BERD financed by the public sector (national and abroad) as % of GDP 0.0050.010.0390.0630.07::0.1000.110Venture capital (market statistics) as % of GDP, total (calculated as a 3-year moving average)0.020.0050.0100.030.040.03:0.08:Seed stage funding share (% of total venture capital)0.00023.66414.9019.9121.58:7.29:Start-up stage funding share (% of total venture capital)85.9910067.22036.9833.8927.79:44.02:Later stage funding share (% of total venture capital)14.0109.11448.1246.2150.63:48.69:New graduates in science and engineering per thousand population aged 25-3416.314.3181817.1::17.6:Graduates in the field of computing per thousand population aged 25-342.63.73.53.83.8::3.6:Academia-business collaboration2024EU average (1)USAHeadline indicator20212020Croatia2012201720222023Science and innovative ecosystemsR&D investment & researchers employed in businessesInnovation outputsDigitalisation of businessesPublic support for business innovationFinancing innovationInnovative talent 
 
 
   
 
 
ANNEX 4: MAKING BUSINESS EASIER 

concern,  affecting 

The  business  environment  in  Croatia  has 
shown  signs  of  improvement,  yet  several 
challenges  persist.  Labour  shortages  are  a 
primary 
investment  and 
business  growth.  Regulatory  and  administrative 
burdens  continue  to  constrain  businesses  more 
often  than  in  other  Member  States,  including  a 
number  of  regulated  professions,  yet  some 
progress  has  been  made.  Integration  into  the 
single  market  is  slightly  below  the  EU  average. 
Simultaneously,  Croatia  has  fostered  a  promising 
entrepreneurial  environment  and  continues  to 
address  its  challenges,  including  by  digitising  the 
business  registration  system  or  initiatives  for 
innovation procurement. 

Economic framework conditions 

There  are  several  obstacles  facing  the 
business 
environment,  with  workforce 
shortage  ranking  top.  When  asked  about  the 
main obstacles to investment, Croatian firms most 
often point to availability of skilled staff (91% vs 
EU  77%,  see  Annex 10),  uncertainty  about  the 
future (82% vs EU 79%) and energy costs (75% vs 
EU  77%,  see  Annex 8) (65).  Labour  shortages  are 
increasingly  affecting  Croatian 
industry,  with 
42.6%  of  surveyed  firms  reporting  that  these 
constraints  limited  their  production  activity  in 
2024,  compared  to  38.3%  in  2023  (see  Table 
A4.1).  By  contrast,  at  the  EU  level,  the  trend  is 
decreasing,  with  20.2%  in  2024  and  23.3%  in 
2023  (see  Table  A4.1).  Firms  operating  in  the 
service  sector,  which  generates  75%  of  gross 
value  added,  faced  a  labour  force  scarcity,  with 
33% of businesses reporting that labour shortages 
limit  their  business  activities  in  the  short  term. 
Croatia  has  taken  several  measures  to  integrate 
the inactive working age population into the labour 
force,  such  as  expanding  its  network  of  Lifelong 
Career  Guidance  Centres  (CISOK)  and  introducing 
greater  salary  co-financing  through  the  Posao+ 
programme.  To  enhance 
investment,  Croatia 
adopted a national  strategy and an action plan in 
December 2024 under its Recovery and Resilience 
Plan (RRP). 

Infrastructure  holds  business 
investment 
back  in  Croatia  slightly  more  than  the  EU 
Investment 
to 
overall.  According 

the  EIB 

Survey (65),  43%  of  firms  in  Croatia  reported 
digital infrastructure as an obstacle to investment 
(EU  41%),  with  8.8%  considering  it  a  major 
obstacle  (EU  13.4%).  The  Digital  Decade  report 
emphasised  an  increase  in  very  high-capacity 
network  (VHCN)  connectivity  between  2022  and 
2023  in Croatia  from  61%  to  67.8%, though it is 
still  below  the  2023  EU  level  (78.8%,  see  Table 
A4.1) (66).  The  VHCN  connectivity  in  rural  areas  is 
particularly  low  (at  25.5%  in  2023  vs  55.6%,  EU 
average).  Fibre  to  the  premises  (FTTP)  coverage 
improved significantly, rising from 54% in 2022 to 
62.1%  in  2023,  closing  in  on  the  EU  average  of 
64%  (see  Table  A4.1).  Connectivity  infrastructure 
for  5G  was  much  higher,  at  83.4%,  though  with 
more modest year-on-year growth and still below 
the  EU  average  (89.3%,  see  Table  A4.1),  while 
approximately  40%  of  the  3.4-3.8  GHz  spectrum 
band has been made available for use, well below 
the EU average of 50.6%. As a part of its recovery 
and  resilience  plan  (RRP),  Croatia  has  allocated 
EUR 207.5 million to VHCN connectivity, alongside 
measures targeting under-served areas. 

The  resilience  of  digital  infrastructures  and 
cybersecurity  awareness  in  enterprises  in 
Croatia  remain  a  challenge.  The  number  of 
businesses  that  experienced  ICT  security  incidents 
leading  to  unavailability  of  ICT  services  due  to 
attack  from  outside  (e.g.  ransomware  attacks, 
denial of service attacks) significantly increased in 
Croatia,  up  from  1.3%  in  2022  to  3.3%  in  2024, 
approaching  the  EU  average  of  3.4% (67).  While 
88.3%  of  enterprises  deployed  some  ICT  security 
measures  (below  the  EU  average  of  92.8%),  only 
39%  of  enterprises  made  their  employees  aware 
of  their  obligations  in  ICT  security-related  issues, 
significantly below the EU average (60%) (68). 

Although  payment  delays  in  Croatia  are 
shorter  than  for  the  EU  overall,  they  are 
more  common  for  SMEs  than 
in  other 
Member  States.  The  average  business-to-
business  payment  delay  in  Croatia  in  2024  was 
slightly below the EU average (see Table A4.1). In 
the public sector, it was the lowest in the EU (9.1 

(65)  European  Investment  Bank,  2024,  EIB  Investment  Survey  – 

EU Overview. 

(66)  European Commission, 2024,  Digital Decade Country Report 

- Croatia. 

(67)  Eurostat, 2024, isoc_cisce_ic (ICT security in enterprises) 

(68)  Eurostat, 2024, isoc_cisce_ra 

45 

 
 
 
 
vs  15.2  days,  see  Table  A4.1).  However,  in  2024 
slightly  more  Croatian  SMEs  experienced  late 
payments than the EU average, both from private 
(50.9%  vs  EU  47.9%,  see  Graph  A4.1)  and  public 
entities  (18.3%  vs  EU  16.6%,  see  Graph  A4.1). 
According to the EU Payment Observatory, there is 
no 
relationship  between  company  size  and 
proportion of late payments in Croatia, contrary to 
the usual positive correlation between the two (69). 
to  equity,  Croatian 
Despite 
businesses reported fewer funding difficulties (see 
Annex 5). 

limited  access 

Graph A4.1: Making Business Easier: selected 
indicators. 

OECD  Product  Market  Regulation  indicators  on 
administrative  and  regulatory  burden  in  Croatia 
improved  between  2018  and  2023 (70).  The 
administrative burden appeared to be closing in on 
the  EU  average,  although  still  above  it.  In  2024, 
surveyed  companies  in  Croatia  reported  that  they 
perceived the labour market (65% vs EU 62%) and 
business regulation (68% vs EU 66%) as obstacles 
to investment, slightly over the EU average (71). For 
business  regulation,  27.7%  consider  it  a  major 
obstacle (vs EU 24.5%, see Graph A4.1). Under its 
RRP,  Croatia  adopted  a  fifth  action  plan  for 
administrative  burden  in  March  2024,  that  is 
expected  to  save  EUR  364  million  in  key  areas 
such  as 
tourism,  pension  system, 
taxation, 
agriculture and transportation.  

Croatia  offers  a  promising  environment  for 
entrepreneurship. Entrepreneurship conditions in 
Croatia  are  on  a  par  with  the  rest  of  the  EU (72). 
The  proportion  of  people  starting  and  managing 
new  businesses  in  2018-2022  exceeded  the  EU 
average  (12%  vs  EU  7%).  Over  70%  of  surveyed 
adults  in  Croatia  self-assessed  that  they  had  the 
knowledge, expertise, and skills necessary to start 
a business (73). Croatia contributes to an attractive 
business  environment 
for  entrepreneurs  by 
measures  such  as  implementing  a  digitalised 
business registration system called START, as part 
of  the  RRP (72).  Public  policies  under  the  2030 
national  development  strategy  aim  to  support 
entrepreneurship,  covering  measures  like  grants, 
loans  and  guarantees  to  SMEs  and  startups,  as 
well  as  strengthening  digital  hubs.  The  RRP  also 
includes  measures  to  provide  further  training, 
consultancy,  and  other  support  for  entrepreneurs 
(see Annex 3). 

Share of (1) enterprises, (2) average intra-EU exports and 
imports in GDP, (3) firms, (4) SMEs. 
Sources: (1) EIB IS, (2) Eurostat, (3) ECFIN BCS, (4) SAFE 
survey. 

Single market 

Regulatory and administrative 
barriers 

The  integration  of  Croatian  firms  into  the 
single  market  lags  slightly  behind  the  EU 
average.  Croatia’s  integration  into  the  single 
market  was  measured  at  38.3%  of  GDP  in  2023 

The  administrative  and  regulatory  burden 
has  been  lowered  during  the  last  five  years 
but  still puts  a  strain on  Croatian firms.  The 

(70)  OECD, 2024, Product Market Regulation Indicators 

(71)  European  Investment  Bank,  2024,  EIB  Investment  Survey  – 

EU Overview. 

(72)  OECD, 2023, The Missing Entrepreneurs 

(69)  European  Commission,  2024,  EU  Payment  Observatory  – 

(73)  Global  Entrepreneurship  Monitor,  2024,  GEM  2023/2024 

Annual Report 2024 

Global Report 

46 

50.918.38.238.327.747.916.61041.624.50102030405060from private entitiesfrom public entitiesMaterial shortages as afactor limiting productionEU Trade IntegrationRegulation as a majorobstacle to investment(4) Late payments(3) Shortages(2) SingleMarket(1) RegulatoryburdenShare (%)EU27HR 
      
 
 
(vs  41.6%  EU  average,  see  Table  A4.1).  The 
integration of goods was right on par with the EU, 
at  28%.  For  services,  Croatia  was  in  eighth  place 
out  of  27  Member  States, 
the 
importance  of  its  tourism  sector.  The  figure  was 
slightly  below  average  at  13.2%  (EU  15%),  since 
there  is  a  number  of  Member  States  that  export 
services at an exceptionally high level. As for other 
EU Member States, Croatia’s barriers to trade were 
lower than the OECD average (74). 

reflecting 

strong. 

law  has 

lengthened  but 

The  average  delay 

The average time to transpose directives into 
the 
national 
performance  of  Croatia’s  SOLVIT  centre 
remains 
in 
transposing directives in Croatia was 19.3 months 
in  2024 (75).  This  is  higher  than  in  2023  (16.8 
months)  and  above  the  current  EU  average  (11.9 
months).  The  percentage  of  directives  not 
transposed  has  increased  and  is  now  slightly 
above  the  EU  average,  while  the  percentage  of 
directives  incorrectly  transposed  has  decreased 
and remains in line with the EU average (see Table 
A4.1). Croatia is performing well on infringements, 
with  a  below-average  number  of  pending  single 
market  cases  (see  Table  A4.1)  and  the  sixth 
shortest  duration  of  infringement  proceedings  in 
the  EU  in  2024 (75),  though  down  from  the 
shortest  duration in  2023.  Croatia  handled 27  EU 
rights  resolution  cases  within  the  SOLVIT  rights 
resolution  system  in  2024,  almost  double  the  15 
of  the  previous  year (74).  The  resolution  rate  has 
decreased but stayed above EU average (see Table 
A4.1). 

report (76), 

restrictions  on 

Croatia  is  making  progress  in  addressing 
regulatory  restrictions  on  professions,  but 
some  require  further  action.  According  to  an 
OECD 
regulated 
professions in Croatia were below both the EU and 
OECD average, except for notaries and real estate 
agents.  Notaries  in  Croatia  face  the  highest 
restrictions  in  the  EU.  The  fees  and  charges 
applicable  to  this  profession,  as  well  as  the 
regulation 
legal  form  of  their 
business,  are  particularly  stringent.  For  lawyers, 
architects,  tax  advisers,  engineers  and  tourist 
appear 
guides, 

imposing  the 

restrictions 

several 

still 

the  RRP,  Croatia  has  committed 

disproportionate.  Croatia  is,  however,  undertaking 
reforms  to  lift  regulatory  barriers  in  services. 
Under 
to 
simplifying  or  removing  at  least  50  regulatory 
requirements  for  professional  services.  According 
to Croatia, the Third Action Plan will be adopted by 
mid-May 2025.  

increase  of 

Regulatory  barriers  are  high  in  the  retail 
sector.  A  widening  gap  between  the  consumer 
price index  and the producer price indexes  (77) for 
food  products  has  been  observed  over  the  past 
years.  Consumers  are  reacting  to  price  increases 
through  supermarket  boycotts.   As  a  response  to 
the  price 
the 
government  has  implemented  a  price  cap  on  70 
are 
essential 
susceptible to undermine free access by traders to 
the  market  in  conditions  of  effective  competition 
and disturb the entire supply chain (79). In addition, 
the  OECD  Product  Market  Regulation (80)  reports 
high  regulatory  barriers  to  entry  and  competition 
in retail in Croatia.  

Such  measures 

food  products, 

goods (78). 

Public procurement 

Public  procurement  in  Croatia  is  relatively 
competitive.  Direct  awards  represented  6%  of 
the  awards  in  2024,  slightly  less  than  the  EU-27 
average  of  7%  (see  Table  A4.1).  The  share  of 
single  bids  is  also  below  the  EU-27  average  with 
27%  against  32%  (see  Table  A4.1).  According  to 
the  OECD  PMR,  Croatia  has  one  of  the  most 
procurement 
competition-friendly 
frameworks (76).  Nevertheless,  there  is  room  for 
improvement.  Indeed,  the  World  Bank  reported  a 
lack of mechanisms to promote SME participation 
in bidding for public contracts (81). Additionally, one 
of the key  challenges in advancing green, socially 
responsible,  and  innovative  procurement  is  the 
need  for  greater  professionalisation  of  public 
procurement  staff (82).  Croatia  reported  a  number 

public 

(77)  Eurostat,  Harmonised 

Index  of  consumer  prices   and 

domestic market- producer price index 

(78)  Government  of  the  Republic  of  Croatia,  2025,  List  of  70 

products with capped prices. 

(74)  OECD, 2024, Product Market Regulation Indicators 

(79)  CJEU, case C-557/23, SPAR v Hungary, paragraph 47. 

(75)  European  Commission,  2024,  Single  Market  Scoreboard  – 

(80)  OECD,  2024,  Product  Market  Regulation  Country  note  - 

Croatia 

Croatia. 

(76)  OECD, 2024, Product Market Regulation Indicators 

(81)  World Bank, 2024, Business Ready economy profile: Croatia. 

47 

 
 
 
of  measures  to  address  limitations  that  SMEs 
might  face,  published  SME-specific  guidelines  on 
their  Public  Procurement  Portal,  and  organised 
targeted  workshops (82).  Croatia  also  requires 
contracting  authorities  to  pay  subcontractors, 
which  is  likely  to  encourage  SME  participation,  at 
least  as  subcontractors,  in  public  procurement 
in 
procedures. 
public 
procurement  procedures  has  been 
increasing. 
Croatia  is  also  currently  developing  the  2026-
2030  national  strategic  framework  for 
the 
development of public procurement in the Republic 
of  Croatia  2026-2030.  The  compulsory  reporting 
of  data  on  strategic  public  procurement  as  from 
2025  might  enhance  both  monitoring  and  further 
development of the strategic public procurement.  

participation 

SME 

Croatia  is  working  to  advance  innovation 
procurement.  Croatian  authorities  highlighted 
several  challenges 
to  making  progress  on 
innovation procurement, including insufficient staff 
capacity  and  training (82).  As  part  of  the  RRP,  in 
initiated  a  project  entitled 
2023  Croatia 
‘Supporting 
Innovation 
of 
Procurement  in  Croatia’,  which  had  the  primary 
improving 
goal 
contracting  authorities' 
capabilities 
in  managing  public  procurement 
processes  involving  innovative  solutions.  Further 
from  additional 
improvements 
solutions,  such  as  a  national  strategy,  action plan 
and targets for procurement of innovation. 

Implementation 

come 

could 

of 

17 

For 

included 

procurement. 

from  a  more 
Croatia  would  benefit 
systematic  approach  to  socially  responsible 
public  procurement.  Socially  responsible  public 
procurement in Croatia tends to be linked to green 
public 
procurement 
categories, Croatia has implemented specific green 
public procurement criteria and targets that are to 
and 
be 
procedures (83).  Some  social  clauses  seem  to  be 
well-known  and  used  to  a  certain  extent,  such  as 
the  possibility  of  reserving  contracts  for  specific 
economic  operators.  Croatia  would  benefit  from 
adopting  a  more  systematic  approach  to  socially 
responsible  public  procurement, 
the 
creation  of  specific  guidelines,  sharing  of  best 
practice,  targeted  training,  and  broader  data 
collection efforts. 

documentation 

through 

the 

in 

(82)  European Commission, 2024, Article 83 – Public Procurement 

monitoring reporting. 

(83)  Croatia, Official Gazette No 137/2024. 

48 

 
 
Table A4.1:  Making Business Easier: indicators. 

*Change in methodology in 2024: reporting late payments from public and private entities separately. 
**The 2024 data on single bids is provisional and subject to revision. Due to missing data, the EU average of direct awards data is 
calculated without Romania. 
Sources: (1) ECFIN BCS, (2) Eurostat, (3) EIB IS, (4) Digital Decade Country reports, (5) Intrum Payment Report, (6) SAFE survey, 
(7) OECD, (8) up to 2023: Single Market and Competitiveness Scoreboard, 2024: Public procurement data space (PPDS). 

49 

POLICY AREA20202021202220232024EU-27 average8.413.324.812.28.210.014.217.834.338.342.620.21.01.51.61.51.42.310.79.010.17.18.813.4-52.361.567.8-78.8-38.753.962.1-64.0-33.882.583.4-89.3Regulatory environment38.838.727.829.227.724.516.111.613.412.914.315.624.410.015.217.49.115.1from public or private entities in the last 6 months50.748.039.532.6--from private entities in the previous or current quarter----50.947.9from public entities in the previous or current quarter----18.316.634.438.645.140.938.341.6-----0.0501.21.41.10.60.90.81.81.41.21.10.90.910010092.993.088.984.926.022.020.022.019.024.42521232327-765567.0CroatiaINDICATOR NAMEInvestment climateShortagesMaterial shortage, firms facing constraints, %1Labour shortage, firms facing constraints, %1Vacancy rate, vacant posts as a % of all available ones (vacant + occupied)2InfrastructureTransport infrastructure as an obstacle to investment, % of firms reporting it as a major obstacle3VHCN coverage, %4FTTP coverage, %45G coverage, %4Reduction of regulatory and administrative barriersImpact of regulation on long-term investment, % firms reporting business regulation as a major obstacle3Late paymentsPayment gap - corporates B2B, difference in days between offered and actual payment5Payment gap - public sector, difference in days between offered and actual payment5Share of SMEs experiencing late payments, %*6Single MarketIntegrationEU trade integration, % (Average intra-EU imports + average intra EU exports)/GDP2EEA Services Trade Restrictiveness Index7ComplianceTransposition deficit, % of all directives not transposed8Conformity deficit, % of all directives transposed incorrectly8SOLVIT, % resolution rate per country8Number of pending infringement proceedings8Competition and transparency in public procurementSingle bids, % of total contractors**8Direct awards, %**8Public procurement 
 
 
 
 
       
 
ANNEX 5: CAPITAL MARKETS, FINANCIAL STABILITY AND ACCESS TO FINANCE 

Graph A5.1: Net savings-investment balance in 
Croatia 

Source: AMECO 

Consistent with its annual net lending to the 
rest  of  the  world,  the  net  international 
investment  position  (NIIP)  of  Croatia  has 
been increasing. As of Q3 2024, total assets on 
foreigners reached 103% of GDP, up from 68% at 
end-2017,  while  liabilities  to  foreigners  stood  at 
124%  of  GDP,  resulting 
in  a  negative  net 
international  investment  position  (NIIP)  equivalent 
to -22% of GDP (see Graph A5.2). The net stock of 
foreign direct investment, which has been broadly 
stable,  stood  at  -48.3%  of  GDP  as  of  Q3  2024. 
This  stability  confirms  the  status  of  Croatia  as  a 
capital 
for 
destination 
investments.  Hence,  the  increase  in  the  NIIP  has 
been driven by the growing net stocks of portfolio 
investment,  which  reached  19%  of  GDP  as  of  Q3 
2024,  and  of  other  investments,  which  stood  at 
4% of GDP. Part of the latter’s increase is due to 
the  structural  change  in  the  stock  of  official 
foreign  exchanges  reserves,  which  declined  from 
above 40% of GDP prior to euro adoption to 3% as 
of  Q3  2024.  Thus,  the  Croatian  economy  appears 
to be well integrated in international capital flows, 
notably  as  a  stable  recipient  of  foreign  direct 
investments. 

long-term 

country 

the  backdrop  of 

Against 
investing  a 
significant  part  of  its  domestic  savings 
abroad, 
the  Croatian  economy  has  a 
dominant banking sector, and a rather small 
capital market. Croatian firms have little access 
to the savings of households, because direct retail 
participation  in  capital  markets  is  low,  despite 
some  progress  in  the  level  of  both  direct  and 
indirect  household  investment.  At  the  same  time, 
the  investment  policies  of  domestic  institutional 
investors  are  quite  conservative.  Government 
bonds  account  for  the  bulk  of  the  institutional 
investor’s  portfolio,  despite  a  noticeable  several-
year trend of diversification through an increase in 
stock  and 
(in 
particular  for  pension  funds,  where  amendments 
to  pension  acts  allow  for  greater  investment 
diversification).  The  undeveloped  capital  markets 
reduce  the  exit  options  for  private  equity  and 
venture  capital 
the 
development of a local venture and growth capital 
market,  further  compounding  the  lack  of  funding 
sources  for 
innovation,  a  key  element  for 
competitiveness. 

investors  and  hamper 

investment  fund 

investments 

Availability and use of domestic 
savings  

The  Croatian  economy  invests  a  significant 
part  of  its  net  savings  abroad.  In  the  last 
decade,  the  private  savings  ratio,  net  of  fixed 
capital  consumption,  fluctuated  around  its  ten-
year  average  of  6.6%  of  GDP,  reaching  a 
maximum  of  8.9%  in  2020  (see Graph  A5.1).  The 
net  private  investment  ratio,  which  measures  the 
net  contribution  of  the  private  sector  to  capital 
accumulation  in  the  country,  exhibited  a  ten-year 
average of 2.4% of GDP and reached a maximum 
of  5.7%  in  2022.  During  the  same  period  the 
government 
balance  was 
somewhat  volatile,  showed  an  average  deficit 
equivalent  to  1.9%  of  GDP.  Thus,  the  moderate 
positive  balance  between  net  domestic  savings 
and  net  investment,  together  with  the  rather 
limited government deficit, resulted in structurally 
positive  net  lending  by  Croatia  to  foreigners  that 
averaged  2.3%  of  GDP,  with  a  peak  of  3.9%  in 
2019.  Hence,  a  significant  portion  of Croatian  net 
savings,  i.e.  after  accounting  for  the  investments 
that are necessary to merely maintain the existing 
capital  structure  of  the  economy,  is  used  to 
finance projects abroad. 

budget,  whose 

50 

-10-50510152025302017201820192020202120222023% of GDPPrivate investment, netLending to the governmentPrivate saving, netPrivate saving, grossBorrowing from the rest of the world 
 
  
 
 
 
 
Graph A5.2: International investment position of 
Croatia 

Source: ECB 

Structure of the capital markets and 
size of the financial sector 

(see 

67%) 

average: 

The  Croatian  economy  has  a  small  domestic 
capital  market.  The  market  capitalisation  of 
listed  equity  reached  29.6%  of  GDP  at  end-2023 
A5.3). 
(EU 
Characteristically, 
corporations 
(NFCs)  accounted  for  75%  of  that  capitalisation, 
while financial corporations accounted for 25% of 
that capitalisation. The outstanding volume of debt 
securities  reached  46.5%  of  GDP  at  end-2023. 
Bonds  issued  by  the  government  accounted  for 
almost 94% of the total bonds at end-2023.  

non-financial 

Graph 

Graph A5.3: Capital markets and financial 
intermediaries in Croatia 

Source: ECB, EIOPA, AMECO. 

Even  though  the  financial  sector  in  Croatia 
remains  dominated  by  banks,  non-bank 
financial intermediaries are growing as well. 
The  banking  sector  is  the  largest  segment  of  the 

51 

financial  services,  accounting  for  103.7%  of  GDP 
in 2023, which remains significantly below the EU 
average  of  253.4%.  The  foreign-owned  banks 
accounted  for  87.5%  of  total  banking  sector 
assets in 2023. The banking sector also has a very 
high  level  of  concentration  with  the top  five  MFIs 
representing  82.1%  of  the  sector  in  2023  (EU 
average:  51.1%).  The  pension 
fund  assets 
accounted  for  27.6%  of  GDP  at  end-2023,  which 
makes pension funds the second largest  segment 
of  the  financial  system  after  the  banking  sector 
(84). The insurance sector assets accounted for only 
7.8%  of  GDP  at  end-2023  (EU  average:  54.8%). 
The  total  assets  of  investment  funds  accounted 
for  4.4%  of  GDP 
in  2023  (see  section  on 
institutional investors). 

Resilience of the banking sector 

Croatian  banking  sector 
remains  well 
capitalised  and  profitable.  The  total  capital 
in  Q3-2024  (EU 
adequacy  ratio  was  21.2% 
average: 20.1%), underlining the robustness of the 
banking sector, with a common equity tier 1 ratio 
of  20.4% 
in  Q3-2024  (EU  average:  16.6%). 
Banking-sector  profitability  remained  high  in  Q3-
2024,  with  return  on  equity  of  17%  (EU  average: 
10%),  mainly  due  to  growth  in  interest  income 
(see  Table  A5.1).  To  further  strengthen  the 
resilience  of  the  banking  sector  the  Croatian 
National  Bank  (HNB)  held  the  countercyclical 
capital buffer rate of 1.5% as of 30 June 2024. In 
December  2024,  HNB  has  also  reset  an  existing 
Systemic Risk Buffer of 1.5% on all institutions as 
of  1  January  2025.    Croatian  banks’  aggregate 
Minimum Requirement for Own Funds and Eligible 
Liabilities  (MREL)  rate  stood  at  33.9%  of  risk 
weighted  assets  at  end-2023.  As  of  1  January 
2024,  all  banks  in  Croatia  meet  their  final  MREL 
targets  against  an  average  MREL  binding  target 
(including CBR) of 30.5% TREA (including CBR) (85). 
Croatia  has  published  information  on  its  national 
bail-in mechanic in line with EBA guidelines (86).  

(84)  HANFA, 2023, Financial Stability, December 2023, p.27. 

HANFA reported that total assets of pension funds reached 
30.7% of GDP at the end of September 2023. 

(85)  EBA MREL Dashboard - Q4 2023, p.13. CBR (Combined 

Buffer Requirement) and TREA (Total Risk Exposure Amount). 

(86)  ) EBA, Guidelines to resolution authorities on the publication 

of their approach to implementing the bail-in tool.  

-150-100-5005010015020172018201920202021202220232024-Q3% of GDPForeign Direct Investment, AssetsPortfolio Investment, AssetsOther investment, AssetsOfficial reserve assetsForeign Direct Investment, LiabilitiesPortfolio Investment, LiabilitiesOther investment, LiabilitiesNIIPNon-financial corporationsFinancial corporationsNon-financial corporationsMFIsInsurance  and pension fundsOther financialsGovernmentMFIsPension fundsInsurance corporationsInvestment funds020406080100120 Listed equity                Bonds                       Assets by sector% of GDP 
  
   
 
Croatian  banks  have  continued  to  reduce 
their  non-performing  loans  (NPLs).  The  NPL 
ratio  decreased  further  to  2.4%  in  Q3-2024,  the 
lowest level since 2015 (EU average: 1.9%). Asset 
quality  has  improved  for  both  corporates  and 
households: the share of NPLs of NFCs went down 
from  4.5%  in  2023  to  4.2%  in  Q3-2024,  and  for 
households  from  4.1%  in  2023  to  3.8%  in  Q3-
2024. Similarly, the NPL coverage ratio was 68.6% 
in  Q3-2024  (EU  average:  42.1%),  which  reflects 
banks’ ability to absorb any future losses. 

The liquidity of the banking system is stable 
and  high.  The  liquidity  of  credit  institutions, 
measured  by  the  liquidity  coverage  ratio  (LCR), 
stood  at  224%  at  the  end  of  July  2024,  and  the 
net stable funds ratio (NSFR) was 169% at the end 
of  June  2024 
indicators  are  at 
exceptionally  high  levels,  which  indicates  stable 
funding  sources  and  significant  amounts  of  liquid 
assets. 

(87).  Both 

Resilience of the non-bank financial 
intermediaries 

Croatia’s  insurance  sector  is  solvent,  highly 
concentrated, and non-life insurance focused 
(due to motor vehicle liability insurance). The 
sectoral solvency ratio was 229% in 2024 (88). The 
TOP5 market participants hold around 67% of the 
insurance market based on gross written premium. 
In  2024,  there  were  14  insurance  companies 
operating  on  the  market,  out  which  two  provide 
only  life  insurance,  four  provide  only  non-life 
insurance,  while  eight  provide  both  life  and  non-
life  insurance  (89).  The  total  premium  collected  in 
2024 amount to EUR 1.9 billion, of which EUR 1.6 
billion (82.6%) is related to non-life insurance (90) 
premium,  and  EUR  335.1  million  (17.4%)  to  life 
insurance  premium  (91).  On  an  annual  basis,  total 

(87)  NBS, 2024.  Macroprudential Diagnostics, Oct. 2024, p.10 

(88)  HANFA, 2024, Monthly Market Review, Dec. 2024, p.34 

premium collected in 2024 rose by 9.9%, with the 
increase  in  non-life  insurance  premium  totalling 
11.2%,  and  the  rise  in  life-insurance  premium 
reaching  4.2%  (92).  According  to  EIOPA’s  2024 
dashboard,  Croatia  is  the  European  country  with 
insurance 
the 
protection  gap  score  for  natural  catastrophes  (in 
particular, 
and 
wildfires) (93).  

fourth-highest 

earthquakes, 

aggregated 

floods, 

for 

(14.8% 

The  pension  fund  market  (the  second  and 
third pillar) is highly concentrated. At the end 
of  December  2024,  net  assets  of  mandatory 
pension  funds  (MPFs)  amounted  to  EUR  23.2 
billion 
increase  y-o-y)  and  voluntary 
pension  funds  (VPFs)  EUR  1.4  billion  (14.8% 
increase  y-o-y)  (94).  At  the  end  of  2024,  the  total 
assets  of  the  12  mandatory  pension  funds 
operating under the second pillar and 29 voluntary 
pension funds operating under the third pillar were 
managed  by  only  five  pension  companies,  which 
exposes  the  overall  pension  system  based  on 
capitalised savings to a high concentration risk (95). 
At  the  end  of  2024  the  number  of  pension  fund 
members  reached  2.8  million,  with  2.3  million 
second  pillar  members  and  466,766  third  pillar 
members (96). 

Sources of business funding and the 
role of banks 

Firms  in  Croatia  rely  more  than  the  EU 
average on funding from banks and less than 
the  EU  average  on  capital  markets.  More 
specifically,  at  the  end  of  2023,  bank  finance 
through  loans  constituted  31.6%  of  all  funding 
sources  for  Croatian  non-financial  corporations 
(NFCs), which was above the EU average of 27.2%. 
Listed  shares  and  bonds  represented  only  16.9% 
of  firms’  funding  sources,  which  was  a  much 
smaller share than the EU average of 23.8%. The 
overall  level  of  NFC  funding  in  Croatia  was 
is 
equivalent 

to  127.6%  of  GDP,  which 

(89)  HANFA, 2024, Monthly Market Review, Dec. 2024, p.30 

(92)  HANFA, 2024. December 2024 Monthly Report. 

(90)  Non-life  insurance  is  dominated  by  motor  vehicle  liability 
insurance  (36.1%),  followed  by  insurance  of  road  vehicles 
(18.7%),  other  property  insurance  lines  (9.3%),  and  insurance 
against  fire  and  natural  disasters  (9.2%).  Source:  HANFA, 
2024. December 2024 Monthly Report. 

(93) EIOPA, 2024. Dashboard on Insurance Protection for Natural 

Catastrophes in a Nutshell. 

(94)  HANFA, 2024. December 2024 Monthly Report. 

(95) HANFA, 2024, Monthly Market Review, Dec. 2024, p.11 

(91)  HANFA, 2024. December 2024 Monthly Report. 

(96) HANFA, 2024. December 2024 Monthly Report. 

52 

 
 
 
substantially 
230.3% of GDP (see Graph A5.4). 

lower  than  the  EU  average  of 

than 

Croatian businesses depend more on internal 
financing 
their  European  peers. 
According to the 2024 EIB Investment Survey, the 
investment  needs  of  70%  of  Croatian  firms  re-
covered  by  internal  funding,  compared  to  an  EU 
average  of  66% (97).  At  the  same  time,  78%  of 
Croatian  firms  believe  that  their 
investment 
activities over the last three years were about the 
right  amount  (close  to  the  EU  average  of  80%), 
while  18%  of  Croatian  firms  believe  that  their 
investment activities were too little (above the EU 
average  of  14%).  This  suggests  that  there  is  no 
material  financing  gap  relative  to  investment 
demand (98). 

Graph A5.4: Composition of NFC funding as % of 
GDP 

Corporate  borrowing  is  expected  to  pick  up 
slightly.  The  October  2024  bank  lending  survey 
conducted  by  the  Croatian  National  Bank  (HNB) 
found that, during Q3-2024, corporate demand for 
loans  remained  unchanged  for  large  corporations 
and for long-term loans (and somewhat increased 
for  small  and  medium-sized  enterprises  (SMEs)). 
According  to  the  same  lending  survey,  banks 
expected  demand  to  slightly  increase  for  large 
corporations and long-term loans in Q4-2024 (100). 

Capital markets and the participation 
of retail investors 

stood 

market 

capitalisation 

Croatia's  capital  market  is  evolving  but  
requires  further  development  to  broaden 
access to finance. . The main stock exchange in 
Croatia  is  the  Zagreb  Stock  Exchange  (ZSE).  Its 
total 
at 
EUR 50.3 billion  as  of  December  2024,  of  which 
stocks  accounted  for  57.5%,  bonds  37%,  money 
market  instruments  5.3%,  and  exchange-traded 
funds  (ETFs)  0.1% (101).  Moreover,  the  number  of 
listed  stocks  dropped  from  87  in  2023  to  78  in 
2024 (102).  Recognising  the  importance  of  cross-
border trading, the ZSE fully acquired the Ljubljana 
Stock Exchange in 2015, and partially acquired the 
North Macedonian Stock Exchange (in 2019 and in 
2022). 

(1) Reference period 2023 
Source: Eurostat 

Lending  to  households  picked  up  while  for 
corporates it slowed down. For households, the 
annual  credit  growth  rate  for  adjusted  loans  has 
gradually  edged  up  from  9.5%  in  2023  to  10.7% 
in  Q3-2024  (EA  average:  0.7%),  due  to  growth  in 
employment  and  wages  coupled  with  consumer 
optimism. For NFCs, the annual credit growth rate 
fell  from  20.8% in  2022 to  6.3%  in  2023  and to 
3.9%  in  Q3-2024  (EA  average:  0.8%),  due  to 
reduced  needs  for  financing  investments  as  the 
drop  in  interest  rates  remained  moderate (99).  A 
significant  proportion  of  investments  is  likely 
financed from own funds, facilitated by favourable 
corporate business performance. 

(97)  EIB, 2024, 2024 EIB Investment Survey, p. 29. 

(98)  Ibid. p. 7. 

The  use  of  equity  by  Croatian  SMEs  is  quite 
high.  In  the  2023  SAFE  survey,  19.6%  of  SMEs 
indicated  that  equity  was  relevant  for  them, 
compared  to  an  EU  average  of  10.1% (103).  In 
2019,  the  ZSE  launched  the  Progress  Market 
multilateral  trading  platform,  which  aimed  to 
encourage  SMEs  to  issue  securities  with  less 
restrictive 
listing  and  reporting  requirements. 
Although  it  started  with  market  capitalisation  of 
EUR 145.3 million in 2019, this figure had dropped 
to EUR 65.3 million by 2024 (104). 

(100) HNB, 2024, Euro-area Bank Lending Survey-HR (Oct.2024), 

Questions 6 & 9. 

(101) ZSE, 2024, Market Data, 2024. 

(102) ZSE, 2024, Market Data, 2024. 

(103) European  Commission,  2023,  Data  and  Surveys-SAFE, 

Results by country, T27. 

(99)  HNB, 2024, Macroprudential diagnostics (Oct. 2024), p. 7. 

(104) Progress Market, 2024, Market Capitalisation. 

53 

050100150200250HREU% of GDPLoansTrade credit and advancesBondsListed sharesUnlisted sharesOther equity 
  
 
 
to  be 

listed  on  exchanges; 

companies 
(v) 
institutional 
eliminating  national  barriers  for 
investors; (vi) making tax systems more supportive 
of 
(vii) 
expanding 
and  market 
participation among the EU population. 

in  capital  markets;  and 

investments 

financial 

literacy 

Croatian  households  have  a  high  share  of 
cash  and  deposits  in  households’  assets, 
which  implies  that  there  is  scope  to  further 
increase  the  level of  direct or  indirect  retail 
investments. Further encouraging the build-up of 
universal  funded  supplementary  pension  schemes 
would positively contribute to (i) the sustainability 
and  adequacy  of  pension  benefits;  (ii)  investment 
in equity; (iii) access to finance; (iv) growth; and (v) 
innovation.   Croatian  households  have  a  higher-
than-average holding of cash and deposits, which 
represent nearly half (46.4%) of household assets 
compared  to  the  EU  average  of  32.3%.  In  2023, 
36.7%  of  household  financial  assets  were  held in 
three  assets  categories:  (i)  pension  funds;  (ii) 
investment  funds;  and  (iii)  directly  held  financial 
investment instruments. This falls short of the EU 
average  of  45.4%  (see  Graph  A5.5).  In  Croatia, 
direct  and  intermediated  retail  investment  by 
households  was  44% 
in  2023  (EU  average: 
56.2%). 

Graph A5.5: Composition of household financial 
assets per capita and as % of GDP 

(1) Reference period 2023 
Source: Eurostat 

initiatives  are  aimed  at 
Recent  policy 
boosting  the  level  of  retail  participation.  In 
2023,  the  Croatian  government  issued  its  first 
national  bonds  and  treasury  bills  aimed  primarily 
at  retail  investors,  in  which  Croatians  invested  a 

(published 

Croatia  is  in  the  process  of  adopting  a 
national  strategy  for  the  development  of 
capital markets. In 2023, CFA Society Croatia, in 
partnership  with  the  Ministry  of  Finance,  and 
relevant  parties  implemented  a  project  aimed  at 
preparing the basis for the Croatian capital market 
development  strategy 
in  January 
2024).) (105).  Based  on  this  report,  the  Croatian 
the  Strategic 
Ministry  of  Finance  prepared 
framework for the development of capital market 
in  the  Republic  of  Croatia  (2025-  2030),  and  the 
first  action  plan  (2025-2026),  in  the  cooperation 
with  the  Croatian  Financial  Services  Supervisory 
Agency and other relevant stakeholders (including 
pension  and  investment  funds,  investment  firms, 
banks,  Zagreb  Stock  Exchange, 
the  Central 
Depository  and  Clearing  Company,  CFA  Society 
Croatia  and  others)  with  the  technical  support 
from  the  European  Bank  for  Reconstruction  and 
Development.  Additionally,  the  second  Action  plan 
is  envisaged  for  2026  and  will  cover  the  period 
until  the  end  of  2030.    The  framework  sets  out 
five key strategic directions: (i) regional integration 
and  positioning  Croatia  as  a  financial  hub;  (ii) 
digitalisation of capital markets; (iii) strengthening 
corporate  governance; 
(iv)  boosting  market 
liquidity; and (v) creating new investment products 
the 
and 
aforementioned  five  key  strategic  directions,  a 
horizontal initiative has also been launched, aimed 
at  continuously  caring  out  legislative  adjustments 
to  be  carried  out  in  order  to  reduce  excessive 
regulation  (gold-plating)  and  to  ensure  that  the 
legal  framework  of  Croatia  remains  competitive, 
simple,  and  aligned  with  the  European  Union 
acquis and relevant EU standards.  

financing  options. 

In  addition 

to 

Croatia has increasingly supported efforts to 
develop  the  Capital  Markets  Union  (CMU)  in 
the  EU.  At  a  meeting  in  May  2024,  the  finance 
ministers of Austria, Croatia and Slovenia issued a 
joint  statement  calling  for  further  progress  on 
CMU (106).  The  statement  identified  a  number  of 
common  CMU  priorities,  including:  (i)  the  need  to 
consider  the  priorities  of  all  Member  States;  (ii) 
debating  centralised  supervision  at  a  later  stage; 
(iii)  a  pragmatic  approach  to  the  securitisation 
framework;  (iv)  harmonising  the  requirements  for 

(105) CFA Society Croatia, 2024, Basis for the capital markets 

development strategy in Croatia. 

(106) Common Statement by the Finance Ministers from Slovenia, 
Croatia and Austria - Unlocking the EU's productivity: a 
finance ministers' perspective, 28 May 2024. 

54 

0501001502002500102030405060708090HREUHREUper capita (000 EUR) (lhs)% of GDP GDP (rhs)Currency and depositsInsurance and pension fundsInvestment fundsBondsListed sharesUnlisted sharesOther equityHH Debt (liability) 
 
  
total  of  EUR 2.3  billion (107).  In  2024,  the  Ministry 
of  Finance  continued  to  turn  to  households  for 
government financing by issuing national treasury 
bills (108). A wider review of the incentives in place 
to promote retail participation in financial markets 
may  also  be  warranted.  In  March  2025,  Croatia 
adopted 
the 
development  of  capital  market  in  the  Republic  of 
Croatia  2025-  2030,  marking  an  important  step 
towards  strengthening  market  infrastructure  and 
broadening access to finance. 

the  Strategic 

framework 

for 

The role of domestic institutional 
investors 

rather 

small,  with 

The  Croatian  fund  management  industry  is 
quite 
conservative 
investment strategies. The largest proportion of 
assets of the Croatian fund management industry 
was  allocated  to  bonds  (52.6%),  followed  by 
shares and other equity (28.9%), deposits (13.2%), 
and  investment  funds  (including  money  market 
fund  shares)  (5.3%) (109).  In  2023,  Croatian  asset 
managers allocated about 75% of their equity and 
52% of their bond holdings to domestic bonds and 
equities, a substantially higher home bias than the 
EU average (110). 

insurance  sector 

The  Croatian 
is  rather 
small, and its investment portfolio is mostly 
composed  of  bond  holdings.  The  Croatian 
insurance  sector  mainly  invests  in  government 
bonds  (mostly  domestic),  which  accounted  for 
46.8%  of  total  assets by mid-2024 (compared  to 
19%  for  the  European  Economic  Area  as  a 
whole) (111),  with  another  6.1%  held  in  cash  and 
deposits.  Property  represented  13.7%,  equities 
12.7%,  corporate  bonds  6.1%,  while  investment 
funds  accounted  for  only  9.8%  of 
insurers’ 
investment portfolio, of which 6.8% was in equity 
funds and 3.9% in private equity funds (112). 

(107) HANFA, 2024, Annual Report 2023, p. 2 

(108) HANFA, 2024, Macroprudential Risk Scanner, p. 10. 

funds 

(pillar 

The  domestic  pension  fund  industry  has  a 
conservative  investment  profile,  placing  a 
greater  focus  on  bonds  with  a  moderate 
growth  in  equity  investments.  In  November 
II: 
2024,  mandatory  pension 
mandatory  capitalised  savings)  accounted  for 
94.3%  of  the  net  assets,  while  voluntary  pension 
funds  (pillar  III:  voluntary  capitalised  savings) 
accounted for only 5.7% of the net assets of these 
two pillars. Debt securities accounted for 63.2% of 
the  total  assets  held  by  pension  funds  as  of  Q3-
2024. Equities were the second largest investment 
asset  held  by  pension  funds,  at  22.6%,  while 
investment  funds  accounted  for  9.6%,  and  bank 
deposits  for  4.1%  of  their  total  assets (113).  The 
high  exposure  to  bonds  (especially  government 
bonds)  reflects  the  perceived  lower  risk  level 
compared with other investment instruments, and 
more  likely  the  lack  of  alternative  investment 
options (114). Overall, this sector could be important 
for the development of domestic capital markets. 

The  participation  of  domestic  institutional 
investors  in  providing  funding  for  start-ups 
and  venture  capital  investors  is  low.  A  2024 
paper by the think tank CEPS showed that pension 
fund  commitments  in  some  central  and  eastern 
(Croatia,  Slovakia  and 
European 
Slovenia) accounted for only 6% of private equity 
and venture capital funds raised annually between 
2007-2023. This figure falls substantially short of 
the  19%  for  the  Baltic  states  or  20%  shares  for 
Nordic Member States (115). 

countries 

Recent  policy  action  may  facilitate  a  shift 
investment 
towards 
strategies. These measures include: 

dynamic 

more 

- in 2019, the amended Mandatory Pension Funds 
Act entered into force, under which any mandatory 
pension  fund  members  who  fail  to  select  their 
mandatory 
themselves,  when 
selecting a fund for the first time, are allocated to 
one of the higher risk category A funds (116); 

fund  category 

-  in  2023,  a  package  of  amendments  to  the 
pension laws was adopted to advance the system 

(109) ECB, 2024, Euro-Area Investment Funds, Q3-2024. 

(113) ECB, 2024, Euro-Area Pension Funds, Q3-2024. 

(110) EFAMA, 2024, Asset Management in Europe, Exhibit 4.4 to 

(114) HANFA, 2024, Macroprudential Risk Scanner, p. 24. 

4.5, p. 46. 

(111) EIOPA, 2024, Insurance Statistics. 

(112) EIOPA, 2024, Insurance Statistics. 

(115) CEPS, 2024, Closing the gaping hole in the capital market for 

EU start-ups – the role of pension funds, p. 2. 

(116) HANFA, 2024, Annual Report 2023, p. 25. 

55 

 
 
 
Table A5.1:  Financial indicators 

(1) Annualised data. 
Credit growth and pension funds EU data refers to the EA average 
Source: ECB, ESTAT, EIOPA, DG FISMA CMU Dashboard, AMECO. 

pension 

individual 

capitalised 

of 
savings: 
liberalising  pension  fund  investments  to  enable 
investment  diversification,  providing 
greater 
flexibility  for  membership  and  the  possibility  to 
switch between pension funds, and reducing costs 
for members (117). 

The depth of available venture and 
growth capital 

The  domestic  venture  and  growth  capital 
market is not developed enough to meet the 
financing needs of innovative firms. The value 
of  annual  private  equity  (PE)  relative  to  nominal 
GDP  dropped  from  0.65%  in  2022  to  0.03%  in 
2023 (EU average in 2023: 0.41%) (118). The value 
of annual  venture capital (VC) investment relative 
to  nominal  GDP  dropped  from  0.02%  in  2022  to 
0.01%  in  2023  (EU  average:  0.05%) (119).  Given 

(117) HANFA, 2024, Annual Report 2023, p. 24. 

(118) European Commission, 2024, Overview of CMU Indicators – 

2024 Update, Indicator 11. 

the limited VC and PE activity in Croatia, there is a 
financing  gap  for  early-stage  innovative  firms  in 
need  of  capital  (See  the  Innovation  to  business 
Annex). 

initiatives 

There  are  some 
in  place  to 
promote  start-up  funding.  The  European 
Investment  Fund  and  the  Croatian  Ministry  of 
Regional  Development  and  EU  Funds  launched  a 
new  EUR 80  million  programme,  the  Croatian 
venture  capital  initiative  2  (CVCi  2),  to  support 
Croatian  start-ups.  These  funds  will  be  used  for 
investments  in  promising  early-stage  Croatian 
companies  with  strong  growth  prospects.  The 
Croatian  recovery  and  resilience  plan  (RRP)  also 
includes  measures  to  support  the  financing  of 
start-ups (120).  The  Croatian  Financial  Services 
Supervisory  Authority  (HANFA)  has  also  set  up  a 
regulatory innovation hub to promote innovation in 
the field of financial services. Further measures to 
promote  and  facilitate  initial  public  offering  (IPO) 
activity could also improve the ability of successful 
start-ups  to  scale-up,  while  offering  an  attractive 
exit option to VC and PE investors. 

(119) European Commission, 2024, Overview of CMU Indicators – 

(120) HR  Recovery  and  Resilience  Plan  -  C1.1.1.R5-I1:  Investment 

2024 Update, Indicator 16. 

in equity and quasi-equity financial instruments. 

56 

20172018201920202021202220232024-Q3EUTotal assets of MFIs (% of GDP)114,8111,7107,4126,7118,5116,1103,798,1248,4Common Equity Tier 1 ratio20,220,221,722,723,822,121,520,416,6Total capital adequacy ratio21,421,122,523,224,422,822,221,220,1Overall NPL ratio (% of all loans)8,87,35,25,34,23,02,52,41,9NPL (% loans to NFC-Non financial corporations)21,218,512,011,48,95,84,54,23,5NPL (% loans to HH-Households)7,76,55,56,86,24,84,13,82,2NPL-Non performing loans coverage ratio62,660,966,262,362,466,168,968,642,1Return on Equity15,98,89,14,77,79,415,717,010,0Loans to NFCs (% of GDP)22,120,719,522,619,620,418,717,430,0Loans to HHs (% of GDP)31,731,331,835,832,329,427,927,344,5NFC credit annual % growth3,72,04,66,61,820,86,33,90,8HH credit annual % growth3,75,67,72,64,65,79,510,70,7Stock market capitalisation (% of GDP)---36,432,027,029,629,769,3Initial public offerings (% of GDP)0,000,110,000,000,090,000,00-0,05Market funding ratio52,953,253,852,153,047,446,3-49,6Private equity (% of GDP)0,010,190,170,270,550,650,03-0,41Venture capital (% of GDP)0,010,000,010,020,060,020,01-0,05Financial literacy (composite)------47,5-45,5Bonds (as % of HH financial assets)0,40,40,40,40,30,53,2-2,7Listed shares (as % of HH financial assets)5,64,74,93,83,83,53,8-4,8Investment funds (as % of HH financial assets)2,62,83,42,62,92,42,8-10,0Insurance/pension funds (as % of HH financial assets)25,425,827,427,227,426,527,0-27,8Total assets of all insurers (% of GDP)10,810,410,712,110,68,67,87,154,8Pension funds assets (% of GDP)---33,132,127,527,628,323,41-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States.Banking sectorNon-banks sector 
 
 
 
   
 
Financing the green transition 

The  financing  needs  of  Croatia’s  green 
transition  are  considerable.  Croatia’s  draft 
updated national energy and climate plan has only 
partial  information  on  the  investment  needed  to 
achieve  the  country’s  2030  climate  and  energy 
targets. It is therefore not possible to estimate the 
investment  gap (121).  However,  the  issuance  of 
bonds  with  environmental,  social,  and  governance 
objectives  as  a  share  of  total  bond  issuance  was 
higher  in  H1 2024,  at  around  21%  of  total  bond 
issuance,  than  its  three-year  average  of  around 
8%,  and  is  rather  high  compared  to  most  of 
Croatia’s  EU  peers (122).  Croatia  taken  some  steps 
towards  prioritising  the  green  transition  in  its 
National  Development  Strategy  2030  (Official 
Gazette  No.  13/21).  On  21  December  2023,  it 
established  the  Forum  for  Sustainable  Finance 
Support  to  promote  information  exchange  and 
boost  the  financial  sector’s  role  in  achieving  the 
European  Green  Deal  goals.  Coordinated  by  the 
Ministry  of  Finance  and  included  in  the  National 
RRP,  the  Forum  aims  to  help  the  financial  sector 
adapt  to  regulatory  requirements  and  advance 
sustainable  finance  through  analysis,  stakeholder 
engagement,  and  potential  regulatory  reforms.  In 
March 2025, the Government adopted the Forum’s 
first  Action  Plan 
(2025–2026),  emphasizing 
stakeholder  collaboration,  best  practice  sharing, 
to  enhance  Croatia’s 
and  capacity  building 
competitiveness in sustainable finance. 

Financial literacy 

Although  financial  literacy  in  Croatia  is 
higher  than  the  EU  average,  more  can  be 
done  to  deepen  the  knowledge  of  retail 
investors  and  SMEs.  Financial  literacy  is  an 
important  factor  in  enhancing  the  participation  of 
retail  investors  in  capital  markets,  as  well  as  in 
informing  small  and  medium-sized  enterprises 
about alternative sources of financing beyond the 
banking  system.  The  July  2023  Eurobarometer 
survey  shows  that  only  20%  of  Croatians  have  a 
high  level  of  financial  literacy,  65%  a  medium 

low 

framework 

for  consumer 

level,  and  the  remaining  16%  a 
level, 
compared  with  the  EU  average  of  18%  for  high 
literacy,  64%  for  medium,  and  18%  for  low (123). 
This leads to an overall financial literacy indicator 
(the  average  of  the  financial  knowledge  and 
financial  behaviour indicators)  of 47.5% vs an EU 
average score of 45.5% (124). In Croatia, a national 
strategic 
financial 
literacy  was  implemented  for  the  period  2015-
2020,  and  updated  for  the  period  2021-2026, 
focusing  on  key  topics  such  as  the  basics  of 
personal finances, debt management, savings and 
in  the 
investments,  and  consumer  protection 
financial  sector (125).  Financial  education  has  also 
been  included  in  primary  and  secondary  schools. 
Moreover, one of the key activities in the Strategic 
Framework  for  the  development  of  the  capital 
market  in  Republic  of  Croatia  2025-2030  is 
further development and improvement of financial 
literacy for citizens, including investors campaigns 
to strengthen confidence in the capital market. 

(123) European  Commission,  2023,  Flash  Eurobarometer  Survey  -
Monitoring  the  level  of  financial  literacy  in  the  EU  -  July 
2023, p. 17. 

(124) European Commission, 2024, Overview of CMU Indicators – 

(121) European Commission, 2024, Country report -Croatia, p. 39. 

2024 Update, Indicator 27. 

(122) AFME, 2024, CMU Key Performance Indicators, p. 23. 

(125) Croatian Ministry of Finance 2024, Financial Literacy. 

57 

 
 
 
 
 
 
ANNEX 6: EFFECTIVE INSTITUTIONAL FRAMEWORK 

Croatia’s  institutional  framework  influences 
its  competitiveness.  Croatia  has  taken  steps  to 
improve 
regulatory 
legislative  quality  and 
governance,  decrease  administrative  burden  and 
develop skills in its public administration. However, 
there 
its 
mechanisms for evaluating regulation and cutting 
administrative  burdens.  Moreover,  challenges 
persist 
in  terms  of  rolling-out  digital  public 
services and the efficiency of the justice system. 

further  strengthen 

is  scope 

to 

Public perceptions 

Graph A6.1: Trust in justice, regional / local 
authorities and in government 

(1) EU27 from 2019; EU28 before. 
Source: Standard Eurobarometer surveys. 

Trust in public institutions remains below the 
EU average despite an upward trend.  Trust in 
government,  justice  and  regional  or  local  public 
authorities  remain  at  broadly  comparable  levels 
(Graph  A6.1).  When  asked  about  ways  to  boost 
trust  in  Croatia’s  public  administration,  51%  of 
citizens  suggested 
(EU 
average: 
for  more 
communication  with  citizens  (EU  average:  31%) 
(126).  The  perceived  quality  of  government  has 
risen  in  most  regions,  although  on  the  whole,  it 
remains below the EU average (127).  

reducing  bureaucracy 
called 
34% 

52%), 

Quality of legislation and regulatory 
simplification 

Performance  in  developing  and  evaluating 
legislation  is  close  to  the  EU  average.  It  is 
generally  stronger  for  stakeholder  engagement 
than  for  ex  ante  and  ex  post  evaluation  of 
legislation.  Croatia  can  strengthen  the  rules  and 
practices for ex  post evaluation of legislation and 
regulatory 
impact  assessments,  especially  for 
subordinate regulations (Graph A6.2). The reforms 
to the regulatory framework adopted in 2024 aim 
to  simplify  regulatory  impact  assessments  while 
making  them  mandatory  for  most  primary  and 
secondary  legislation,  promote  assessments  of 
existing  legislation  and  strengthen  legal  drafting 
capacity (128).  The  updated  legal  framework  is 
complemented  by  new  methodological  guidelines 
for  the 
implementation  of  better  regulation 
instruments. 

Graph A6.2: Indicators of Regulatory Policy and 
Governance (iREG) 

Source: OECD (2025), Regulatory Policy Outlook 2025 and 
Better Regulation across the European Union 2025 
(forthcoming). 

(126) Understanding Europeans’ views on reform needs - April 
2023 - Eurobarometer survey. Country Fact Sheet. 

(127) Inforegio - European Quality of Government Index. 

(128) Government Legislation Office, The government adopted a 

decree for the implementation of the Act on Policy 
Instruments of Better Regulation, link 

58 

00.10.20.30.40.50.60.7AutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSummerWinterSummerWinterSpringAutumnSpringAutumn2014201520162017201820192020202220232024Justice,  legal system EU27Justice,  legal system HRRegional or local public authorities EU27Regional or local public authorities HRGovernment  EU27Government  HR0.00.51.01.52.02.53.03.54.0Primary lawsSubordinateregulationsPrimary lawsSubordinateregulationsPrimary lawsSubordinateregulationsHR_StakeholderengagementHR_Regulatory ImpactAssessmentHR_Ex-post evaluation oflegislationMethodologySystematic adoptionTransparencyOversight and quality control2021EU-27 
 
      
 
     
 
 
 
 
 
Table A6.1:  Croatia. Selected indicators on administrative burden reduction and simplification 

(1) This table presents a subset of iREG indicators focusing on regulatory costs. The indicators refer to primary legislation. 
Source: OECD (2025), Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the 
European Union 2025 (forthcoming). 

assessments and ex post evaluation of legislation 
are  required  to  evaluate  administrative  burdens 
this 
and 
requirement applies to some (and not all) primary 
laws (Table A6.1).  

substantive 

compliance 

costs, 

Graph A6.3: Proportion of laws adopted within 30 
days 

Croatia has made visible progress in reducing 
the proportion of laws adopted by fast-track 
procedure. The proportion of legislation approved 
by  fast-track  procedure  dropped  from  53%  in 
2022  to  26%  in  2023,  with  an  average  for  the 
2016-2023  period  of  46%.  Nevertheless, 
it 
remains above the EU average (129) (Graph A6.3). 

Croatia  has  taken  targeted  steps  to  reduce 
administrative burdens  for  businesses.  It  has 
put in place a plan for 2024-2025 which is aimed 
at  optimising  and  digitising  103  administrative 
procedures,  focusing  on  areas  such  as  taxation, 
tourism,  agriculture,  pensions  and  transport.  The 
government 
reduce 
to 
administrative 
the  economy  by 
EUR 364 million (130). 

the  plan 
for 

expects 
costs 

There  is  scope  to  further  strengthen  its 
mechanisms  for  simplifying  regulation.  For 
example,  when  preparing  primary 
legislation, 
regulators are not mandated to evaluate the level 
impact 
of 

compliance.  While 

regulatory 

(129) See 2024 country-specific chapter for Croatia in the Rule of 

Law Report (pp. 27-28) 

(130) Action Plan to Reduce Administrative Burden for Economy: 

link  

Source: European Commission based on national parliament 
websites 

59 

00.10.20.30.40.50.60.70.80.9HREU-27Ex ante impact assessment of legislationEx post evaluation of legislationIdentify and assess the impacts of the baseline or ‘do nothing’ option.Is required to consider the consistency of regulations and address areas of duplication.Identify and assess the impacts of alternative non-regulatory options.Is required to contain an assessment of administrative burdens.Quantify administrative burdens of new regulations.Is required to contain an assessment of substantive compliance costs.Quantify substantial costs of compliance of new regulations.Compares the impact of the existing regulation to alternative options.Assess macroeconomic costs of new regulations. Periodic ex post evaluation of existing regulations is mandatory.Assess the level of compliance.Government uses stock-flow linkage rules when introducing new regulations (e.g., one-in one-out).Identify and assess potential enforcement mechanisms.A standing body has published an in-depth review of specific regulatory areas in the last 3 years.In the last 5 years, public stocktakes have invited businesses and citizens to assess the effectiveness, efficiency, and burdens of legislation.When developing new legislation, regulators are required to …Yes /  For all primary laws For major primary laws For some primary lawsNo / Never 
 
      
 
   
 
 
Table A6.2:  Key Digital Decade targets monitored through the Digital Economy and Society Index 

Source: State of the Digital Decade report 2024. 

Social dialogue  

representatives  of 

Tripartite  cooperation  is  well  established  at 
the  national  level  (131).  Croatia  has  established 
an effective institutional framework for promoting 
social dialogue, comprising the tripartite Economic 
Social Council (ESC) and its working bodies, which 
serves  as  an  advisory  body  to  the  Croatian 
Government.  The  Croatian  ESC  consists  of  an 
the 
equal  number  of 
government, 
trade  union  confederations  and 
employer’s associations. The ESC committees deal 
with the issues  of  wage  policy,  tax  system, social 
legislation 
policy,  employment,  education  and 
pertinent to the issues of labour, employment and 
industry.  The  tripartite  social  dialogue  that  began 
at  national  level  has  since  progressed  to  be 
developed  at  regional  level  by  the  establishment 
of regional ESCs at each county level. At the level 
of companies, institutions and particular branches 
and 
is 
industries,  bipartite  social  dialogue 
developed  through  the  activities  of  the  trade 
unions  and  employers’  associations  who  conclude 
collective  agreements  and  facilitate  trade  union 
activities 
in  companies,  works  councils  and 
supervisory boards.  

However,  there  are  challenges  at  the  sub-
national level. Social partners are represented in 
working  bodies  within  the  Croatian  Parliament, 

(131) For  an  analysis  of  the  involvement  of  Croatia’s  social 
partners at national level in the European Semester and the 
Recovery  and  Resilience  Facility,  see  Eurofound  (2025), 
National-level  social  governance  of  the  European  Semester 
and the Recovery and Resilience Facility. 

National  Council  for  protection  at  work,  National 
Council  for  Competitiveness,  National  committee 
for monitoring the negotiations with EU, governing 
boards  of  the  Social  Insurance  Fund  and  other 
public  institutions.  However,  there  are  gaps  and 
room  for  improvement,  especially  regarding  the 
involvement  of  local  and  regional  social  partners 
in  the  social  dialogue.  Whereas  social  dialogue 
institutions  exist,  the  social  partners  are  not  fully 
satisfied with their involvement in policymaking.  

Efficiency of selected administrative 
procedures 

of 

all 

and 

permits 

regulation 
The  OECD  product  market 
indicators  show  that  Croatia’s 
licensing 
system  is  aligned  with  most  best  practices. 
Although  the  government  keeps  an  up-to-date 
inventory 
licences 
required/issued to businesses by public bodies, the 
inventory  is  not  available  online  for  consultation. 
Furthermore,  there  is  no  requirement  for  the 
government  to  regularly  review  it  and  assess 
whether  such 
licences  and  permits  are  still 
required  or  should  be  withdrawn  (see  also  Annex 
4). Moreover, selected indicators point to Croatia’s 
public  administration  taking  longer  to  complete 
procedures. 
B-READY 
indicators (132)  show  considerable  potential  for 
cutting the time it takes to obtain building permits, 
to  prepare,  file  and  pay  taxes,  and  to  complete  a 
generic tax audit. 

example, 

the 

For 

(132) World Bank. 2024. Business Ready 2024. Washington, DC: 

World Bank. doi:10.1596/978-1-4648-2021-2 

60 

Digital Decadetarget by 20302022202320242024EU-27Digitalisation of public services169716779100Score (0 to 100)20212022202320232030268676685100Score (0 to 100)202120222023202320303na868679100Score (0 to 100)20212022202320232030CroatiaEU-27Digital public services for citizensDigital public services for businessesAccess to e-health records 
 
 
 
  
 
Digital public services 

Digitalisation  of  public  services  in  Croatia 
scores  below  the  EU  average  (67.2  compared 
to an EU average of 79.4 in relation to services for 
citizens  and  66.2  compared  to  an  EU  average  of 
85.4  in  relation  to  services  for  businesses)  (Table 
A6.2).  However,  access  to  e-health  records  is  a 
particular  strength  for  Croatia  which  scored  85.6 
compared to an EU average of 79.1.  

The proportion of e-government users surged 
from  68%  in  2022  to  88.5%  in  2023,  surpassing 
the EU average of 75%. Nevertheless, use of e-ID 
to  access  public  and  private  services  remains  low 
(36.7% 
to  an  EU  average  of 
41.1%) (133).  

compared 

Croatia  is  making  good  progress  towards 
seamless,  automated  exchange  of  authentic 
documents  and  data  across  the  EU.  It  has 
already  successfully  tested  its  first  transactions 
through  the  Once-Only  Technical  System  (134), 
which  is  part  of  the  European  Union’s  Single 
Digital  Gateway (135).  Croatia  is  in  the  process  of 
connecting the first authorities. 

Civil service  

secondary 

Croatia  has  introduced  various  measures  to 
increase  the  attractiveness  and  improve 
skills in its civil service. A new Civil Service Act 
and 
legislation  are  aimed  at 
modernising the job structure and pay scale. A new 
council will monitor the implementation of the new 
pay system, analyse the competitiveness of public 
employment 
financial 
sustainability  of  the  wage  bill.  A  new  online 
platform  linked  to  Croatia’s  e-citizens  portal  will 
provide  information  on  the  current  needs  of  the 
public administration. Public calls for expression of 
interest  for  jobs  in  the  civil  service  will  enable 
better  talent  screening.  Moreover,  merit-based 

overview 

and 

the 

(133) European Commission. Digital Decade 2024: Country reports 

(134) European Commission, The Once Only Principle System: A 

breakthrough for the EU’s Digital Single Market 

(135) European Commission, Once-Only Technical System 

Acceleratormeter 

61 

requirements have been stepped up, vacancies are 
now  published  centrally,  and  candidate  pools  are 
being created. A new appraisal system is expected 
to  improve  the  performance  and  productivity  of 
civil servants.  

Participation  of  civil  servants 
in  adult 
learning  has  improved  in  recent  years  but 
remains  below  the  EU  average.  In  2024, 
Croatia achieved a participation rate of 10.3%, as 
compared  to  an  EU  average  of  18.9%  (136).  The 
National School of Public Administration had been 
developing  new  training  programmes  to  underpin 
Croatia’s recently adopted competency framework, 
developed  under  a  project  financed  by  the 
European Social Fund in 2023. Under the recovery 
and  resilience plan,  efforts  were made  by Croatia 
promoted SmartWorking model which enables civil 
servants  to  work  from  home (137).  Its  aim  is  to 
make 
the  administration  a  more  attractive 
employer.  

Integrity 

related 

A  far  higher  percentage  of  companies  than 
the  EU  average  consider  corruption  to  be 
widespread  and  a  problem  when  doing 
business,  and  court  cases 
to 
corruption take a long time. In Croatia, 85% of 
companies  consider  that  corruption  is  widespread 
(EU  average  64%),  while  61%  consider  that 
corruption  is  a  problem  when  doing  business  (EU 
average  36%) (138).  Moreover,  only  18%  of 
companies  believe  that  people  and  businesses 
caught 
senior  official  are 
appropriately  punished  (EU  average  31%) (139). 
High-level  corruption  cases  continued  to  be  well 
represented  among  investigated  and  finalised 
corruption  court  cases  against  individuals  (140). 

for  bribing  a 

(136) Eurostat, 2025,  European Union Labour Force Survey. 

(137) European Commission, Positive preliminary assessment of 

the satisfactory fulfilment of milestones and targets related 
to the fifth payment request submitted by Croatia on 15 
April 2024, transmitted to the Economic and Financial 
Committee 76aa9215-bf28-4aa0-8e26-f1318e236ee0_en, 
(p.57-65).  

(138) Flash Eurobarometer 543 on businesses’ attitudes towards 

corruption in the EU (2024).   

(139) Ibid. 

(140) See the 2024 country-specific chapter for Croatia of the Rule 

of Law Report, pp. 13-14. 

 
 
 
the 

time 

The  average  disposition 

increasing from 410 days in 2022 to 533 days in 
for 
2023. 
administrative  cases  at  first  instance  increased 
from 143 days in 2022 to 221 days in 2023. The 
quality  of 
is  gradually 
improving.  Electronic  communication  between 
courts  and  parties  to  proceedings  has  increased 
and further initiatives are being taken to close the 
digitalisation gap in the justice system. As regards 
judicial  independence,  no  systemic  deficiencies 
have been reported (145). 

justice  system 

However, proceedings continue to take a long time 
and  there  have  not  yet  been  any  convictions  for 
foreign  bribery  cases.  The  efficiency  of  Croatia’s 
criminal courts continues to pose a challenge, with 
length of trials at first instance among the longest 
in  the  EU,  among  the  longest  for  bribery  cases 
(decreasing from an average of 531 days in 2022 
to  478 days  in  2023)  and  for  money  laundering 
cases (increasing from an average of 597 days in 
2022  to  771 days  in  2023)  (141).  Legislation  has 
been  improved  to  allow  corruption  cases  to  be 
investigated and prosecuted more efficiently, while 
a  draft  law  to  further  amending  the  Criminal 
Procedure Code and the Law on a specialised anti-
corruption  prosecution  service  is  planned  for  late 
2025.  Furthermore,  public  procurement  continues 
to be an area at high risk of corruption in Croatia. 
21%  of  companies  (EU  average  27%)  think  that 
corruption  has  prevented  them  from  winning  a 
public  tender  or  a  public  procurement  contract  in 
practice  in  the  last  three  years  (142).  The  energy 
sector  and 
local  government 
authorities also appear as sectors with a high-risk 
of corruption (143). 

regional  and 

in  October  2024. 

Croatia is implementing a new public register 
for  lobbyists.  Whereas  most  Member  States 
already  have  a  register  for  lobbyists,  in  Croatia 
legislation  to  regulate  lobbying  only  entered  into 
force 
the 
organisation,  content  and  manner  of  keeping  a 
lobby  register,  restrictions  on  lobbying  activities 
and  rules  on  the  verification,  enforcement  and 
penalties  for  violations  of  the  law  (144).  This 
legislation 
transparency 
regarding corporate lobbying of decision-makers. 

can  help 

regulates 

increase 

It 

Justice 

Significant  efficiency  issues  persist  in  the 
justice system. The backlog of cases and length 
of  proceedings  in  Croatia  continue  to  be  among 
the highest in the EU, with the  disposition time in 
civil  and  commercial  cases  at  first  instance 

(141) See the upcoming 2025 EU Justice Scoreboard.   

(142) Flash Eurobarometer 543 on businesses’ attitudes towards 

corruption in the EU (2024). 

(143) See the 2024 country-specific chapter for Croatia of the Rule 

of Law Report, p. 20. 

(144) Ibid., pp. 17-18. 

(145) For more detailed analysis of the performance of the justice 
system  in  Croatia,  see  the  upcoming  2025  EU  Justice 
Scoreboard and the 2024 Rule of Law Report. 

62 

 
 
 
SUSTAINABILITY 
ANNEX 7: CLEAN INDUSTRY AND CLIMATE MITIGATION 

clean 

industry  and 

Croatia  is  faced  with  several  challenges 
regarding 
climate 
mitigation.  A  faster  shift  to  renewables  and 
further  modernisation  investments  are  needed  to 
decarbonise the manufacturing industry. To tackle 
growing  transport  emissions,  it  will  be  crucial  to 
adopt  a  more  comprehensive  approach  with  both 
sectorial  measures  and  the  phase-out  of  fossil 
fuels  subsidies.  Clean-tech  manufacturing  growth 
is  hindered  by  lengthy  industrial  permitting,  the 
absence  of  a  comprehensive  policy  framework, 
limited  incentives  for  private  investment,  and  a 
shortage  of  skilled  workers.  Croatia  could  reduce 
its  dependency  on  critical  raw  materials  and 
become  less  vulnerable  to  geo-political  instability 
by  making  its  economy  more  circular.  This  would 
also  help  increase  secondary  raw  material  use  in 
the  economy, 
improve  competitiveness  and 
innovation,  and  reduce  the  environmental  impact 
of economic activity. This annex reviews the areas 
in  need  of  urgent  attention  in  Croatia’s  ’s  clean 
industry  transition  and  climate  mitigation,  looking 
at different dimensions.  

Strategic autonomy and technology 
for the green transition 

Net zero industry 

Croatia  is  home  to  a  limited  set  of  clean 
technology  manufacturing  capacities (146). 
These include makers of heat pumps, solar panels, 
storage and batteries, grid components and hydro 
power  equipment.  Regarding  solar,  Croatia’s  main 
production  facilities  include  the  Solvis  factory  in 
Varaždin  Hrvatska  which 
solar 
photovoltaics  (PV)  modules  and  has  an  estimated 
capacity  of  300-350 MW.  In  the  field  of  grid,  in 
addition to Eur0Cable Group and Elka, two existing 
facilities,  a  EUR 100  million 
manufacturing 
investment 
is  planned  by  TTCables  for  the 
construction  of  a  new  cable  factory  for  medium 
and  high  voltage  cables (147).  Croatia’s  electric 
is  also  growing,  and  several 
vehicle  sector 

produces 

(146) EC,  The  net-zero  manufacturing  industry  landscape  across  the 
Member  States,  1/2025;  Bruegel,  European  clean  tech  tracker, 
update: 7/2024, EC, Net zero technologies’ monitoring dashboard. 
(147) TTCables, 1 August 2024, ‘Our new cable factory for medium and 

high voltage in Bedekovcina/Croatia’, available here. 

companies  are  involved  in  the  production  of 
batteries.  The  company  FRIŠ  produces  lithium-ion 
batteries,  and  Rimac  Technology,  a  producer  of 
battery management systems, has announced that 
it  will  open  an  additional  facility  producing 
300 MW/y  stationary  energy-storage  systems  in 
2025 (148). 

to 

room 

Croatia’s  clean  tech  is  already  somewhat 
integrated in global value chains, but there is 
increase  participation. 
ample 
Croatia’s  exports  in  clean  tech  (149)  represent  less 
than 0.2% of its GDP, much less than in Bulgaria, 
Poland  and  Romania.  Simulations  conducted  by 
the  World  Bank  (150)  suggest  that  due  to  its  low 
initial  export  levels  and  high  potential,  Croatia 
could increase its clean energy technology-related 
exports  to  other  EU  countries  several  times  over 
the 2022 level.  

investment 

technologies 

Despite  some  progress,  Croatia  could  do 
more  to support the  development of  the  net 
zero  industry.  Croatia  has  done  some  progress 
by adopting a smart specialisation strategy, which 
steers 
that 
towards 
support its climate goals. In addition, Croatia has a 
dedicated  strategy  for  hydrogen.  Nevertheless,  it 
could do more to support the development of the 
net zero industry. It does not have a robust policy 
framework 
its  development,  nor 
incentives  to  encourage  private  investment  in 
clean  tech,  such  as  resilience  criteria  in  auctions. 
Long industrial permit procedures and the absence 
of  one-stop  shop  (151)  for  industrial  permitting 
complicate  and  slow  down  the  development  of 
additional  manufacturing  capacity.  In  addition, 
Croatia faces a significant challenge in securing a 
skilled workforce that meets the demand from its 
companies, 
energy 
in 
engineering.  

to  support 

renewable 

notably 

(148) The  SineStack  battery  system  helps  reduce  losses  and  energy 
usage  but  also  improves  safety.  See  D.  Sito-sucic,  31 January 
2024,  ‘Electric  carmaker  Rimac  to  produce  stationary  energy-
storage batteries’, available here. 

(149) Electrolysers, electric vehicles batteries, heat pumps, solar, wind. 
(150) World  Bank,  Clean  tech  value  chains,  zooming  in  Croatia, 

12/2024. 

(151) EC, The net-zero manufacturing industry landscape across 

the Member States, 1/2025  

63 

 
 
 
 
 
 
 
Critical raw materials 

Climate mitigation 

Croatia  depends  heavily  on 
imports  for 
critical  raw  materials  needed  for  the 
development of net zero industry. In 2023, the 
main  critical  raw  materials  imported  by  Croatia 
from  non-EU  countries,  in  terms  of  trade  values, 
were  aluminium  (mainly  from  Russia  and  Bosnia-
Herzegovina), 
from 
Kazakhstan,  Colombia  and  Indonesia),  and  silicon 
metal  (from  Bosnia-Herzegovina)  (152).  Imports 
from  some  countries  could  be  affected  by  geo-
political  instability.  At  the  same  time,  Croatia’s 
score  on  the  import  concentration  index  is  the 
lowest  in  the  EU  (153),  which  suggests  a  good 
diversification of its supply sources. 

(primarily 

coking 

coal 

Croatia  has  wide  scope  to 
implement 
measures  strengthening  supply  chains  and 
improving the uptake of circular solutions for 
critical raw materials. Key circular economy and 
waste  management  indicators  are  below  the  EU 
average  (see  below).  However,  initiatives  with  a 
potential  to  reduce  Croatia’s  reliance  on  critical 
raw material and some best practices exist. Under 
its  recovery  and  resilience  plan,  Croatia  finances 
companies  that  invest  in  green  technologies  in 
sectors  such  as  metalworking, 
textile,  food, 
chemical,  construction  and  wood  working.  These 
and other measures promote the circular economy 
and  the  sustainable  supply  of  primary  and 
secondary  raw  materials.  Between  the  end  of 
2024 and the beginning of 2025 Croatia adopted 
two  important  decisions  to  establish  the  National 
Circular  Economy  Council  and  to  prepare  a 
National  Plan  for  the  development  of  the  Circular 
the  period  2026-2032.  Once 
Economy 
these  measures  will  positively 
implemented 
impact on Croatia’s competitiveness and reduce its 
economy’s  environmental  impact.  The  recycling 
rate  for  e-waste,  a  key  source  of  critical  raw 
materials,  is  above  the  EU  average,  at  90%  in 
2021. The reuse and recycling rate for end-of-life 
vehicles  is  also  above  the  EU  average  (96%  vs 
89%  in  2022).  This  positive  element  of  Croatian 
the  car 
waste  management  could  support 
industry’s shift to battery-electric vehicles. 

for 

(152) EC, Raw material Information System, country profile Croatia. 
(153) The import concentration measures how much a country relies on a 
limited  number  of  sources  for  a  basket  of  critical  raw  materials. 
Source: COMEXT. 

Industry decarbonisation 

in 

of 

the 

industry 

Croatia’s 

intensity 

emissions 

Croatia’s manufacturing sector provides less 
than a fifth of its greenhouse gas emissions, 
but 
its 
manufacturing production is high, dominated 
by process emissions (154). At 18%, the share of 
manufacturing 
total 
is  below  the  EU 
greenhouse  gas  emissions 
average  of  21% (155).  Between  2017  and  2022, 
the emissions intensity of manufacturing declined 
more than in the EU on average (by 28%, against 
20%  in  the  EU).  However,  with  540 g  CO2eq  of 
greenhouse  gases  per  euro  of  gross  value  added 
(GVA) in 2022, it was still among the highest in the 
EU  and  twice  the  EU  average.  Greenhouse 
emissions  from  manufacturing  in  Croatia  are 
dominated  by  industry  process  and  product  use, 
which  account  for  59%  of  the  sector’s  emissions, 
the  rest  being  related  to  energy  use.  In  the  EU 
industry  processes  and  product  use 
overall, 
account for 43%. 

Manufacturing  in  Croatia  has  started  to 
reduce  emissions  from  industrial  processes, 
but  cleaner  energy  supply  has  yet  to 
materialise.  Between  2017  and  2022,  both 
process  and  product  use-related  and  energy  use-
related  greenhouse  emissions 
intensity  of 
manufacturing  production  in  Croatia  declined  by 

(154) For the GHG emissions intensity of GVA related to energy use 
and  industrial  processes  and  product  use  respectively,  GHG 
emissions  are  from  inventory  data  in  line  with  the  UNFCCC 
Common  Reporting  Format  (CRF),  notably  referring  to  the 
source sectors CRF.1.A.2 –  fuel combustion in manufacturing 
industries and construction and CRF.2  – industrial processes 
and  product  use.  The  CRF.1.A.2  data  broadly  correspond  to 
the NACE C and E sectors, excluding C-19. GVA data (in the 
denominator  for  both  intensities)  are  aligned  with  this 
sectoral  coverage.  Therefore,  they  are  not  fully  consistent 
with the data referred to in other part of this section. 

(155) In  2023.  Manufacturing  includes  all  divisions  of  the  “C” 
section  of  the  NACE  Rev.  2  statistical  classification  of 
economic  activities.  In  the  remainder  of  this  section,  unless 
indicated  otherwise,  data  on  manufacturing  refer  to  the 
divisions  of  the  NACE  section  C  excluding  division  C19 
(manufacture  of  coke  and  refined  petroleum  products),  and 
the  year  2022.  The  source  of  all  data  in  this  section  is 
Eurostat;  data  following  the  UNFCCC  Common  Reporting 
Framework (CRF) are from the European Environment Agency 
(EEA), republished by Eurostat. 

64 

 
 
 
in 

final  energy  consumption 

23% (156). For energy use, the decline was steeper 
than in the EU overall, which saw a 16% decrease. 
In  the  same  period,  the  share  of  electricity  and 
renewables 
in 
manufacturing  remained  static  at  around  31%. 
The energy intensity of manufacturing experienced 
a  decline,  however,  of  23%,  or  from  2.2 GWh  per 
euro  of  GVA  produced  to  1.7  GWh.  This  suggests 
that 
energy-related 
the 
to  efficiency 
emissions 
improvements, or product improvements reflected 
in the value added, while the shift to green energy 
is yet to come. 

intensity  were  due 

improvements 

in 

Graph A7.1: GHG emission intensity of manu-
facturing and energy-intensive sectors, 2022 

Source: Eurostat. 

Some  energy-intensive  sectors  in  Croatia 
operate  with  high  greenhouse  gas  emission 
intensities  of  production.  Energy-intensive 
industries (157)  account  for  11%  of  Croatia’s 
manufacturing  GVA  (2021).  The manufacturing  of 
chemicals and non-metallic mineral products such 
intensities  of 
as  cement 

recorded  emission 

(156) For the GHG emissions intensity of GVA related to energy 
use and industrial processes and product use respectively, 
GHG  emissions  are  from  inventory  data  in  line  with  the 
UNFCCC  Common  Reporting  Format 
(CRF),  notably 
  fuel 
referring  to  the  source  sectors  CRF1.A.2  – 
combustion  in  manufacturing  industries  and  construction 
and  CRF2  –  industrial  processes  and  product  use.  The 
CRF1A.2  data  broadly  correspond  to  the  NACE  C  and  E 
sectors, excluding C-19. GVA data (in the denominator for 
both  intensities)  are  aligned  with  this  sectoral  coverage. 
Therefore,  they  are  not  fully  consistent  with  the  data 
referred to in other part of this section.  

(157) Notably,  the  manufacture  of  paper  and  paper  products 
(NACE  division  C17),  of  chemicals  and  chemical  products 
(C20),  “other”  non-metallic  mineral  products  (C23;  this 
division includes manufacturing activities related to a single 
substance of mineral origin, such as glass, ceramic products, 
tiles,  and  cement  and  plaster),  and  basic  metals  (C24).  To 
date,  these  industries  are  energy-intensive  –  i.e.  consuming 
much  energy  both  on  site  and/or  in  the  form  of  purchased 
electricity  –  and  greenhouse  gas  emissions  intensive,  in 
various combinations. 

production  (9.7 kg CO2eq/€  and  5.1 kg  CO2eq/€) 
significantly  above  the  EU  total.  High  energy 
prices(158),  and  global  competition  more  broadly, 
put pressure on energy-intensive industries.  

its 

is  rolling  out  some 

innovative 
Croatia 
projects  to  modernise 
industry,  but 
further  efforts  are  needed.  To  support  the 
deployment  of  renewables  and  improve  energy 
efficiency in manufacturing, Croatia is increasingly 
using the Modernisation Fund. In addition, in 2024 
the  cement  industry  started  to  roll  out  a  carbon 
capture  and  storage  project  co-financed  by  the 
Innovation  Fund,  which  aims  to  capture  around 
360 000  tonnes  of  CO2  annually.  As  Croatia  aims 
to become a regional leader in carbon capture and 
is  currently  conducting  feasibility 
storage, 
studies  to  identify  potential  storage  sites.  Croatia 
started cooperation with neighbouring countries on 
the  development  of  hydrogen  infrastructure  and 
on building the value chain for production of green 
hydrogen. By end of 2026, Croatia plans to build a 
capacity of at least 30 MW in electrolysers and to 
launch  biomethane  production.  However,  further 
modernisation  measures  are  needed  to  support 
the  decarbonisation  of  manufacturing  production 
processes,  particularly 
in  the  energy-intensive 
sectors, and a faster shift to renewable sources of 
energy, including via on-site generation.  

it 

Reduction  of  emissions  in  the  effort  sharing 
sectors 

Croatia is projected to reach its 2030 target 
for the effort sharing sectors if it adopts and 
implements  the  planned  additional  climate 
mitigation  measures (159).  GHG  emissions  from 
Croatia’s  effort  sharing  sectors  in  2023  are 
expected  to  have  been  9.9%  below  the  level  of 
2005.  By  2030,  current  policies  are  projected  to 
reduce  them  by  8.2%  relative  to  2005  levels; 
additional  policies  under  Croatia’s  final  national 
energy  and  climate  plan  are  projected  to  achieve 
further  reductions  of  13.1  percentage  points. 
Hence,  Croatia  is  projected  to  overachieve  its 
effort sharing target of a 16.7% reduction, by 4.6 

(158) For a detailed analysis of energy prices, see Annex 8 on the 

affordable energy transition. 

(159) The national greenhouse gas emission reduction target is set 

out in Regulation (EU) 2023/857 (the Effort Sharing 
Regulation). It applies jointly to buildings (heating and 
cooling); road transport, agriculture; waste; and small industry 
(known as the effort sharing sectors). 

65 

024681012C-C19C17C20C23C24KG CO2eq / €CroatiaEU-27 
  
 
 
percentage points (160), if it adopts and implements 
those measures. Croatia has recently amended its 
climate legislation to include the climate neutrality 
target  and 
target. 
Furthermore,  sectoral  targets  will  be  adopted  for 
the effort sharing sectors.  

its  2030  effort  sharing 

Specific  investments  are  planned  to  tackle 
the  growing  GHG  emissions  from  domestic 
road  transport  in  the  next  two  years  aimed 
at  boosting  the  very  low  uptake  of  zero-
emission  vehicles  (161)(162)  and  improving  the 
energy-efficiency  of  the  rail  transport.  This 
will  be  supported  by  the  Recovery  and  Resilience 
Fund, Cohesion Funds and the Modernisation Fund, 
amongst  others.  However, 
the 
challenge  more  comprehensively,  it  will  be  crucial 
to  also  address  the  low  and  decreasing  share  of 
renewables  (in  2023  0.9%  vs  10.8%  EU  average) 
and  to  speed  up  the  shift  to  more  sustainable 
transport  options  while  reviewing  the  existing 
fossil fuels subsidies.   

to  address 

Graph A7.2: Greenhouse gas emissions in the 
effort sharing sectors, 2005 and 2023 

Source: European Environment Agency 

(160) The emissions from effort sharing sectors for 2023 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  Croatia’s  final 
national energy and climate plan. 

(161) The share of newly registered electric cars was lower than 5% in 

2023. EEA,2024. 

(162) Investments will focus on purchase of zero-emission 

cars/vehicles and electric and hydrogen charging infrastructure.  

Sustainable industry 

Circular economy transition 

Despite  positive  trends,  Croatia 
is  still 
lagging  behind  in  the  circular  transition. 
Standing  at  6.2%  in  2023,  Croatia’s  circular 
material use is below the EU average but with the 
current  increase  rate,  the  gap  is  likely  to  persist. 
Resource  productivity  too,  was  below  the  EU 
average in 2023, with EUR 1.23 generated per kg 
of  material  consumed.  Even  if  improving  slowly 
over  the  past  decade  Croatia’s  low  resource 
productivity keeps the country vulnerable to supply 
chain  disruptions  and  to  the  volatile  raw  material 
markets. 

There  is  scope  for  Croatia  to  implement 
additional  policies  to  increase  circularity. 
Croatia  has  not  yet  adopted  a  comprehensive 
national  circular  economy  strategy.  The  country’s 
circular  economy  policy  is  linked  more  to  waste 
management and less to the life cycle of products 
from the design phase to the end-of-life. Some of 
the  positive  reforms  introduced  lately,  like  the 
‘Regulation  on  waste  management  and  deposit 
fees’ that include a coefficient of eco-modulation, 
the  introduction  of  a  National  Circular  Economy 
Council  and  the  decision  to  establish  a  National 
Plan for the development of the Circular Economy 
have yet to produce their impact. The transition to 
circular economy is however addressed by several 
government documents (163). The Croatian recovery 
and 
reforms  and 
investments to make the economy more circular in 
the  areas  of  sustainable  tourism;  skills;  biowaste; 
and building development and construction waste. 
Support  is  also  provided  under  cohesion  policy 
programmes 
and  medium-sized 
enterprises  and  innovative  solutions  and  training. 
Croatia’s  new  rules  for  green  public  procurement, 
in  force  since  January  2025,  apply  to  tender 
procedures relating to specific product groups (164) 
such as electric energy; computers and computers 
equipment;  air 
transport 
conditioners; 
vehicles; and food and catering. 

resilience  plan 

includes 

small 

road 

to 

(163) Ministry of Economy and Sustainable Development, 2021, 

Low-carbon Development Strategy, Link. 

(164) Zelena javna nabava, 2024, Hrvatska predvodnica zelene 

tranzicije: Vlada RH donijela Odluku o provedbi zelene javne 
nabave!, Link. 

66 

0246810121416182020052023MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
       
 
 
Croatia  lags  behind  in  waste  management. 
Despite producing less waste than the EU average 
(475 kg  vs  511 kg  per  capita,  see  Graph  A7.3), 
Croatia is the EU country with the highest increase 
in waste generation since 1995. Furthermore, with 
a  recycling  rate  of  36%,  it  is  ranked  among  the 
low  performers  in  the  EU  for  municipal  waste 
recycling in 2023 and is not on track to meet the 
2025  recycling  and  the  2035  landfilling  targets. 
Croatia  is  also  at  risk  of  missing  both  the  55% 
preparing  for  reuse  and  recycling  target  for 
municipal  waste,  and  the  65%  packaging  waste 
recycling target. In 2021, at 35%, its recycling rate 
for  plastic  packaging  was  below  the  EU  average 
with no improvement since 2017. In 2022, 81.8% 
of construction and demolition waste was recycled, 
excluding  backfilling,  above  the  EU  average  of 
79.8%.  At  about  15  tonnes  per  person,  the 
country’s material footprint is however on par with 
the EU average. 

Graph A7.3: Municipal waste treatment 

Source: Eurostat 

Current  investment  in  the  circular  transition 
is  insufficient  and  projects  are  implemented 
at a slow pace. The swift establishment of waste 
management centres under cohesion policy would 
help  Croatia  progress  towards  meeting  recycling 
targets.  Croatia 
is  estimated  to  need  total 
additional investments of at least EUR 118 million 
per  year  for  the  circular  economy  transition, 
including  for  waste  management.  To  close  the 
circular  economy  investment  gap  to  attain  policy 
targets  that  are  not  yet  budgeted,  EUR 26 million 

67 

is  needed  for  recent  initiatives  on  the  circular 
economy  such  as  eco-design  for  sustainable 
products;  packaging  and  packaging  waste; 
labelling  and  digital  tools;  critical  raw  materials 
recycling;  and  measures  proposed  under  the 
amendment of the Waste Framework Directive. An 
additional  EUR 74  million  is  needed  to  unlock  the 
circular economy potential (165). 

Zero pollution industry 

Croatia has made some progress in reducing 
air  pollution,  which  is  now  decoupled  from 
GDP  growth.  The  2020-2029  emission  reduction 
commitments  under  the  national  air  pollution 
control programme are met, and the country is on 
track  to  meet  the  commitments  for  the  2030s, 
except for nitrogen oxide (NOx). In 2023, limits set 
by the Ambient Air Quality Directive for PM10 were 
breached in one air quality zone and target values 
for  ozone  concentration  were  not  met  for  two 
quality  air  zones.  Between  2010  and  2022, 
nitrogen oxide (NOx) emissions decreased by 45%. 
The main reason for the failure to meet NOx limit 
values is road transport. 

Croatia is one of the EU’s lowest emitters of 
industry  pollutants  to  water,  but  levels  of 
releases  to  air  are  high.  With  EUR  33.8  per 
thousand  EUR  of  GVA,  damage  to  health  and 
environment  due  to  the  main 
industrial  air 
pollutants in Croatia is higher than the EU average 
(EUR 27.5).  Most  emissions  to  air  come  from  the 
energy  sector  (dust  emissions)  and  the  mineral 
industry 
(NOX  emissions).  Both  sectors  also 
contribute  to  emissions  of  sulfur  dioxide  and 
heavy  metals.  On  water  pollution, Croatia  has  the 
5th lowest absolute amount of emissions of heavy 
metals  to  water  in  the  EU,  and  EUR 0.14  in 
damage to health and the environment per billion 
EUR  of  GVA.  Its  emission  intensity  for  water 
pollutants  is  below  the  EU  average.  The  key 
emitter  of  heavy  metals  and  nitrogen  to  water  is 
the refining sector. 

The costs of pollution remain higher than the 
investment 
in  pollution  prevention  and 
control.  For  2022,  about  3 800  deaths  were 
attributed 
(PM2.5) 
pollution;  450  deaths  were  attributed  to  nitrogen 

to  fine  particulate  matter 

(165) European Commission, DG Environment, Environmental 

investment needs & gaps assessment programme, 2025 
update. Expressed in 2022 prices. 

459433456478475010020030040050060020192020202120222023Kg per capitaMaterial recyclingComposting and digestionLandfill/disposalTotal incineration (incl. energy recovery)Waste treatment unspecifiedEU-27 total waste per capita 
       
 
dioxide, and 980 to ozone (166).  The costs from all 
pollutants are estimated at EUR 1.7 billion (167).  In 
contrast,  to  meet  its  objectives  for  pollution 
prevention and control and address the health and 
economic  costs  of  pollution,  Croatia  needs  an 
additional  EUR 226  million  per  year  (0,34%  of 
GDP), mostly for measures on clean air (168). 

(166) Latest available annual estimates by the European 

Environment Agency [Harm to human health from air 
pollution in Europe: burden of disease status, 2024 | 
European Environment Agency's home page]. In terms of 
years of life lost, this implies 34 200 years for PM2.5, 4 100 
for NO2, and 8 900 for O3. 

(167) For 2021, value of statistical life method. Source: EEA, 2024, 
The costs to health and the environment from industrial air 
pollution in Europe – 2024 update, Link. 

(168) European Commission, DG Environment, Environmental 

investment needs & gaps assessment programme, 2025 
update. Expressed in 2022 prices. 

68 

 
 
Table A7.1:  Key clean industry and climate mitigation indicators: Croatia 

Source:  Net zero industry: European Commission: The net-zero manufacturing industry landscape across Member States: final 
report, 2025. Automotive industry transformation: Eurostat. Critical raw materials: Eurostat. Climate mitigation: See 
footnotes in the "climate mitigation" section; reduction of effort sharing emissions: EEA greenhouse gases data viewer; European 
Commission, Climate Action Progress Report, 2024. Sustainable industry: Years of life lost due to PM2.5: Eurostat and EEA, 
Harm to human health from air pollution in Europe: burden of disease status, 2024. Air pollution damage: EEA, EU large industry 
air pollution damage costs intensity, 2024. Emissions covered: As, benzene, Cd, Cr, Hg, NH3, Ni, NMVOC, NOX, Pb, dioxins, PM10, 
PAH, SOX. Water pollution intensity: EEA, EU large industry water pollution intensity, 2024. Releases into water covered from 
cadmium, lead, mercury, nickel. Other indicators: Eurostat. 

69 

Strategic autonomy and technology for the green transitionNet zero industryOperational manufacturing capacity 2023- Solar PV (c: cell, w: wafer, m: module), MW300-350 (m)- Electrolyzer, MW-- Wind (b: blade, t: turbine, n: nacelle), MW-- battery, MWh-Automotive industry transformation201720182019202020212022202320182021Motorisation rate (passenger cars per 1000 inhabitants), %398420439449465478495539561New zero-emission vehicles, electricity motor, %0.110.300.441.773.182.872.561.038.96Critical raw materials201720182019202020212022202320182021Material import dependency, %31.432.733.835.536.836.924.222.6Climate mitigationTrendIndustry decarbonisation201720182019202020212022202320172022GHG emissions intensity of manufacturing production, kg/€0.750.710.70.680.610.540.510.340.27Share of energy-related emissions in industrial GHG emissions57.758.558.559.660.259.658.544.842.5Energy-related GHG emissions intensity of manufacturing287.9279.6266.8275.6249.3222.8-158.4132.9and construction, kg/€Share of electricity and renewables in final energy consumption31.732.431.531.632.831.732.343.344.2in manufacturing, %Energy intensity of manufacturing, GWh/€2.202.142.102.051.871.711.761.291.09Share of energy-intensive industries in manufacturing production11.17.3GHG emissions intensity of production in sector [...], kg/€- paper and paper products (NACE C-17)0.410.390.340.300.220.650.63-0.730.68- chemicals and chemical products (NACE C20)4.424.743.532.9214.599.6912.17-1.251.26- other non-metallic mineral products (NACE C23)7.546.997.766.184.285.065.06-2.532.24- basic metals (NACE C24)1.301.610.771.731.610.970.90-2.793.49Reduction of effort sharing emissions20182019202020212022202320182023GHG emission reductions relative to base year, % 3.46.4-9.9- domestic road transport15.418.64.512.921.44.01.45.2- buildings-27.4-29.6-27.9-24.2-28.1-30.721.432.92005202120222023TargetWEMWAMEffort sharing: GHG emissions, Mt; target, gap, %18.118.719.216.3-16.7-8.54.6Sustainable industryTrendCircular economy transition20182019202020212022202320182021Material footprint, tonnes per person13.714.313.614.414.515.214.715.0Circular material use rate, %5.0        5.4        5.5        6.1        6.8        6.2        11.611.1Resource productivity, €/kg1.2        1.3        1.1        1.3        1.5        1.6        2.12.3Zero pollution industryYears of life lost due to PM2.5, per 100,000 inhabitants1,207    920      1,014    1,001    1,267    -702571Air pollution damage cost intensity, per thousand € of GVA    33.8          27.5      Water pollution intensity, kg weighted by human factors per bn € GVA    0.1   0.9CroatiaEU-27CroatiaEU-27CroatiaEU-27 
 
 
  
 
ANNEX 8: AFFORDABLE ENERGY TRANSITION 

This  annex  outlines  the  progress  made  and 
the  ongoing  challenges  faced  in  enhancing 
energy  competitiveness  and  affordability, 
while advancing the transition to net zero in 
Croatia.  It  examines  the  measures  and  targets 
proposed  in  the  final  (draft)  updates  to  the 
national  energy  and  climate  plans  (NECPs)  for 
2030. 

In  2024,  Croatia’s  energy  system  was 
strained  by  extreme  seasonal  temperatures, 
leading  to  higher  electricity  consumption, 
increased 
depleted  hydro  reserves  and 
reliance  on  costly 
imported  fossil  fuel-
generated  electricity,  driving  up  prices  and 
highlighting  the  vulnerabilities  of  Croatia’s 
energy  system.  While  the  uptake  in  rooftop 
photovoltaics  increased  solar  production  in  2024, 
grid-scale  solar  and  wind  projects  stalled  due  to 
delays  in  new  grid  fee  setting  and  pending  high-
voltage reinforcement, limiting overall deployment 
of cheap renewables. Further structural challenges 
such  as  limited  system  flexibility,  low  consumer 
empowerment,  weak  demand-side  response,  and 
stagnating energy efficiency gains - leaves Croatia 
exposed to sustained pressure on electricity prices. 

Energy prices and costs 

Graph A8.1: Retail energy price components for 
household and non-household consumers, 2024 

(i) For household consumers, consumption band is DC for 
electricity and D2 for gas. Taxes and levies are shown 
including VAT. 
(ii) For non-household consumers, consumption band is ID for 
electricity and I4 for gas. Taxes and levies are shown 
excluding VAT and recoverable charges, as these are typically 
recovered by businesses. 
Source: Eurostat 

Croatian  energy  prices  remained  stable  in 
2024  compared  to  2023.  Household  electricity 
and  gas  prices  remained  significantly  below  EU-
averages,  while  non-household  consumers  prices 
for  electricity  hovered  above  EU-averages  for 
electricity. For  both  household  and  non-household 
consumers, 
supply  price 
the  energy  and 
component  represent  a  higher  share  than  EU-
average, while network costs and taxes and levies 
components are notably lower. For gas, taxes and 
levies account for only 4.8% of the total price for 
household  consumers,  significantly  below  the  EU 
average  of  27.8%.  For  non-household  consumers, 
the share is 6.4%, also lower than the EU average 
of 11.6%. 

Graph A8.2: Monthly average day-ahead wholesale 
electricity prices and European benchmark 
natural gas prices (Dutch TTF) 

(i) the Title Transfer Facility (TTF) is a virtual trading point for 
natural gas in the Netherlands. It serves as the primary 
benchmark for European natural gas prices. 
(ii) CWE and SEE respectively provide average prices in the 
central-western European (Belgium, France, Germany, 
Luxembourg, the Netherlands and Austria) and south-eastern 
European (Bulgaria, Greece and Croatia) markets. 
Source: S&P Platts and ENTSO-E 

electricity 

Croatia’s  wholesale 
prices 
averaged  94.6 €/MWh  in  2024 (169)  (the  ninth 
highest  in  the  EU);  and,  while  they  declined 
early  in  the  year  amid  falling  natural  gas 
costs, they  surged  during  the  spring/summer 
and  again  in  the  winter  (diverging  from 
central-western  European  (CWE)  markets). 
This  price  increase  was  driven  by  factors  that 
affected  both  consumption  and  generation. 
Prolonged summer heatwaves and a colder winter 
in  the  region  led  to  higher  consumption  (+3%  in 

(169) 

Fraunhofer (ENTSO-E data). 

70 

 
 
 
 
 
 
 
limited  non-fossil 

2024).  Reduced  hydropower  reserves  (-15%  in 
2024 (170)  and 
flexibility 
exacerbated the supply-demand gap. This gap was 
mainly filled with higher imports, particularly from 
Slovenia  (where  costly  natural  gas  and  coal-fired 
generation  was  ramped  up  by  20%  and  10% 
respectively 
in  2024),  especially  during  peak 
demand  hours.  Consequently,  and  more  than  in 
2023,  these  conditions  drove  concentrated  price 
spikes  in  evening  hours  when  demand  remained 
high. However, average daytime hourly prices were 
lower than in 2023, probably due to the uptake of 
solar output in both Croatia (+110% in 2024) and 
Slovenia (+51% in 2024) (171). 

Flexibility and electricity grids 

for 

cross-zonal 

To  strengthen  its  compliance  with  the  EU’s 
70%  minimum  threshold  of  capacity  made 
available 
electricity 
trading (172),  Croatia  has  established  an 
action  plan  for  2022–2025 (173).  It  focuses  on 
increasing capacity with Hungary and Slovenia via 
network  development  and  optimisation,  and  on 
improved congestion management. Croatia is part 
of  the  Core  capacity  calculation  region  (CCR) (174) 
where  increased  collective  efforts  are  needed  to 
reach the 70% threshold. 

in 

but 

is  well 

interconnected  with 
Croatia 
additional 
neighbouring  markets, 
investments 
its  national  grid  are 
necessary in order to improve the integration 
and  uptake  of  renewables.  Croatia’s  electricity 
interconnection target is well above the minimum 
required  level,  reaching  49%  for  2025.  Two  key 
(PCIs)  have 
projects  of 
contributed  to  this:  the  Croatia-Hungary-Slovenia 
transmission  grid  connection  project  and  the 

common 

interest 

(170) 
(171) 

ENTSO-E. 
Yearly  electricity  data,  Ember 
consumption data throughout the paragraph). 

(generation  and 

(172) 

TSOs  are  required  under  EU  law  to  make  70%  of 
transmission  capacity  available  for  electricity  trading  with 
neighbours by the end of 2025. 

(173) 

Action  plan  in  line  with  Article 15  of  Regulation 

(EU) 2019 943.pdf. 

(174) 

A CCR is a group of countries that calculate the cross-
border electricity trade flows together. Core is the CCR which 
covers Belgium, Czechia, Germany, France, Croatia, Hungary, 
the  Netherlands,  Austria,  Poland,  Romania,  Slovenia  and 
Slovakia (and, once connected, Ireland). 

71 

SINCRO.GRID smart electricity grid project. Croatia 
is  also  investing  in  its  national  grid  under  its 
recovery  and  resilience  plan  (RRP)  in  the  ongoing 
upgrade  of  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. However, internal grid constraints are still 
limiting renewables deployment. In 2023, 45 GWh 
of  renewables  were  curtailed  (1.2%  of  total 
renewable  energy  sources  [RES]  production) (175), 
while  negative  price  hours  doubled  in  2024  to 
184 hours (176). Expanding Dalmatia’s transmission 
line) 
capacity  (e.g. the  400 kV  Konjsko-Melina 
towards northern consumption and interconnection 
hubs is essential  in order to fully  unlock Croatia’s 
strong wind and solar potential. 

In  Croatia,  connection  to  the  grid  is  one  of 
the  major  obstacles  to  the  development  of 
renewables.  Delay  on  the  part  of  the  Croatian 
Energy Regulatory Agency (HERA) in setting a new 
grid  connection 
fee  has  halted  numerous 
renewable projects and led to divestment by some 
international  renewable  developers  from  Croatia. 
the 
Croatia  has  not  yet 
Renewable  Energy  Directive  III  into  national  law. 
There  are  no  specific  acceleration  measures  for 
renewable  energy  grid  projects.  The  permitting 
procedures  are  similar  for  cross-border  and 
internal  projects.  However,  PCIs  automatically 
qualify  for  ‘strategic  investment  project’  status 
under  the  Strategic  Project  Investments  (SPI)  Act, 
which  allows  procedural  advantages  (e.g. urgent 
handling of applications). 

transposed 

fully 

Croatia  is  expanding  its  non-fossil  flexible 
power  capacity,  but  demand-side  response 
(DSR)  and  consumer  empowerment  need  to 
be  lifted.  In  addition  to  the  270 MW  Velebit 
facility  that  is  currently  in  operation,  Croatia  is 
developing  a  new  hydro  pumped  storage  plant 
(Vrdovo  450 MW project) along  with its  first  grid-
scale battery and virtual power plant (VPP) system 
with  a  60 MW/120 MWh  capacity  near  Šibenik.  In 
theory,  Croatia’s  regulatory  framework  allows  all 
new  actors  and  distributed  energy  resources 
(DERs) to access day-ahead and intra-day markets 
as  well  as  to  participate  in  ancillary  services  and 
provide  congestion  management  services  to  TSOs 
(except  energy  communities) (177). 
In  practice, 

(175) 
(176) 
(177) 

ACER. 
ENTSO-E. 
2023 Market Monitoring Report, ACER. 

 
 
 
however, the absence of a dedicated  independent 
aggregator  framework  limits  DERs’  access  to 
wholesale  markets.  This  has  resulted  in  Croatia 
having  the  second 
lowest  number  of  active 
nationwide  electricity  suppliers  in  the  EU  and  one 
of  the  highest  market  concentrations  in  the 
EU (178). On consumer empowerment, the switching 
rate is still very low (less than 2%) which indicates 
a lack of participation by consumers in the market. 
24%  of  final  household  consumers  had  smart 
meters  in  2023 (179).  This  is  an  improvement  on 
the  19%  in  2022,  but  it  is  still  far  below  the  EU 
target of 80% of final customers and is preventing 
an  uptake  in  subscription  to  dynamic  contracts. 
According to the local energy communities’ citizen 
association,  only  three  energy  communities  have 
completed  the  necessary  administrative  steps  to 
establish  themselves  as  legal  entities  in  Croatia, 
though  they  have  not  yet  started  producing 
electricity - lagging significantly behind the rest of 
the EU in development. 

Electricity  accounted  for  20.3%  of  Croatia’s 
final  energy  consumption  (FEC)  in  2023 
(slightly below the EU average of 22.9%) but 
this  share  has  remained  largely  stagnant  in 
last  decade (180),  partly  due  to  an 
the 
unfavourable  electricity-to-gas  price  ratio 
that  disincentivizes  electrification  and  cost-
effective  decarbonization.  Electricity  accounts 
for  24.8%  and  26.6%  of  households’  and 
industry’s FEC respectively (see also Annex 7). For 
the transport sector, this share remains negligible 
at  1.0%.  Further  progress  in  electrification  across 
sectors is  required to  cost-effectively  decarbonise 
the economy and bring the benefits of affordable 
renewable  generation  to  consumers.  In  2024’s 
second semester, Croatia had some of the lowest 
household  energy  prices 
in  the  EU  due  to 
government support, but its electricity-to-gas price 
ratio was the fifth highest. Before taxes and levies, 
electricity  cost  2.7  times  more  per  unit  than  gas, 
rising  to  3.3  after.  Taxes  and  levies  made  up 
17.7%  of  electricity  costs  but  only  5.9%  for  gas, 
discouraging household electrification. For energy-

(178) 

2024  Market  Monitoring  Report  on  Energy  Retail  and 

Consumer Protection, ACER-CEER. 

(179) 

This 

improvement 

is  supported  by  the  ongoing 
nationwide  roll-out  of  100 000  smart  meters  by  2026,  co-
financed via the Croatian RRP. 

(180) 

The  CAGR  (compound  annual  growth  rate)  was  0.1% 
between  2013  and  2023.  The  minimum/maximum  shares 
were  20%  and  20.8%  respectively.  Source:  Final  energy 
balances, Eurostat. 

72 

intensive  industries,  electricity  prices  were  among 
the highest in the EU (seventh highest), with higher 
taxes  on  electricity  than  gas  for  this  consumer 
segment, there is also room for fiscal adjustments. 
Before  taxes  and  levies,  electricity  cost  3.7  times 
more per unit than gas, rising to 3.9 after (181). 

Renewables and long-term contracts 

Croatia’s  renewable  sources  benefit  from 
historically  strong  hydro  capacity  and 
growing  rooftop  solar  penetration  which 
altogether  represented  73%  of  electricity 
generation  in  2024  (the  EU’s  overall  RES 
share  was  47%).  Hydropower  remains  the  key 
renewable  source,  representing  close  to  44%  of 
the mix (one third of which is run-of-river hydro). It 
is a cheap and renewable source of electricity but 
is  also  highly  sensitive  to  the  shifting  climate,  as 
shown  in  2024,  which  is  expected  to  bring  more 
frequent and intense droughts, along with reduced 
snowmelt.  Wind  generation  is  slowly  growing  and 
represented  16%  of  all  generation  in  2024  (vs 
14% in 2023). Solar generation is also growing but 
remains limited (less than 6%) (182). Croatia added 
a  record  397 MW (183)  of  solar  capacity  (almost 
exclusively  rooftop)  in  2024,  but  wind  capacity 
stagnated  (+31  MW  in  2024  vs  +173  MW  in 
2023).  Overall,  Croatia’s  solar  and  wind  potential 
is  still  untapped,  at  both  rooftop  and  utility-scale 
levels. In terms of gross final energy consumption 
(based  on 
the  Renewable  Energy  Directive 
methodology),  the  share  of  renewable  energy 
sources  remained  stagnant  at  28%  in  2023  (EU 
average at 24.5%) (184). 

(181) Source: Eurostat. For household consumers, consumption 
band is DC for electricity and D2 for gas, which refer to 
medium-sized consumers and provide an insight into 
affordability. For non-household consumers, consumption 
band is ID for electricity and I4 for gas, referring to large-
sized consumers, providing an insight into international 
competitiveness (price used for the calculation excludes VAT 
and other recoverable taxes/levies/fees as non-household 
consumers are usually able to recover VAT and some other 
taxes). 

(182) 
Yearly electricity data, Ember. 
(183) Renewable capacity statistics 2025, IRENA. 

(184) Eurostat. 

 
 
 
Graph A8.3: Croatia's installed renewable capacity 
(left) and electricity generation mix (right) 

respectively.  FEC  decreased  in  residential  and 
services  by  2.7%  and  3.5%  respectively,  showing 
that energy efficiency efforts in buildings continue 
to  deliver  savings.  Additional  energy  efficiency 
efforts to address the energy savings potential  in 
industry and tertiary sectors could boost Croatia’s 
competitiveness  and  lower  energy  costs.  The 
recast  Energy  Efficiency  Directive  (EED)  requires 
Croatia  to  reach  6.80 Mtoe  in  PEC  and  5.88 Mtoe 
in FEC by 2030. 

“Other” includes renewable municipal waste, solid biofuels, 
liquid biofuels, and biogas. 
Source: IRENA, Ember 

Croatia  has  made  progress  on  permitting 
procedures for renewable energy. This includes 
the use of positive administrative silence for small 
installations, transparency, etc. However, delays in 
in  the 
the 
electricity  sector  and  the  absence  of  a  one-stop-
shop  have  created  bottlenecks 
in  connecting 
projects. 

implementation  of 

legal  reforms 

Croatia held a new renewable energy auction 
in  2024,  allocating  support  to  more  than 
400 MW  of  solar  PV.  No  new  schedule  on  the 
expected allocation of support for renewables had 
been 
the  Union  Renewables 
Development Plans platform by the end of 2024. 

released 

in 

(PPAs).  Apart 

regulatory  barriers, 

Croatia  does  not  have  a  market  for  power 
purchase  agreements 
from 
possible 
the  pipeline  of 
renewable  energy  projects  is  too  constrained  to 
allow  sufficient  supply  to  feed  a  PPA  market.  In 
these  circumstances,  electricity  consumers  can 
only  have  direct  access  to  renewable  electricity 
through on-site generation. 

Energy efficiency 

Croatia’s  energy  efficiency  gains  have 
slowed  down  overall,  although  energy 
efficiency  efforts  in  residential  and  services 
are  continuing  to  deliver  energy  savings. 
Primary  energy  consumption  (PEC)  increased  by 
2.9%  in  2023  to  8.54 Mtoe  compared  with  2022. 
Final energy consumption (FEC) increased by 3.2% 
to 7.10 Mtoe. Compared with 2022, FEC increased 
in  industry  and  transport  by  4.0%  and  11.0% 

73 

to 

purposes, 

No  significant  measures  are  being  taken  in 
Croatia  to  phase  out  the  use  of  fossil  fuels, 
to  lower  gas  consumption  for  heating  and 
cooling 
significantly 
or 
modernise  and  electrify  heating  and  cooling 
systems. Croatia relies on a large net renewables 
butt  heating  and  cooling  systems,  but  these  are 
often  not  efficient  (as  per  the  efficient  district 
heating  and  cooling  definition  in  the  Energy 
Efficiency Directive) and need to be modernised in 
order  to  accommodate 
low-temperature  heat 
supply. That is why Croatia through RRP and ERDF 
allocated  more  than  EUR  76  million  for  research 
for  geothermal  potential  for  district  heating 
systems.  Croatia  still  has  to  enable  citizens  to 
access  to  their  real  heating  consumption  and 
submetering 
in  multiapartment 
individual 
buildings.  Croatia 
the 
provided 
not 
has 
Commission  with  a  comprehensive  heating  and 
cooling  assessment  in  which  it  identifies  the 
potential  for  the  application  of  high-efficiency 
cogeneration  and  efficient  district  heating  and 
cooling  (in  line  with  Article 25(1)  of  the  EED)  and 
has given no indication of when it will do so. 

Croatia  needs  to  step  up  its  efforts  in  the 
residential building sector in order to achieve 
its  2030  energy  consumption  target  for 
buildings.  Residential  FEC  decreased  in  2023 
compared  with  2022  but  has  remained  almost 
constant  since  2018  (when  one  applies  a  climate 
correction). Croatia is therefore invited to renovate 
its  building  stock.  Encouraging  progress  has  been 
made  on  this  point  during  the  post-earthquake 
reconstruction process. 

final 

Heating and cooling represented almost 80% 
of  Croatia’s 
energy 
residential 
in  2022. Croatia  has  around 
consumption 
in 
275 000 
residential  buildings.  Financial 
for 
installation of heat pumps is available, amounting 
to EUR 4 250 or 40% of the total cost for a typical 
family.  Electricity  in  Croatia  was  3.3 times  more 

individual  gas  boilers 

installed 
support 

 
 
expensive than gas in 2023. This means that end 
users who switch to heat pumps may not get any 
economic benefit from any energy saving.  

Fossil fuel subsidies 

in 

investment 

in  Croatia  are 

Croatia  has  a  national  financing  framework 
energy 
that  mobilises 
efficiency  based  mainly  on  grant-support 
programmes  for  energy  renovations,  as  well 
as some dedicated financial instruments. The 
main  programmes  supporting  energy  efficiency 
investment 
the  Ministry  of 
Construction’s  energy  renovation  programmes  for 
the different segments of the building stock. These 
rely entirely on grants and there is limited scope to 
mobilise further investment. Croatia also has some 
financial instruments for energy efficiency (e.g. the 
Environmental  Protection  and  Energy  Efficiency 
Fund,  and  the  Croatian  Bank  for  Reconstruction 
and Development).  

Security of supply and diversification  

Croatia  has  significantly  invested  in  gas 
infrastructures  in  order  to  enhance  supply 
diversification  and  regional  energy  security. 
The  CESEC  action  plan  on  gases,  which  was 
endorsed  in  2024,  identifies  four  REPowerEU 
projects  in  Croatia,  whose  timely  completion  in 
2025  will  be  critical:  (i) the  Krk  LNG  terminal 
expansion  (scheduled  for  Q3 2025);  (ii) increasing 
the  capacity  of  the  Zlobin-Bosiljevo  pipeline 
(scheduled  for  Q1 2025);  (iii) the  Bosiljevo-Sisak-
Kozarac  pipeline  (scheduled  for  December  2025); 
and  (iv) the  Lucko  (Croatia)  –  Zabok  (Slovakia) 
interconnection  (scheduled  for  December 2025). 
On  renewable  gases,  Croatia  still  has  to  further 
define its hydrogen and biomethane needs and to 
plan  the  relevant  infrastructure  it  needs  in  line 
with its hydrogen and gas package requirements. 

Croatia  has  made  progress  on  renewables, 
but  remained  as  heavily  reliant  on  fossil 
fuels in 2023 as it had in 2022. Oil accounted 
for  41.4%  of  gross  inland  consumption,  natural 
gas  for  26.3%  and  coal  for  4% (185).  Renewables 
(and biofuels) contributed 27.8% (186).  

(185) 

Electricity  and  heat  are  excluded  in  order  to  avoid 

double-counting. The focus is on primary energy sources. 

(186) 

Gross inland consumption (Eurostat). 

Income/price 

In  2023,  environmentally  harmful  (187)  fossil 
fuel  subsidies  without  a  planned  phase-out 
before  2030  represented  0.65%  (188)  of 
Croatia’s  GDP  (189),  above  the  EU  weighted 
support 
average  of  0.49%. 
accounted  for  81%  of  this  volume,  while  tax 
measures  represented  19%.  Fossil  fuel  subsidies 
without  a  planned  phase-out  before  2030  and 
which  do  not  specifically  address,  in  a  targeted 
way,  energy  poverty  nor  genuine  energy  security 
concerns  included  the  ongoing  emergency  price 
cap  on  petroleum  products,  partial  refunds  of 
excise  duties  for  diesel  in  commercial  transport, 
and  exemption  of  excise  duty  rates  on  gasoil  for 
agriculture, 
fish  growing,  and  aquaculture. 
Additionally,  Croatia’s  2023  Effective  Carbon 
Rate (190)  averaged  EUR  62.3  per  tonne  of  CO₂, 
below the EU weighted mean of EUR 84.80 (191). 

(187) Direct fossil fuel subsidies that incentivise maintaining or 
increasing in the availability of fossil fuels and/or use of 
fossil fuels. 

(188) Numerator is based on volumes cross-checked with the 

Croatian authorities. For all Member States, it includes public 
R&D expenditures for fossil fuels as reported by the IEA 
(Energy Technology RD&D Budgets) and excludes, for 
methodological consistency, excise tax exemption on 
kerosene consumed in intra-EU27 air traffic. 

(189) 2023 Gross Domestic Product at market prices, Eurostat. 

(190) The Effective Carbon Rate is the sum of carbon taxes, ETS 
permit prices and fuel excise taxes, representing the 
aggregate effective carbon rate paid on emissions. 

(191) OECD (2024), Pricing Greenhouse Gas Emissions 2024 

74 

 
 
 
Table A8.1:  Key Energy Indicators 

Source: Eurostat, ENTSO-E, S&P Platts 

75 

20212022202320242021202220232024Household consumer - Electricity retail price (EUR/KWh)0.1306          0.1416              0.1481              0.1478          0.2314              0.2649          0.2877          0.2879          Energy & supply [%]44.3%46.3%47.5%47.8%36.6%54.3%55.6%47.8%Network costs33.5%32.6%31.6%31.6%26.7%25.3%24.8%27.2%Taxes and levies including VAT22.2%21.2%20.9%20.6%36.7%20.3%19.6%25.0%VAT11.5%11.4%11.5%11.5%14.5%13.4%13.8%14.6%Household consumer - Gas retail price0.0386          0.0428              0.0448              0.0456          0.0684              0.0948          0.1121          0.1128          Energy & supply58.0%69.2%76.6%76.3%43.7%61.0%64.5%53.9%Network costs22.0%19.4%18.8%18.9%22.5%17.3%17.1%18.3%Taxes and levies including VAT19.9%11.4%4.7%4.8%33.8%21.7%18.4%27.8%VAT19.9%11.4%4.7%4.8%15.5%11.6%10.2%13.6%Non-household consumer - Electricity retail price0.0977          0.1635              0.2176              0.1988          0.1242              0.1895          0.1971          0.1661          Energy & supply54.4%67.7%72.8%71.4%43.0%66.5%63.0%55.8%Network costs22.3%13.5%10.0%10.9%15.8%10.7%11.9%15.5%Taxes and levies excluding VAT13.3%8.1%6.4%6.9%30.4%9.9%11.2%15.4%Non-household consumer - Gas retail price0.0377          0.0632              0.0514              0.0502          0.0328              0.0722          0.0672          0.0517          Energy & supply70.7%85.1%87.8%83.1%66.2%77.3%77.3%68.7%Network costs6.4%5.0%5.9%6.3%7.7%3.8%5.3%7.1%Taxes and levies excluding VAT3.7%0.8%1.6%6.2%12.5%6.1%7.3%11.6%Wholesale electrity price (EUR/MWh)114.3271.7104.094.6111.0233.299.184.7Dutch TTF (EUR/MWh)n/an/an/an/a46.9123.140.534.420172018201920202021202220232024Gross Electricity Production (GWh)11 984           13 632              12 760              13 385           15 210              14 221           17 541           -Combustible Fuels5 193         4 435             5 185             5 665         5 681             6 284         6 273         -Nuclear-              -                 -                 -              -                 -              -              -Hydro5 508         7 785             5 933             5 810         7 229             5 574         8 248         -Wind1 204         1 335             1 467             1 721         2 062             2 138         2 587         -Solar79               75                  83                  96               149                152             413             -Geothermal-              2                     92                  94               90                  73               21               -Other Sources-              -                 -                 -              -                 -              -              Gross Electricity Production [%]Combustible Fuels43.3%32.5%40.6%42.3%37.4%44.2%35.8%-Nuclear0.0%0.0%0.0%0.0%0.0%0.0%0.0%-Hydro46.0%57.1%46.5%43.4%47.5%39.2%47.0%-Wind10.0%9.8%11.5%12.9%13.6%15.0%14.7%-Solar0.7%0.5%0.7%0.7%1.0%1.1%2.4%-Geothermal0.0%0.0%0.7%0.7%0.6%0.5%0.1%-Other Sources0.0%0.0%0.0%0.0%0.0%0.0%0.0%-Net Imports of Electricity (GWh)6 9545 3886 1334 6393 9614 6951 578-As a % of electricity available for final consumption 42.3%32.4%37.0%29.8%23.5%28.3%9.5%-Electricity Interconnection [%]52.0%53.2%50.0%52.0%45.6%60.0%29.5%36.7%Share of renewable energy consumption - by sector [%]Electricity46.4%48.1%49.8%53.8%53.5%56.2%58.8%-Heating and cooling36.6%36.7%36.8%36.9%38.0%37.2%36.2%-Transport1.2%2.6%5.9%6.6%7.0%2.4%0.9%-Overall27.3%28.0%28.5%31.0%31.3%28.1%28.1%-20202021202220232020202120222023Import Dependency [%] 53.6%54.5%60.3%55.7%57.5%55.5%62.5%58.3%of Solid fossil fuels 106.0%100.7%100.9%109.2%35.8%37.2%45.9%40.8%of Oil and petroleum products 73.7%78.4%86.8%82.8%96.8%91.7%97.8%94.5%of Natural Gas 68.8%74.5%77.5%68.7%83.6%83.6%97.6%90.0%Dependency from Russian Fossil Fuels [%]of Natural Gas 0.0%0.0%0.0%0.0%41.0%40.9%20.7%9.3%of Crude Oil0.0%0.0%0.0%0.0%25.7%25.2%18.4%3.0%of Hard Coal76.0%78.7%53.1%0.0%49.1%47.4%21.5%1.0%2017201820192020202120222023Gas Consumption (in bcm)3.0                 2.8                     2.9                     3.0                 2.9                    2.5                 2.6                 Gas Consumption year-on-year change [%]15.2%-7.9%5.0%4.6%-4.4%-12.9%2.4%Gas Imports - by type (in bcm)1.8                 1.6                     2.0                     2.1                 2.3                    3.0                 2.9                 Gas imports - pipeline1.8                 1.6                     2.0                     2.1                 0.6                    0.5                 0.3                 Gas imports - LNG0.00.00.00.01.72.52.6Gas Imports - by main source supplier [%]United States0.0%0.0%0.0%0.0%42.0%70.2%49.9%Trinidad and Tobago0.0%0.0%0.0%0.0%3.6%0.4%16.5%Oman0.0%0.0%0.0%0.0%0.0%0.0%11.0%Slovenia12.5%19.0%24.0%27.1%9.3%12.8%7.3%CroatiaEU 
 
   
 
ANNEX 9: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT 

Croatia  is  exposed  to  several  climate  risks, 
meriting  urgent  action  to  tackle  resilience 
and  environmental  degradation.  Action  to 
reduce  climate  risks  and  protect  the  environment 
to  country’s  economic  stability  and 
is  key 
competitiveness.  The  economy 
is  particularly 
vulnerable  to  flood  damages  given  the  very  low 
rate  of  insurance  coverage  while  sectors  such  as 
agriculture,  energy  and  tourism  are  increasingly 
exposed  to  the  various  negative 
impacts  of 
climate  change.  While  the  identified  investment 
needs  are  substantial,  the  implementation  of 
lagging 
adaptation  policies  and  measures 
lacking  action  plans  and 
behind  due 
comprehensive  monitoring, 
and 
evaluation  systems,  both  at  national  and 
subnational  levels.  Nature-based  solutions  and 
climate proofing are not yet systematically applied 
across  sectors.  While  improvements  have  been 
made  following  important  reforms  carried  out 
under the recovery and resilience plan (RRP), there 
is 
sustainable  water 
scope 
management 
in  terms  of  water  governance, 
wastewater treatment and flood management. To 
meet  its  2030  target,  Croatia  needs  additional 
investments in the land use, land-use change and 
forestry  sector.  It  also  needs  immediate  and 
additional  action  to  tackle  the  poor  status  of 
ecosystems and the degradation of soils. 

reporting 

improve 

to 

to 

is 

Climate adaptation and preparedness 

Europe 

floods 

Croatia is particularly exposed to heatwaves, 
and  wildfires  with 
droughts, 
significant implications for key sectors. It is in 
two of the three regions identified  as hotspots of 
climate  risks  most  affected  by  climate  change  – 
southern 
coastal 
and 
regions (192).  Agriculture  and  water  management 
are the two sectors affected the most by droughts, 
but hydro and thermal power production also face 
risks,  as  does  tourism.  Increasingly  frequent  and 
more  severe  droughts  and  heatwaves  are  having 
significant effects on ecosystems. In 2022, a third 
of  the  country  suffered  from  drought  leading  to 
reduction in crop yields (193) and wildfires affecting 

low-lying 

The 

impact. 

forests,  especially  in  the  coastal  area.  Between 
2006  and  2023,  wildfires  burned  an  average  of 
more  than  13 600  hectares  and  in  2024  alone, 
15 800  hectares  (28%  of  all  land  –  one  of  the 
highest rates in the EU). In 2024 Croatia adopted a 
new  disaster  risk  assessment (194)  which  is  based 
on  improved  methodologies  to  analyse  climate 
change 
basin 
management plan for 2028-2033 aims to include 
the  results  of  the  ‘Study  on  marine  flooding  risk 
management’  and  of  the  drought  management 
plan  that  is  currently  being  developed.  Several 
measures  related  to  forest  fire  prevention  are  in 
place or are being rolled out, such as a centre for 
coordination,  monitoring  and  communication, 
surveillance equipment, access corridors, seasonal 
reallocation  of  resources,  training  programmes, 
and awareness-raising campaigns.  

future 

river 

Climate  risks  have  a  direct  effect  on 
Croatia’s  economy  while  insurance  coverage 
remains  very  low.  Between  1980  and  2023, 
Croatia recorded EUR 4.2 billion in economic losses 
caused  by  weather  and  climate-related  extreme 
events. At the same time, only 2% of the economic 
insured (195), 
damages  over  this  period  were 
making Croatia one of the EU Member States with 
the  lowest  rate  of  insurance  coverage  against 
extreme  events (196).  Floods  are  a  risk  both  in 
terms of expected annual damage, including to the 
infrastructure needed to decarbonise the transport 
sector such as railways and ports, and in terms of 
population exposed. At present, flood damages are 
covered  by  the  state  budget  but  Croatia  has 
started  examining  the  potential  role  of  insurance 
companies  and  has  initiated  some  awareness-
raising  campaigns  to  encourage  farmers  to  take 
out insurance. 

Croatia  has  been  strengthening  its  national 
policy  framework  on  climate  adaptation  and 
preparedness  but  actual 
implementation 
remains an issue. Since 2019, it adopted a basic 

(194) The assessment has been made for 10 sectors and the 
results have been integrated in the national climate 
adaptation strategy. 

(195) EEA, 2024, Economic losses from weather- and climate-

related extremes in Europe, Link. 

(192) EEA, 2024, European Climate Risk Assessment. 

(193) In 2022, the drought caused EUR 300 million in damage to 

agriculture, see EEA, 2021, Drought impact on ecosystems in 
Europe, 2000-2023, Link. 

(196) The overall climate protection gap score is 1.75 (medium) 
and has been stable. Insurance coverage is limited (below 
50% for all perils), resulting in a high gap of 3 for floods and 
2.5 for wildfires respectively, with insurance coverage below 
25%. 

76 

 
 
 
 
 
 
amongst 

procedures, 

legal  act (197)  and  a  national  climate  adaptation 
strategy.  As  per  statutory  requirements,  climate 
adaptation  must  be  taken  into  account  when 
drafting  new 
legislation,  new  national  and 
subnational development documents and strategic 
sectoral  documents,  and  in  environmental  impact 
assessment 
others. 
Nevertheless,  the  national  action  plan  and  a 
comprehensive  monitoring, 
and 
evaluation  system  have  not  been  set  up  to  date, 
although  this  is  planned  in  2025.  This  makes  it 
difficult to assess progress on the ground.  Croatia 
is  also  planning  to  set  up  a  National  Centre  for 
Climate 
strengthening 
administrative  capacities  which  should  help 
improve  governance  and 
disaster  risk  management  strategy  up  to  2030  is 
in place since 2022 with the action plan for 2025-
2027 currently in the process of being adopted. 

Adaptation 

reporting 

and 

is 

coordination.  The   

level 

is 
Implementation  at  subnational 
largely stalling. In 2023, 62% of the population 
(EU average: 46%) lived in municipalities that have 
signed the EU Covenant of Mayors for Climate and 
Energy.    However,  to  date  only  a  few  Croatian 
cities and counties have signed the EU Mission on 
Adaptation  to  Climate  Change  charter.  Also,  in 
2024 only Slavonski Brod and three smaller cities 
adopted  climate  mitigation  and  adaptation  action 
plans while the vast majority of counties and large 
cities  are  lagging  behind  (only  8  out  37  have 
adopted a plan).  To encourage cities and counties 
to  develop  and implement  subnational  adaptation 
strategies  and  action  plans,  Croatia  launched 
public  calls  in  2024  with  the  support  of  the 
Environmental  Protection  and  Energy  Efficiency 
Fund.  In  addition,  Croatia  is  planning  to  set  up  a 
network  of  climate  officers  to  improve  local 
capacities. 

Nature-based solutions  and  climate  proofing 
are  not  yet  systematically  applied  across 
sectors.  In  Croatia,  nature-based  solutions  and 
guidelines  are  still  mainly  used  with  regards  to 
fluvial floods and actions are usually implemented 
in  the  context  of  disaster  risk  management  (e.g. 
flood  protection,  fire  protection).  While  in  2025-
2026 Croatia plans to carry out some further flood 
protection  measures  and  pilots  on  green  urban 
infrastructure, it does not yet deploy nature-based 
solutions  and  ecosystem-based  adaptation  at  a 

large  scale  and  across  sectors.  Trainings  on 
climate  proofing  are  increasingly  taking  place, 
including  on  the  local  and  regional  level,  but 
systematic  measures  to  build  resilience  and 
ensure  climate  proofing  across  different  sectors 
and  key  infrastructure,  including  the  future  gas 
pipelines (198)  or management of water scarcity in 
the energy sector, are not yet applied. 

Croatian 

Croatia  draws  on  several  EU  funds  to 
improve its preparedness, but the investment 
needs are significant. Flood prevention and fire 
protection  are  tackled  under  cohesion  policy, 
including cross-border programmes, with EUR 325 
million  for  flood  and  saline  intrusion  prevention 
investments.  Cohesion  policy  funds  also  allocate 
EUR 61 million to firefighting measures under the 
2021-2027 
for 
competitiveness  and  cohesion.  Cohesion  policy 
provides support for climate adaptation measures 
that  allocate  an 
under  calls  for  proposals 
additional  EUR 54.5  million 
for  2021-2027. 
However,  under  the  national  climate  adaptation 
strategy,  the  cost  of  implementing  83  measures, 
risk 
including  measures 
reduction  for  the  period  up  to  2040,  was 
estimated  at  around  EUR 3.6  billion.  Establishing 
proper  monitoring  and  evaluation  systems  will  be 
key for channelling investments in the future. 

to  support  disaster 

programme 

Water resilience 

Croatia  has  abundant  renewable  water 
resources  but  climate  change  and  rising 
demand  from  water-dependent  sectors  such 
as  tourism,  energy  and  agriculture  put 
resources  under  stress.  Croatia’s  water 
productivity is EUR 82 per m3 of abstracted water 
in  2022,  on  an  upward  trend  over  a  five-year 
period (199).  The  Water  Exploitation  Index  Plus 
(WEI+)  is  one  of  the  lowest  in  the  EU  but  it  is 
increasing  slightly  and  reached  0.3  in  2022.  The 
main consumer of water is the public water supply. 
Between 2017 and 2022, water abstraction in the 
public  water  supply  sector  fell  by  about  12%  but 
the  sector  still  accounts  for  the  highest  share  of 

(198) Wildfires can be particularly problematic for the gas 

pipelines. 

(197) Parliament of Croatia, 2019, The Climate Change and Ozone 

(199) Measured as GDP in 2010 chain linked volumes over total 

Layer Protection Act, Link. 

fresh surface water abstracted in cubic metres. 

77 

 
 
 
water  consumption  at  110  million  m3,  i.e.  over 
50% of total consumption in 2022, putting a strain 
on  the  country’s  water  resources.  The  old  water 
infrastructure is one of the most serious causes of 
significant water loss in Croatia. The share of non-
revenue water (200) in 2021 was around 49% (201). 
is 
The  Croatian  government 
implementing 
measures  to  reduce  water 
loss,  both  under 
cohesion  policy  and  under  the  recovery  and 
resilience  plan.  This  includes  the  adoption  of  a 
national  plan  on  reducing  water  loss  in  public 
water 
construction, 
remediation  and  extension  of  water  supply 
networks and the installation of metering devices. 

systems, 

supply 

the 

ecological 

Surface  water  quality 
in  Croatia  has 
deteriorated  but  the  quality  of  groundwater 
bodies has remained stable. Croatia’s third river 
basin  management  plan  (2022-2027)  under  the 
Water Framework Directive shows that, as a result 
of better knowledge and monitoring, the ecological 
status  and  potential  of  surface  water  bodies  has 
significantly decreased since the second plan. Only 
33%  of  surface  water  bodies  are  classified  as 
status/potential,  a 
having  good 
significant  decrease  from  42.1%  in  the  second 
plan.  As  a  result  of  better  knowledge  and 
monitoring,  Croatia  has  also  downgraded  the 
chemical  status  for  surface  water  bodies,  with 
80%  having  a  good  chemical  status  down  from 
92%  under  the  second  plan.  The  source  of 
significant pressure is wastewater discharges from 
unconnected dwellings that impair water quality in 
65% of rivers and 62% of lakes. The quantitative 
status  of  groundwater  bodies  has  slightly 
deteriorated  since  the  second  plan,  with  90% 
reported as having good quantitative status. Their 
chemical  status  has  slightly  improved,  with  at 
least 92% now reported as having good chemical 
status. 

treatment 

Croatia’s  wastewater 
is  a 
particular  cause  for  concern  and  a  major 
source  of  water  pollution.  Despite  minor 
improvements  in  compliance  over  the  years,  in 
particular  thanks  to  EU  cohesion  funding,  Croatia 
has 
in 
implementing  the  Urban  Wastewater  Treatment 
Directive.  The  compliance  rate  was  only  7%  in 

experienced 

difficulties 

serious 

(200) Water produced and lost before it reaches the customer. 

(201) European Commission, The World Bank (2023), Technical 

assistance on support to reduce water loss within the reform 
of the water sector in Croatia, Link. 

78 

(RRF) 

to  meet 

2020, with 68 agglomerations not meeting all the 
requirements  of  the  Directive.  Therefore,  Croatia 
should  swiftly  implement  the  projects  planned 
under the cohesion policy funds and the Recovery 
and  Resilience  Facility 
the 
requirements  of  the  Directive.  The  investment 
needs  shown  in  Graph  A9.2  for  water  protection 
and  water  management  are  substantial.  Croatia 
has a financing gap of EUR 272 million per year up 
to 2027. Of the total financing, 27.7% is provided 
by the EU multiannual financial framework (mostly 
through cohesion policy), and 13.3% from the RRF. 
Most  funding  comes  from  national  resources 
(59%).  Further  infrastructure  development  would 
help improve water management, e.g. wastewater 
collection and treatment, water reuse, reduce leaks 
in  the  networks  and  the  general  water  supply. 
Additional  investments  are  needed  to  improve 
monitoring  (quality  and  quantity)  and  to  support 
nature-based solutions, flood prevention and river 
restoration. 

Biodiversity and ecosystems 

The  state  of  nature  and  ecosystems 
continues  to  deteriorate  in  Croatia,  reducing 
the country’s climate resilience. Croatia has a 
very  high  level  of  biological  diversity,  home  to 
about  40 000  species  endemic 
to  Europe. 
According to the last available data, only 39.2% of 
the  country’s  habitats  have  a  good  status,  higher 
than 
the  EU  average  of  14.7%,  but  still 
suboptimal. By contrast, the conservation status of 
species  is  concerning,  with  only  7%  reported  as 
having  a  good  status,  lower  than  the  EU  average 
of  27%.  Monitoring  the  state  of  nature  is  still 
problematic as the conservation status of 47% of 
species  and  14%  of  habitats  was  unknown  in 
2018. 

Nature  degradation  creates  significant  risks 
to  the  economy  and  to  competitiveness  as 
Croatia  has  one  of  the  highest  degree  of 
dependency on ecosystem services in the EU. 
Croatia is the Member State with the highest direct 
dependency  on  ecosystem  services,  with  59%  of 
its  gross  value  added  categorised  as  highly 
dependent,  against  the  EU-27  average  of  44%. 
Several  sectors  such  as  agriculture,  forestry, 
fisheries,  construction,  water  utilities,  mining  and 
metals  and  healthcare  delivery  (see  Graph  A9.1) 
are  estimated  to  be  particularly  dependent  on 

 
 
ecosystem  services.  100%  of  the  gross  value 
added  of  these  sectors  is  highly  dependent  on 
ecosystem  services.  In  addition,  the  chemicals 
sector  has  a  particularly  high  degree  of 
dependency, with 14% of gross value added highly 
dependent  and  86%  with  a  medium  degree  of 
dependency.  This  means  that  failure  to  maintain 
the  capacity  of  ecosystems  to  deliver  services 
could  entail  significant  costs  or  even  stop 
these  sectors.  Protecting  and 
production 
restoring key ecosystems would help maintain the 
long-term competitiveness of these sectors. 

in 

Graph A9.1: Direct dependency(1) on ecosystem 
services(2) of the gross value added generated by 
economic sector in 2022 

an 

area  makes 

therefore  has  one  of  the  highest  shares  of 
protected land in the EU. By contrast, only 9.5% of 
Croatia’s  marine  area  is  protected.  Croatia’s  land 
protected 
above-average 
contribution  to  the  EU  biodiversity  strategy  target 
but below-average contribution to the EU target to 
protect  marine  areas. Croatia  is  currently drawing 
up  management  plans  for  protected  areas,  which 
is a step towards making an effective contribution 
to  biodiversity  protection.  Between  2006  and 
2012,  the  extent  of  soil  areas  providing  flood 
control ecosystem services decreased by 48% due 
to soil sealing (202) caused mainly by urbanisation, 
industrial  plants,  roads  and  water  accumulation. 
Limiting soil sealing and investing more in nature-
based  solutions  for  flood  protection  would  both 
limit flood damage and improve river ecosystems. 
Croatia also needs to restore 351 to 6 908 km2 of 
habitats listed in Annex I to the Habitats Directive, 
corresponding  to  0.6%  to  12.4%  of  the  country’s 
territory  and  up  to  798  km2  of  its  marine 
habitats (203).  It  requires  EUR   914  million  of 
investment  per  year  to  effectively  protect  and 
restore its natural capital, mitigate the impacts of 
climate  change  and  preserve  the  country’s  rich 
biodiversity  (see  Graph  A9.2).  The  current level  of 
financing 
ecosystem 
biodiversity 
conservation in  Croatia is around  EUR 313  million 
per  year.  This  shortfall  undermines  the  country’s 
commitment  to  global  biodiversity  agreements 
and 
social 
development. 

long-term 

economic 

and 

and 

for 

its 

(1) Dependency based on the sector’s own operations, 
excluding value chain operations within countries and across 
international value chains. A high dependency indicates a high 
potential exposure to nature-related shocks or deteriorating 
trends, which means that the disruption of an ecosystem  
service could cause production failure and severe financial 
loss. 
(2) Ecosystem services are the contributions of ecosystems to 
the benefits that are used in economic and other human 
activity, including provisioning services (e.g. biomass 
provisioning or water supply), regulating and maintenance 
services (e.g. soil quality regulation or pollination), and cultural 
services (e.g. recreational activities). 
Source: Hirschbuehl et al, 2025, The EU economy’s 
dependency on nature, Link.  

Targeted  action  on  nature  protection  and 
restoration  is  needed  to  meet  Croatia’s 
nature  restoration  targets.  In  2021,  38%  of 
land  was  protected,  and  this  percentage  has 
remained constant over the last few years. Croatia 

(202) European Commission, European Environment Agency 

(2021), Accounting for ecosystems and their services in the 
European Union. 

(203) European Commission (2022), Impact assessment 

accompanying the proposal for a Regulation on nature 
restoration. 

79 

0%20%40%60%80%100%AgricultureForestryFishery and acquacultureMining and metalsConstructionWater utilitiesHealthcare deliveryAviation travel and tourismFood beverages and tobaccoSupply chain and transportPublic services and othersElectricityChemical and materials industryElectronicsOil and gasReal estateHeat utilitiesAutomotiveRetail consumer goods and…Information technologyBanking and capital marketsInsurance and asset…Digital communicationsHighMediumLow 
     
 
 
Graph A9.2: Investment needs and gaps in EUR 
million, in 2022 constant prices 

2035)  and  plans  to  publish  the  results  of  the 
second  national  inventory  of  forest  resources  in 
2026. To improve reporting, a land matrix will also 
be created for forests and forest land and carbon 
stocks  in  soil,  litter,  humus  and  large  and  small 
dead  wood  will  be  assessed.  Croatia  is  in  the 
process  of  establishing  a  national  certification 
scheme 
removals. 
However, investments in the conversion of ageing 
degraded  forests and afforestation are needed to 
boost  carbon  sequestration  capacity,  especially 
given Croatia’s vulnerability to wildfires. 

forest-based 

carbon 

for 

Source: European Commission, DG Environment, 
Environmental investment needs & gaps assessment 
programme, 2025 update. 

Sustainable agriculture and land use 

(LULUCF). 

Croatia’s  carbon  removals  fall  short  of  the 
level  of  ambition  needed  to  meet  its  2030 
target  for  land  use,  land-use  change  and 
In  Croatia,  net  carbon 
forestry 
removals  in  the  LULUCF  sector  fell  by  almost  1 
million tonnes in 2022 due to sanitary logging and 
forest  fires.  To  meet  its  2030  LULUCF  target, 
additional  carbon  removals  of  -0.6  million  tonnes 
of  CO2  equivalent  (CO2eq)  are  needed  (204).  The 
latest  available  projections  show  a  gap  to  target 
of  2.0  million  tonnes  of  CO2eq  for  2030  (205). 
Therefore, additional measures are needed for the 
country to reach the 2030 target. 

Several  initiatives  are  underway  to  improve 
carbon  sequestration  capacities 
the 
LULUCF  sector,  but  additional  investments 
are  needed.  In  August  2024,  the  government 
to  plant  1 million 
adopted  an  action  plan 
additional trees per year by 2030. Croatia started 
preparing  a  new  forest  management  plan  (2026-

in 

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

Regulation (EU) 2023/839. 

(205) Climate Action Progress Report 2024, COM/2024/498. 

Agriculture  is  a  source  of  greenhouse  gas 
emissions  in  Croatia  and  has  a  significant 
impact  on  soils,  air  and  water.  In  2022, 
agriculture  generated  2.47  million  tonnes  of 
CO2eq,  down  slightly  since  2018,  accounting  for 
around  10.5%  of  the  country’s  total  emissions. 
This  includes  1.5  million  tonnes  of  CO2eq  from 
livestock  (also  down  since  2018).  The  utilised 
agricultural  area  (UAA)  in  Croatia  increased  by 
11.6% from 1.33 million hectares in 2012 to 1.48 
million  in  2023  but  on  a  downward  trend  since 
2016.  The  increase  has  translated  into  a  rise  in 
nutrient  losses  from  agriculture,  mainly  from 
mineral  fertilisers  and  manure,  which  poses  a 
significant  environmental  concern  and  a  threat  to 
human  health.  This  is  reflected  in  the  country’s 
nitrogen  balance,  which 
reached  59.5 kg  of 
nitrogen  per  hectare  of  UAA  in  2021,  one  of  the 
highest values in the EU. Nonetheless, according to 
data  collected  under  the  Nitrates  Directive,  only 
1.5%  of  groundwater  monitoring  stations 
in 
Croatia  recorded  average  nitrate  concentrations 
above  50 mg/l  between  2016  and  2019, 
exceeding 
threshold  for  human 
consumption.  Although  the  livestock  density  index 
was  0.61  in  2020,  slightly  below  the  EU  average 
of  0.75,  ammonia  emissions  remained  constant 
from  2013  to  2022.  However,  that  the  average 
consumption  of  pesticides  in  Croatia  (1.0  kg  per 
hectare  in  2023)  is  only  half  of  the  EU  average 
(1.9 kg per hectare). 

the  healthy 

Croatia is transitioning to a sustainable food 
system  by  implementing  policies  to  reduce 
the  environmental  impact  of  agriculture.  In 
2022, 6.9% of its agricultural land had landscape 
features  such  as  woods  and  non-productive 
grasslands,  above  the  EU  average  of  5.6%. 
Organic  farming,  which  reduces  the  use  of 
synthetic  fertilisers  and  pesticides,  made  up 
almost  9%  of  Croatia’s  agricultural  land,  a  272% 
increase since 2012. Croatia aims to reach 12% of 

80 

 - 100 200 300 400 500 600 700 800 900 1 000BiodiversityWaterBaselineGap 
     
 
UAA  under  organic  farming  by  2030,  which  it  will 
comfortably  achieve  with  the  current  growth  rate 
of organic farming. However, this is not ambitious 
enough to meet the objective of 25% at EU level, 
set in the European Green Deal. 

Croatia’s  common  agricultural  policy  (CAP) 
strategic  plan  and  recovery  and  resilience 
plan  (RRP)  contain  measures  to  help  reduce 
soil,  air  and  water  pollution.  As  agricultural 
emissions  mainly  stem  from  soil  and  manure 
management,  a  number  of  measures  were 
introduced  in  Croatia’s  CAP  strategic  plan  to 
protect  soil  organic  matter  and  carbon  content. 
This  will  contribute  to  climate  change  mitigation 
and improve water quality and biodiversity. Almost 
48%  of  UAA  will  be  covered  by  measures  to 
improve  and  protect  soils  while  12%  of  UAA  will 
be  covered  by  measures  to  improve  air  quality. 
Other  CAP  strategic  plan  measures  covering  65% 
of  livestock  aim  to  improve  animal  feeding,  care 
and welfare conditions, and by extension to reduce 
emissions in the livestock sector. The bioeconomy, 
encompassing  the  production  and  processing  of 
biological products, contributed EUR 4.35 billion of 
added  value  to  the  country’s  gross  domestic 
product in 2021. Agriculture, forestry and fisheries 
generated EUR 2.62 billion, while the food industry 
contributed  EUR 1.78  billion  in  2023.  Measures 
under the RRP, including the land consolidation and 
monitoring programme, should contribute to better 
water management, prevention of soil erosion and 
acidification,  air  conservation,  and 
landscape 
protection. 

81 

 
Table A9.1:  Key indicators for progress on climate adaptation, preparedness and environment 

(1) The data show the average for the timespan 2006-2023 based on EFFIS - European Forest Fire Information System. 
(2) Scale: 0 (no protection gap) – 4 (very high gap). EIOPA, 2024, Dashboard on insurance protection gap for natural catastrophes. 
(3) van Daalen, K. R. et al., 2024, The 2024 Europe report of the Lancet Countdown on health and climate change: unprecedented 
warming demands unprecedented action, The Lancet Public Health. 
(4) This indicator measures total water consumption as a percentage of the renewable freshwater resources available for a given 
territory and period. Values above 20% are generally considered to be a sign of water scarcity, while values equal or greater than 
40% indicate situations of severe water scarcity. 
(5) European Commission, 2024, 7th Implementation Report from the Commission to the Council and the European Parliament on 
the implementation of the Water Framework Directive (2000/60/EC) and the Floods Directive (2007/60/EC) (Third River Basin 
Management Plans and Second Flood Risk Management Plans). 
(6) For this indicator, the EU average includes figures for the UK under the previous configuration, EU-28. 
(7) European Commission, 2023, EU Bioeconomy Monitoring System dashboards. 
(8) Nitrates can persist in groundwater for a long time and accumulate at a high level through inputs from anthropogenic sources 
(mainly agriculture). The EU drinking water standard sets a limit of 50 mg NO3/L to avoid threats to human health. 
(9) 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. 
Source: Eurostat, EEA. 

82 

Climate adaptation and preparedness:20182019202020212022202320182021Drought impact on ecosystems0.030.071.923.0931.860.056.772.76[area impacted by drought as % of total]Forest fires burned area (1)13 647     13 647     13 647     13 647     13 647     13 647     [ha, annual average 2006-2023]Economic losses from extreme events334          -           61            -           352          151          24 142       62 981       [EUR million at constant 2022 prices]Insurance protection gap (2)----1.88         1.75         [composite score between 0 and 4]Heat-related mortality (3)121          121          121          121          121          [number of deaths per 100 000 inhabitants in 2013-2022]Sub-national climate adaptation action50            51            53            55            55            62            4144[% of population covered by the EU Covenant of Mayors for Climate & Energy]Water resilience:20182019202020212022202320182021Water Exploitation Index Plus, WEI+ (4)0.20.20.30.20.3-4.54.5[total water consumption as % of renewable freshwater resources]Water consumption215          209          210          204          217          -           [million m3]Ecological/quantitative status of water bodies (5)[% of water bodies failing to achieve good status]Surface water bodies---67%---59%Groundwater bodies---2%---93%Biodiversity and ecosystems:20182019202020212022202320182021Conservation status of habitats (6)39.2-----14.7-[% of habitats having a good conservation status]Common farmland bird index------72.274.42000=100Protected areas---3838--26[% of terrestrial protected areas]Sustainable agriculture and land use:20182019202020212022202320182021Bioeconomy's added value (7)3 704       3 965       3 713       4 352       634 378     716 124     [EUR million]Landscape features----7              -[% of agricultural land covered with landscape features]Food waste--717172-[kg per capita]Area under organic farming6.97.27.28.38.97.99-[% of total UAA]Nitrogen balance58.855.255.859.5--[kg of nitrogen per ha of UAA]Nitrates in groundwater (8)------[mgNO3/l]Net greenhouse gas removals from LULUCF (9)5 493-       5 726-       5 659-       5 764-       4 867-       -           256 077-     240 984-     [Kt CO2-eq]CroatiaEU-27CroatiaEU-27CroatiaEU-27CroatiaEU-27 
 
  
 
FAIRNESS 
ANNEX 10: LABOUR MARKET 

in 

is  historically 

that 
economic 

underrepresentation 
the 

Croatia’s labour market has shown resilience 
and  continuous  improvement,  yet  structural 
challenges 
hinder 
remain 
growth 
competitiveness  and 
potential.  Employment  has  increased  in  recent 
low. 
years  and  unemployment 
some 
Nevertheless, 
of 
vulnerable  groups 
labour  market  – 
particularly  older  people,  low-skilled  workers  and 
persons  with  disabilities  –  negative  demographic 
trends  as  well  as  labour  shortages  and  skills 
mismatches affecting labour productivity together 
with  segmentation  pose  challenges. As  Croatia 
works towards reaching its 2030 employment rate 
target,  key  challenges  towards  achieving  a  more 
inclusive  labour  market  and  robust  economic 
growth will be activating underrepresented groups 
and  better  using  their  potential  and  addressing 
increasing 
potential  skill  mismatches  through 
relevant labour market training. 

Croatia’s labour market continues to improve 
but  still  performs  below  the  EU  average. 
Though  improving  since  2021,  the  employment 
rate  remained  below  the  EU  average  in  2024 
(73.6%  vs  75.8%).  At  75%,  the  country’s  2030 
employment rate target remains above the current 
rate  (by  1.4  percentage  points (pps),  underscoring 
the  need  for  further  efforts.  The  unemployment 
rate  has  steadily  declined  since  2014,  reaching 
historically  low  levels  below  the  EU  average  (5% 
vs  5.9%  in  2024).  In  addition,  strong  economic 
activity and labour demand led to record low long-
in  2024  (1.8%).  Labour 
term  unemployment 
market  slack  (206)  decreased  slightly  to  8%  in 
2024, 
the  EU 
remaining  significantly  below 
average 
(11.7%).  However,  skills  mismatches 
persist  as  the  macroeconomic  skills  mismatch 
remains  above  the  EU  average  (24%  vs  19%  in 
2023),  as  does  youth  unemployment  (16.8.%  vs 
14.9% 
in 
employment  rates  are  relatively  high,  with  the 
Pannonian  and  Adriatic  regions  having 
lower 
employment  rates  (67.3%  and  65%,  respectively) 
than  the  national  average.  The  labour  market 
participation  rate,  although  increasing  in  recent 
years,  is  still  below  the  EU  average  (71.9%  vs 

in  2024).  Regional 

disparities 

(206) The labour market slack is the underutilization of labour 

resources, including unemployment, underemployment, and 
those available for work but not actively seeking 
employment. 

83 

75.4%  in  2024),  making  it  harder  to  reach  the 
2030  employment  rate  target.  This  emphasises 
the need  for further labour market activation and 
to  be 
for  bottlenecks 
addressed. 

labour  migration 

in 

Graph A10.1: Key rates: activity, unemployment, 
long-term unemployment, youth unemployment, 
NEET 

(1) Activity rate and Employment rate (% of population), total, 
ages 20-64 
Unemployment rate and long-term unemployment rate (% of 
labour force), total, ages 15-74 
Youth unemployment rate (% of labour force), total, ages 15-
24 
NEET: Not in employment, education or training (% of 
population), total, ages 15-29 
Source: Eurostat, LFS [lfsi_emp_a, une_rt_a, edat_lfse_20, 
une_ltu_a] 

labour 

increasing 

quality 
in  active 

market 
Despite 
participation  overall,  older  people  and  low-
skilled workers face persistent challenges in 
accessing 
employment.  Overall, 
labour  market  policies 
investments 
(ALMPS)  in Croatia  are low  compared to  other  EU 
Member States, negatively affecting the support to 
vulnerable  groups  with  spending  predominantly 
focused  on  subsidies  and  financial  incentives. 
Older  workers  and 
remain 
the 
underrepresented  in  the  labour  market.  While 
some  progress  has  been  made  in  recent  years, 
Croatia  still  has  one  of  the  lowest  employment 
rates for older workers (aged 55-64) in the EU. In 
2024,  their  employment  rate  was  53.9%,  well 
below  the  EU  average  of  65.2%,  with  even  lower 

low  skilled 

5055606570758001020304050602009201020112012201320142015201620172018201920202021202220232024%%HREmployment rate 20-64 (rhs)Activity rate 20-64 (rhs)Unemployment rate 15-74 (lhs)Long-term unemployment rate 15-74 (lhs)Youth unemployment rate 15-24 (lhs)NEET rate 15-29 (lhs) 
 
 
 
   
 
 
groups. 

population 

employment rate for those aged 60-64 (40.9% vs 
53.1% in the EU). This disparity in the 55-64 group 
is  partly  due  to  historically  high  retirement  rates, 
driven by low statutory and early retirement ages, 
as  well  as  widespread  early  retirement  among 
the 
specific 
employment rate for low-skilled workers (aged 20-
64)  remains well below the EU average (41.3% vs 
58.7% in the EU in 2024). It also significantly lags 
behind  the  employment  rates  of  medium-skilled 
(71.9%)  and  high-skilled 
(87.2%)  workers, 
particularly pertaining to skills that are inadequate 
for labour market needs, highlighting the need for 
upskilling  and  reskilling  opportunities  for  this 
group in particular. 

Similarly, 

the 

(informal) 

or social exclusion (8.2%). However, major reforms 
and investments, including those supported by the 
Recovery  and  Resilience  Facility  (RRF)  and  the 
ESF+,  are  being  carried  out  to  improve  early 
childhood  education  and  care  (ECEC)  quality  and 
availability  In  addition,  Croatian  women  also  take 
on  most  of 
long-term  care 
responsibilities for family members as the country 
has  the  lowest  coverage  of  formal  institutional 
and  home  care  in  the  EU.  To  address  this,  the 
government has started a structural reform of the 
LTC system with RRF and ESF+ support. Successful 
implementation  of  ECEC  and  LTC  reforms  should 
labour  market 
help 
the 
participation  of  women  and 
reduce  gender 
disparities in employment. 

increase 

further 

The  employment  situation  for  persons  with 
disabilities  is  particularly  concerning.  The 
disability  employment  gap  increased  significantly 
over two consecutive years, rising from 28.7 pps in 
2021  to  41.0 pps  in  2024,  well  above  the  EU 
average  of  24.0 pps.  Only  38.3%  of  people  with 
some or severe disabilities are active in the labour 
market, well below the EU average of 64% (207). In 
2022,  almost  half  of  young  persons  with 
disabilities  were  not  in  employment,  education  or 
training  (48%  compared  to  the  EU  average  of 
27.3%).  Croatia  has  not  yet  set  a  target  for  the 
employment  of  persons  with  disabilities.  It  is 
implementing  the  national  plan  for  equalising 
opportunities  for  persons  with  disabilities  for  the 
period  2021-2027,  and  personal  assistance 
services  are  regulated  through  the  country's  Law 
on  Personal  Assistance,  with  support  from  the 
European  Social  Fund  Plus  (ESF+).  Further  policy 
initiatives  would  be  beneficial  for  expanding 
employment  and  training  opportunities  and  help 
improve  labour  market  inclusion  for  persons  with 
disabilities. 

(LTC)  services 

Increasing  access  to  formal  childcare  and 
long-term  care 
improves 
women’s  participation  in  the  labour  market. 
Women’s employment rate is slightly below the EU 
average (70.8% vs 70.6% in 2024), showing a 3.2 
pp  increase  form  2023.  Women  are  often  unable 
to work full-time due to insufficient availability of 
early  childcare  services  –  only  30.2%  of  Croatian 
children under 3 were in formal childcare in 2024, 
compared  to  the  EU  average  of  39.2%,  and  the 
rate was even lower for children at risk of poverty 

(207) European comparative data on persons with disabilities - 

data 2022 - European Commission. 

84 

Graph A10.2: Young people: in education and 
training, employment rate, unemployment rate, 
unemployment-to-population ratio, NEET 

(1) Employment rate (% of population), total, ages 15-24 
Young people in education and training (% of population), 
total, ages 15-24 
Youth unemployment rate (% of labour force), total, ages 15-
24 
Youth unemployment-to-population ratio (% of population), 
total, ages 15-24 
NEET: Not in employment, education or training (% of 
population), total, ages 15-24 
Source: Eurostat, LFS [edat_lfse_18, lfsi_emp_a, une_rt_a, 
lfsi_act_a, edat_lfse_20] 

long-term 

Despite 
improvements,  young 
people  still  face  challenges  in  the  labour 
market.  In  2024,  the  youth  unemployment  rate 
stood  at  11.9%,  slightly  above  the  EU  average 
(11.4%). In addition, young workers are more often 
employed on temporary contracts than the overall 
in  2023), 
population 

vs  11.1% 

(27.1% 

010203040506070800102030405060200720082009201020112012201320142015201620172018201920202021202220232024%%HRUnemployment rate (lhs)Unemployment ratio (lhs)NEET (lhs)In education, training (rhs)Employment rate (rhs) 
 
   
underscoring their limited access to stable jobs. On 
the  other  hand,  the  share  of  young  people  not  in 
education,  employment  or  training  (NEETs)  has 
steadily  declined,  falling  for  the  first  time  below 
the  EU  average  in  2024  (10.6%  vs  11.0%  in  the 
EU).  The  ESF+  supports  access  to  employment 
prioritising  youth  employment,  including  through 
ALMPs  and  skills  development  initiatives,  which 
include implementing the vouchers system that is 
expected to be transformed into individual learning 
accounts  (ILAs).  Various  measures  aim  to  reach 
almost 70 000 people. The better use young talent 
in the Croatian labour market could be achieved by 
raising 
the  quality  of  offers  and  outreach 
activities,  especially  for  young  people  under  the 
European 
along  with 
strengthening training and education to align with 
labour  market  needs  and  better  preparing  young 
people for their transition to work. 

Guarantee, 

Youth 

and 

rate 

force 

participation 

(see  below).  Nevertheless, 

Further  integrating  underrepresented  groups 
into the labour market is critical as Croatia’s 
decreasing and ageing population poses long-
term  risks. Croatia’s  population is both  shrinking 
and  ageing  rapidly,  driven  by declining  birth  rates 
and  rising  life  expectancy.  According  to  the  2021 
census,  the  population  fell  by  9.25%  between 
2011  and  2021.  Between  2022  and  2070,  it  is 
projected  to  further  decrease  by  approximately 
22%, from 3.86 million to 3.01 million people. The 
labour 
the 
employment  rate  for  the  working-age  population 
(20-64  or  20-74)  are  both  projected  to  rise 
throughout  the  projection  period.  These  increases 
are  partly  due  to  the  rising  retirement  age  for 
women,  affecting  both  early  and  statutory 
retirements 
the 
working-age population is projected to decline, and 
life 
rise 
significantly. As  a  result,  the  old-age  dependency 
ratio  (the  ratio  of  people  aged  65  and  over  to 
those  aged  20-64)  is  set  to  grow  from  38.9%  in 
2022  to  62.2%  by  2070.  To  address  these 
challenges,  Croatia  has  introduced  a  pension 
reform, 
the 
pensionable  age  for  women  (by  three  months 
every  year),  reaching  65 
It  also 
introduced the possibility of combining the right to 
a pension with employment. The ESF+ is financing 
ALMPs  targeted  towards  activating,  reskilling  and 
upskilling  groups  underrepresented  in  the  labour 
market.  However,  further  efforts  in  these  areas 
would  be  beneficial  and  the  country  could 
encourage  legal  migration  and  attract  talent, 
including  from  non-EU  countries.  In  addition,  the 

including  gradually 

expectancy 

anticipated 

increasing 

in  2030. 

to 

is 

ageing  population  will  place  further  strain  on  the 
is  already  under 
healthcare  system,  which 
pressure (see Annex 14). 

for 

Labour migration from non-EU  countries  has 
increased, although the impact on the labour 
force  is  expected  to  remain  limited.  In  2022, 
Croatia  experienced  a  positive  migration  balance 
for the first time since 2008. In 2023, the number 
of  new  permits 
third-country  nationals 
increased  by  42%  compared  to  2022(208).  Over 
95%  of  permits  were  given  for  employment 
reasons. The employment rate of non-EU nationals 
is higher than the overall rate, standing at  80.3% 
(vs 64.2% in the EU). However, migration flows are 
relatively low  overall  and  are  projected to  have a 
limited  effect  on  future  labour  force  numbers. 
Promoting  legal  migration  and  attracting  talent, 
particularly  from  non-EU  countries,  is  therefore 
becoming  increasingly  important. In  March  2025, 
Croatia  has  amended  its  Foreigners  Act  to  ease 
hiring  and  keep  the  non-EU-  nationals  in  the 
labour  market  as  well  as  increase  their  social 
protection and inclusion. 

recent  efforts 

Skills  mismatches  pose  a  challenge  to  the 
labour  market,  with  workforce  shortages  in 
many  sectors.  Croatia’s 
in 
upskilling  and  reskilling  are  supported  by  the 
recovery  and  resilience  plan  (RRP)  and  the  ESF+; 
these  measures  include  creating  ILAs.  However, 
adult learning remains limited (23.3% vs 39.5% in 
the EU in 2022), with particularly low participation 
rates  among  vulnerable  groups  (see  Annex  12). 
Skills  mismatches  contribute  to  labour  shortages, 
employment  below  the  level  of  the  qualification 
attained  and  fewer  employment  opportunities  for 
workers  with  medium  and  especially 
lower 
qualifications.  While  the  job  vacancy  rate  fell 
below the EU average in Q4-2024 (1.7% vs 2.3% 
in the EU), it remains above its pre-pandemic level 
(1.5% in Q4-2019). In January 2025, the share of 
employers expecting labour shortages to limit their 
production  was  particularly  high  in  construction 
(47%) and manufacturing (40.6%). High shortages 
were  also  reported 
in  public  administration, 
education  and  healthcare  sector.  The  declining 
working-age  population  risks  further  exacerbating 
labour  shortages,  especially  among  the  people 
lower  qualifications, 
with 
economic 
undermining 

intermediate  and 

Croatia’s 

(208) Residence permits – statistics on authorisations to reside and 

work - Statistics Explained 

85 

 
 
in 

to 

needs 

industries 

(vs  3.5% 

In  energy-intensive 

(11.7%).  The  RRP  envisages 
revised 

Effectively  navigating  the  green  and  digital 
transitions  requires  strengthened  upskilling 
and  reskilling  actions.  Employment  in  energy-
intensive  industries  has  increased  in  recent  years 
and  represented  2.3%  of  total  employment  in 
2024 
the  EU).  By  contrast, 
employment in mining and quarrying has fallen by 
16% since 2015. Labour shortages in construction, 
a  key  sector  for  the  green  transition,  are  limiting 
in 
business  activity.  Upskilling  and  reskilling 
energy-intensive 
be 
strengthened. 
industries, 
workers’  participation  in  education  and  training 
stood  at  only  3.7%  in  2024,  well  below  the  EU 
the 
average 
publication 
skills 
development  plan,  which  would  encourage  people 
to acquire  green skills as part of Croatia’s energy 
efficiency  and  renovation  plans.  The  ICT  sector 
faces  significant  challenges 
IT 
in 
ICT 
specialists.  The  percentage  of 
specialists  was  below  the  EU  average  in  2023 
(17.4%  vs  19.4%).  The  RRP  aims  to  address 
upskilling  and  acquisition  of  skills  related  to  the 
green  and  digital  transitions  by  introducing  new 
ALMPs for long-term unemployed people and less 
employable people from disadvantaged groups, by 
using  the  voucher  system  for  adult  education. 
ESF+  funding  also  contributes  to  green  skills  and 
jobs,  adding  to  RRP  investments  and  aligning 
vocational  education  and  training  to  the  labour 
market needs of the green transition. 

retaining 
female 

national 

of 

a 

competitiveness. It  would  be  beneficial  if  the 
country  stepped  up  its  efforts  to  improve  the 
coverage  and  labour  market  relevance  of  adult 
education and training, for example, through ILAs. 

Graph A10.3: Employment by type (permanent, 
temporary, self-employed), year-on-year changes 

(1) Employment (thousand), total, ages 20-64, year-on-year 
change based on non-seasonally adjusted data. Self 
employment is defined as the total of self-employed persons 
and contributing family workers.. 
Source: Eurostat, LFS [lfsq_egaps, lfsq_etgaed] 

Wage growth has been strong and well above 
the  EU  average.  Following  average  annual 
growth of more than 13% in the period from 2022 
to 2024 (among the highest wage growth rates in 
the EU), nominal wage growth is expected to slow 
down but remain above the EU average. Real wage 
growth,  in  turn,  is  expected  to  slow  to  1.1%  in 
2025 (209), having previously risen rapidly and well 
above  the  EU  average  (1.6%  in  2022,  7.3%  in 
2023 and 7.1% in 2024), driven by robust nominal 
wage growth and a rapid decline in inflation (from 
8.4%  in  2023  to  4.0%  in  2024).  The  statutory 
minimum wage increased by around 56% between 
January  2025,  which 
January  2022  and 
corresponds  to  a  real  increase  of  almost  26%. 
Despite  above  average  growth  in  real  wages  in 
recent years, wages remain low compared to other 
Member  States.  Real  labour  productivity  per  hour 
worked was above the EU average in 2023 (110.1 
vs 105.5). 

(209)Based on the European Commission Autumn 2024 economic 

forecast. 

86 

-150-100-500501001502002007-Q42008-Q42009-Q42010-Q42011-Q42012-Q42013-Q42014-Q42015-Q42016-Q42017-Q42018-Q42019-Q42020-Q42021-Q42022-Q42023-Q42024-Q4thsHRPermanent employeesTemporary employeesSelf employmentOverall 
   
 
 
ANNEX 11: SOCIAL POLICIES 

While  social  conditions 
in  Croatia  are 
improving,  the  country  still  faces  significant 
challenges  related  to  poverty  and  social 
exclusion,  especially  among  vulnerable 
groups  and  in  rural  areas.  Key  contributing 
factors  include  the  low  impact  of  social  transfers 
(excluding  pensions)  on  poverty  reduction  and 
high-income 
inequality.  Limited  employment 
opportunities  and  the  low  impact  of  the  social 
protection  and  pension  system,  in  terms  of  both 
adequacy  and  coverage  continue  to  pose  a 
challenge.  Demographic  changes  raise  concerns 
about  the  adequacy  and  sustainability  of  the 
pension and care systems. The limited capacity of 
the  social  protection  system  and  lack  of  quality 
community-based services, in particular long-term 
care,  pose  risks  to  Croatia’s  sustainable  and 
inclusive growth and prosperity. 

Croatia is implementing the National plan for 
combating  poverty  and  social  exclusion 
2021-2027  and  the  National  Plan  for  the 
Development  of  Social  Services  2021-2027, 
as  well  as  multiple  sectoral  strategies.  More 
than  EUR 600  million  from  the  European  Social 
Fund  Plus  (ESF+)  and  more  than  EUR 110  million 
from  the  European  Regional  Development  Fund 
(ERDF)  will  be  invested  to  improve  social  services 
and  infrastructure  in  the  social  sector.  Planned 
measures  include  developing  poverty  diagnostics, 
county  social  plans,  social  welfare  academy, 
inclusion  of  children  and 
support  of  social 
deinstitutionalisation  and  the  development  of 
community services. 

Graph A11.1: At-risk-of-poverty or social exclusion 
rate and its components (AROP, SMSD, LWI) 

social 

exclusion 

Poverty  and 
remain 
moderate,  but  the  situation  has  been 
worsening for older people and persons with 
disabilities.  The  at-risk-of-poverty  or  social 
exclusion  (AROPE)  rate  increased  by  1.8 pps  to 
21.7%  in  2024,  surpassing  the  EU  average  (21% 
in 2024). This was mainly driven by the increase in 
monetary  poverty  (measured  by  the  at  risk  of 
poverty  rate),  which  stood  at  20.3%  in  2024, 
above the EU average of 16.2%. The poverty gap, 
measuring the distance of the income of those at 
risk  of  poverty  from  the  poverty  threshold,  was 
also significantly above the EU average (27.8% vs 
22.8%). Worsening trends are noticeable in AROPE 
rates  for  vulnerable  groups,  especially  the  older 
people and persons with disabilities.  

Vulnerable  groups  and  rural  areas  are 
particularly  affected  by  poverty  and  social 
exclusion. In 2024, AROPE rates were at 27.2% in 
rural areas, 12.7 pps higher than in cities 14.5. The 
region  of  Pannonian  Croatia  in  particular  shows 
higher  AROPE  rates,  at  31%,  9.3 pps  higher  than 
the  Croatian  average.  The  AROPE  rate  for  older 
people  (65  and  over)  was  at  37.6%  in  2024, 
substantially  higher  than  the  EU  average  of 
19.4%.  The  AROPE 
for  persons  with 
rate 
disabilities  increased  for  the  third  consecutive 
year,  reaching  40.2%  in  2024,  and  is  among  the 
highest  in  EU  (28.8%  EU  average).  49.1%  of 
persons  with  severe  disabilities  are  at  risk  of 
poverty  and  social  exclusion  in Croatia  (vs the  EU 
average  of  36.3%,  2024).  This  is  linked  to  lower 
employment and a high disability employment gap 
in Croatia (see Annex 10).  

87 

(1) AROPE: At-risk-of-poverty or social exclusion rate (% of 
total population). People who are at-risk-of poverty (AROP) 
and/or suffering from severe material and social deprivation 
(SMSD) and/or living in household with very low work intensity 
(LWI). 
Source: Eurostat, EU-SILC [ilc_peps01n, ilc_li02, ilc_mdsd11, 
ilc_lvhl11n] 

Additional  efforts  are  needed  to  reach  the 
national  poverty  reduction  target  by  2030. 
The  number  of people  at risk  of  poverty  or  social 
exclusion  (AROPE)  decreased  by  31  000  persons 
since  2019  leaving  considerable  room  for  further 
progress  towards  reaching  the  2030  target  of 
reducing  the  number  by  298 000.  More  action  is 
needed  to  combat  poverty  and  reach  the  2030 
target,  including  improvement  in  the  areas  of 
social  benefits  and  employment  support,  health 
and 
the 
especially 
disadvantaged groups. 

education 

targeting 

0510152025302015201620172018201920202021202220232024% of populationHRAt-risk-of-poverty-or-social-exclusion rateAt-risk-of-poverty rateSevere material and social deprivationPeople living in low work intensity households 
 
  
 
 
The risk of poverty or social exclusion among 
increased.  Between  2023and 
children  has 
2024,  the  AROPE  rate  for  children  increased  by 
2 pps  to  19.3%  (EU:  24.2%)  reversing  the  earlier 
positive  trend.  This  development  suggests  that 
Croatia  should  increase  efforts  to  achieve  its 
target for child AROPE reduction (94 000 in 2030, 
compared  to  134 000  in  2019).  To  mitigate  the 
is 
impact  of  poverty  on  children,  Croatia 
implementing the European Child Guarantee (ECG) 
in  line  with  its  2023  action  plan,  which  is  also 
supported by the RRP and ESF+. 

than 

lower 

traditionally 

Work  intensity  plays  an  important  role  in 
determining poverty risks. The poverty rate for 
quasi-jobless households was at 72.7% in 2024(vs 
64.8%  EU  average),  while  in  work  poverty  for 
households, 
the  EU 
average,  increased  in  2024  to  8.3%,  surpassing 
the  EU  average  of  8.2%.  It  has  increased  since 
2023by  6 pps  for  single  parents  (22.0%  in  2024 
vs  18.9% in  the  EU)  and by  6.9 pps  for  part time 
employees  (16.6%  in  2024  vs  12.8%  in  the  EU). 
This  points  to  the  importance  of  active  inclusion 
for  those  at  risk  of  poverty,  including  adequate 
access  to  quality  employment,  education  and 
services, specifically early childhood education and 
care, long-term care and employment support (see 
Annexes 10 and 12). 

Graph A11.2: At-risk-of-poverty or social exclusion 
rate, age groups 

(1) AROPE: At-risk-of-poverty or social exclusion rate (% of 
total population). 
Source: Eurostat, EU-SILC [ilc_peps01n] 

88 

low-wage  earners  and 

Income inequality is on the rise. The income of 
the richest 20% of the population was 4.97 times 
that of the poorest 20% (above the EU average of 
4.66) in 2024. The difference is larger for women, 
at  5.05  (EU:  4.6)  as  well  as  for  older  people,  at 
4.65 (EU:  4.14)  in 2024. The relatively  high share 
of 
low  coverage  of 
collective  bargaining  in  Croatia  are  also  factors 
contributing  to  income  inequalities.  The  inequality 
reducing  effect  of  the  tax  and  benefit  system  is 
weak  (35%  in  Croatia  vs  49%  EU  average)  (210). 
The  inequalities  have  a  regional  component,  with 
the  indicator  standing  at  5  in  Pannonian  Croatia, 
and 4.2 in the Adriatic Croatia. 

The  social  protection  system  presents 
considerable  adequacy  and  coverage  gaps. 
The impact of social transfers (excluding pensions) 
on  poverty  reduction  is  among  the  lowest  in  the 
EU. In 2024, it stood at 21.6%, well below the EU 
average of 34.4% and has significantly declined in 
the  last  decade.  Expenditure  on  social  protection 
benefits as a share of GDP in 2022 was below the 
EU average (21% vs 28%). The rate of persons at 
risk  of  monetary  poverty  after  social  transfers 
reached  20.3%,  compared  to  16.2%  in  the  EU  in 
2024.  The  benefit  recipient  rate  for  persons  that 
are  at  risk  of  poverty  and  living  in  quasi-jobless 
households  is  also  much  lower  than  the  EU 
average in 2023 (56.3% vs EU:  83.5%).  For those 
households receiving benefits in 2023 the relative 
poverty gap is still substantially larger than the EU 
average (67.8% vs 46.5%).  

Croatia’s  minimum  income  scheme  -  the 
Guaranteed Minimum Benefit (GMB) - has low 
adequacy and coverage and does not protect 
people  from  falling  below  the  poverty 
threshold. The adequacy of the minimum income 
scheme according to the benchmarking framework 
is much worse than the EU average (33.3% of the 
poverty  threshold  vs  EU:  55.6%;  and  30%  of  the 
income of a low-wage earner vs EU: 46.1%). Only 
around 2.5% of those whose income is below the 
at-risk-of-poverty rate threshold received the GMB 
in  2022  (211).  Furthermore,  the  unemployment 
benefit  coverage  in  Croatia  is  relatively  low,  only 
16.8% of unemployed for less than twelve months 

(210) Economic inequalities in the EU - Key trends and policies, 

p. 29 Publications catalogue - Employment, Social Affairs & 
Inclusion - European Commission. 

(211) GODIŠNJE STATISTIČKO IZVJEŠĆE O PRIMIJENJENIM 

PRAVIMA SOCIJALNE SKRBI,2023. 

05101520253035402015201620172018201920202021202220232024% of populationHRChildren (<18y)Working age (18-64)Elderly (65+) 
  
 
received  the  benefit  or  assistance 
in  2024, 
compared  to  35.7%  EU  average.  The  benefit 
coverage  for  those  long-term  unemployed  (more 
than twelve months) is around 5.4%, substantially 
lower than the EU average of 28.6% in 2024 (212). 
Net  replacement  rates  after  six  months  of 
unemployment  are  below  EU  average,  especially 
for  single  parents  and  single  income  families. 
There  is  scope  for  further  actions  to  strengthen 
access to social protection, in line with the related 
2019  Council  Recommendation.  The  new  Social 
Welfare  Act  came  into  force  in  2022  under  the 
recovery  and  resilience  plan  (RRP),  bringing  about 
changes  in  the  minimum  income  scheme  and 
other social benefits and services. However further 
steps  to  increase  the  adequacy  of  minimum 
income  schemes  would  help  secure  adequate 
income  while  ensuring  also  active 
minimum 
inclusion  as  set  out 
in  the  related  Council 
Recommendation (213). 

reflecting 

to  45.7%, 

Demographic 
trends  pose  a  significant 
challenge  for  the  future  adequacy  of  the 
pension  system.  The  aggregate  replacement 
ratio  (ARR)  is  among  the  lowest  in  EU  and  has 
dropped  to  35%  in  2024  (EU:  61%),  while  the 
average pension as a share of the average salary 
amounted 
the  more 
favourable tax treatment of pensions. This can be 
explained  by  a  very  unfavourable  pension  system 
dependency  ratio,  low  benefits  from  the  pension 
limited  number  of  years  of 
system,  and  a 
contribution (short working lives). Over 30% of the 
population  is  currently  retired,  largely  due to  past 
insufficient  incentives  to  delay  early  retirement, 
lenient  criteria  for  obtaining  disability  pensions, 
and a comparatively complex pension system with 
favourable  conditions  for  specific  groups  (for 
example war veterans) accounting for around 15% 
of all pensioners. The old-age dependency ratio is 
projected  to  increase  from  38.9%  in  2022  to 
62.2%  by  2070.  Future  demographic  trends  are 
expected  to  significantly  strain  the  sustainability 
of the pension system. While the Croatian pension 
system 
adjustment 
mechanism,  the  introduced  reform  of  raising  the 
statutory  retirement  age  for  women  from  sixty-
three  years  and  three  months  in  2023  to  sixty-
five, and the early retirement age from fifty-eight 

automatic 

lacks 

an 

years and three months in 2023 to sixty by 2030, 
is expected to alleviate some of this pressure (214). 

Access  to  non-institutional  long-term  care 
services  remains  very  limited.  In  addition  to 
low-to-medium  replacement  ratios  for  pensions, 
underdeveloped  and  low  coverage  of  long-term 
care  contributes  to  inadequate  support  to  the 
living standards of older people (215). According to 
the EU Ageing Report of 2024, public spending on 
LTC (health and social) is among the lowest in the 
EU (0.5% of GDP against 1.7% in the EU in 2022) 
and  concerns  primarily  residential  care  (53.7%  of 
total  LTC  expenditure  in  2022  vs  46.2%  EU 
average).  This 
influences  the  relatively  high 
proportion  of  older  people  with  unmet  assistance 
needs (at 71% of the 65+ population vs 46.6% EU 
average in 2019). Limited availability of long-term 
care services and significant shortages of qualified 
staff 
of 
deinstitutionalising  and  transitioning  persons  with 
disabilities to independent living. It also leads to a 
high  proportion  of 
informal  carers  delivering 
intensive informal care. 

hindering 

process 

are 

the 

substantial 

investments 

services  and 

the  RRP,  Croatia 

Enhancing  the  pace  of  deinstitutionalisation 
in 
requires 
related 
community-based 
infrastructures.  Under 
is 
investing  in  centres  for  the  elderly  to  provide 
community care and services to older people living 
at  home  and  European  Regional  Development 
Fund  (ERDF)  is  investing  in  organised  housing  to 
support the deinstitutionalisation process. In 2022, 
under ESF+, Croatia developed its operational plan 
for  deinstitutionalisation  and  its  operational  plan 
for long-term care, which are due to be adopted in 
2025. By 2025, transformation plans for 35 social 
welfare  institutions  were  completed,  providing  a 
critical foundation for EU investments ensuring the 
timely  and  efficient 
the 
deinstitutionalisation process. 

implementation  of 

Croatia  does  not  face  significant  challenges 
with energy and transport poverty, but some 
households  are 
in  a  more  vulnerable 
situation.  The  percentage  of  the  population 
unable  to  keep  their  homes  adequately  warm  is 
below the EU average (4.6% vs 9.2% in 2024). The 

(212) Data are with low reliability, Statistics | Eurostat. 

(213) Council adopts recommendation on adequate minimum 

income - Employment, Social Affairs & Inclusion - European 
Commission 

(214) 2024 Ageing report-Croatia. 

(215) The 2024 pension adequacy report. Current and future 

income adequacy in old age in the EU. 

89 

 
 
 
share  of  households  that  faced  arrears  on  utility 
bills has been falling since 2021 but still remains 
above  the  EU  average  (8.8%  vs  6.9%  in  2024) 
with  those  at  risk  of  poverty  particularly  effected 
(16.2%  in  2024).  As  for  transport  poverty,  the 
continued  dominance  of  private  cars  and  the 
stagnation  in  public  transport  use  (only  14.5%  of 
population  used 
trains,  motor  coaches,  and 
trolleybuses  in  2022,  vs  16.6%  in  EU)  highlight 
challenges  in  promoting  sustainable  and  inclusive 
transportation  systems.  Croatia 
is  addressing 
energy poverty through a combination of financial 
aid,  energy  efficiency  programmes,  and  support 
for  renewable  energy.  There  are  subsidies  for 
heating  and 
income  support  for  vulnerable 
households.  Furthermore,  measures  outlined  in 
Croatia’s  RRP  include  targeted  programmes  to 
reduce  energy  consumption,  increase  the  use  of 
renewable  energy,  and  tackle  energy  poverty  in 
rural  areas,  with  a  particular  focus  on  building 
local 
renovation  and 
authorities. 

capacity-building 

for 

House  prices  have  been 
increasing  but 
housing  affordability  has  remained  broadly 
stable over the past years with strong house 
price  increases  but  also  expanding  housing 
supply. House price growth became very dynamic 
in  the  last  years,  supported  both  by  dynamic 
mortgage  growth  and  foreign  demand.  Nominal 
house  prices  have  been  increasing  (12.3%  year-
on-year  in  2024-Q3),  as  well  as  mortgage  rates 
(from  2.8%  in  2021  to  3.3%  in  2023).  Mortgage 
credit  remains  dynamic  (+9.8%  in  2023)  and  the 
borrowing  capacity  of  households 
improved 
significantly over the past decade. Building permits 
are increasing and if the supply remains strong, it 
may moderate the evolution of house prices. This 
will require close monitoring. In terms of financial 
in  2024,  the  ESRB  concluded  that 
stability, 
following  the  combination  of  relaxed  lending 
standards  together  with  house  price  and  credit 
dynamics,  the  residential  real  estate  market  in 
Croatia  was  subject  to  medium  risks  and  the 
macroprudential 
partially 
appropriate and partially sufficient to mitigate the 
situation.  Housing  affordability  however  hasn’t 
changed  much.  The  standardised  house  price-to-
income  ratio,  persistently  very  high,  shows  only  a 
mild  increase  since  2015  (+2%  vs  +8%  EU 
average) and stood in 2023 close to its 2015 level 
as  household  income  grew  at  similar  pace  as 
house  prices.  With  very  high  home-ownership 
rates, 
rather 
underdeveloped  with  arguable  large  share  of 

policy  mix  was 

rental  market 

remains 

the 

informal rental agreements. The ratio of dwellings 
per  capita  has  increased  continuously  since  2015 
due  to  an  increase  in  the  number  of  dwellings 
amid  declining  population.  Furthermore,  the  ratio 
of  house  completions  per  capita  has  also 
increased  from  low  level  to  slightly  above  the  EU 
average.  Residential  construction  and  granted 
building  permits  have  increased  over  the  past 
years.  On  the  other  hand,  significant  share  of 
house  remain  vacant  and  large  share  of  units  in 
coast  regions  are  used  for  short-term  rentals, 
which  are  aimed  to  be  tacked  from  2025  by 
introduction  of  recurrent  taxation  of  vacant 
housing units and higher taxation for income from 
short-term rent. 

Overcrowding  and  housing  cost  overburden 
rates  are  declining,  but  some  regions  might 
face higher affordability challenges. According 
to the 2021 census, the number of households fell 
by  5.3%,  while  the  number  of  housing  units 
increased  by  4%  since  2011  (216).  The  housing 
overcrowding  rate 
is  decreasing  but  remains 
higher  than  in  EU  average,  31.7%  vs  16.9%  in 
2024.  For  people  at  risk  of  poverty,  the  rate  has 
also  been  falling  and  is  approaching  EU  average 
(29.2%  vs  28.8  in  the  EU).  However,  the  housing 
cost  overburden  rate  is  lower  than  EU  (3.7%  in 
2024 vs 8.2% in the EU), also for those at risk of 
poverty and social exclusion (16.8% vs EU: 31.1%). 
According  to  preliminary  results  of  the  ESPON 
study  ‘House  for  all’,  housing  affordability  on 
NUTS3  level  shows  regional  variation.  In  many 
cities, particularly  along  the  coast,  property  prices 
are  rising,  driven  by  high  demand  from  tourists 
and foreign buyers, making it difficult for locals to 
afford  homes.  Poor  housing  conditions  are 
relatively limited, with 6.9% of population living in 
housing  deprivation  (vs  14.5%  EU  average  in 
2023)(217).  Croatia  is  implementing  measures  to 
improve housing affordability and availability. The 
National  Housing  Policy  Plan 
focusing  on 
affordable  housing  models  is  expected  to  be 
adopted in 2025 and implemented with support of 
Technical support instrument.  

(216) Državni zavod za statistiku - Objavljeni konačni rezultati 

Popisa 2021 

(217) The indicator is defined as the percentage of the population 
deprived of each available housing deprivation items. The 
items considered are: - Leaking roof, damp 
walls/floors/foundation, or rot in window frames or floor; - 
Lack of bath or shower in the dwelling; - Lack of indoor 
flushing toilet for sole use of the household; - Problems with 
the dwelling: too dark, not enough light. 

90 

 
 
ANNEX 12: EDUCATION AND SKILLS 

and 

and 

competitiveness. 

underperformance 

Skills  shortages,  low  participation  in  adult 
learning 
in 
mathematics  represent  some  of  the  key 
challenges  for  Croatia’s  human  capital 
formation 
Skills 
development  challenges  start  at  an  early  age,  as 
participation in early childhood education and care 
(ECEC)  is among the lowest  in the EU. This stems 
from both lack of infrastructure and shortages of 
teachers. The education system struggles to equip 
young  people  with  basic  skills  in  mathematics. 
Together with a low share of top  performers, this 
poses a risk for competitiveness. Higher education 
challenges  are  low  attainment  rates  and  lack  of 
alignment  with  labour  market  needs.  Croatia 
continues to improve the labour-market relevance, 
quality and attractiveness of vocational education 
and training (VET). The share of adults engaged in 
learning  activities  nevertheless  remains  very  low. 
Efforts have been made to improve the quality of 
adult  education  and  training  and  increase  its 
labour  market  relevance.  However,  further  action, 
such  as  creating  individual  learning  accounts 
(ILAs), is needed to increase the country’s potential 
for  research  and  innovation,  productivity  growth, 
and competitiveness. 

Croatia is investing  in boosting  participation 
in ECEC, but staff shortages persist and may 
hinder  quality  and  participation.  ECEC 
participation  has  increased  substantially  over  the 
last  decade (218),  although  it  is  still  among  the 
lowest in the EU (83.5% vs EU 93.3%). The country 
has invested substantial resources to improve the 
quality  and  accessibility  of  ECEC.  Infrastructure 
investments under the recovery and resilience plan 
(RRP)  and  the  cohesion  policy  aim  to  create 
22 500  additional  ECEC  places  and  increase  the 
participation  rate  to  96%.  Universal  pre-school 
access  is  planned  by  2030.  Reforms  underway 
include  the  development  of  a  national  ECEC 
curriculum (219)  and  a  pre-school  curriculum  (220). 

These would increase the number of hours of pre-
school  education  from  250  to  700.  According  to 
most  recent  estimates,  around  7 000  teachers 
need  to  be  hired  to  meet  the  2030  needs.  This 
would require increasing the number of graduates 
from  ECEC  teacher  programmes  and  additional 
immediate  measures (221).  Croatia  is  working  to 
increase  the  number  of  trained  ECEC  teachers  in 
the  medium  term,  by  enabling  primary  school 
teachers,  while 
teachers 
completing 
In 
2024/2025, 
launched  such 
programmes  with  a  current  total  of  71  students, 
and additional programmes are expected. 

to  work  as  ECEC 
requalification 
three  universities 

programmes. 

to 

time 

students 

contribute 

Shortages  of  qualified  teachers  and  low 
high 
instruction 
underperformance  in  mathematics  and  low 
share  of  top  performers,  posing  risks  for 
competitiveness.  Although  basic  skills  have 
remained  generally  stable  since  2018  and 
improved 
in  science  according  to  the  OECD 
Programme  for  International  Student  Assessment 
(PISA) 2022 results, the underachievement rate in 
mathematics remained high (32.9% vs EU 29.5%). 
The  underperformance  is  particularly  high  among 
disadvantaged 
in  2022). 
Performance gaps can also be noted between rural 
and  urban  schools,  with  students  from  rural 
schools achieving on average lower results in basic 
skills  than  those  in  urban  schools (222).  The  share 
of top performers in all three subjects is below the 
EU  average.  This  may  harm  competitiveness  and 
innovation.    The  overall  quality  of  education  in 
mathematics and physics is further constrained by 
shortages of qualified teachers. The government is 
trying  to  address  this  through  scholarships  for 
students  studying  to  become  STEM  teachers  and 
enabling re-employment of retired STEM teachers. 
In addition, 47% of eighth graders do not reach a 
basic  level  in  computer  and  information  literacy 

(47.8% 

(218) 

In  2023,  29.6%  of children  under  three  were  enrolled 
in formal childcare. Compared to 2013, the rate increased by 
18.6 percentage points (pps). In 2022, the participation rate 
of children between the age of three and the age for starting 
compulsory primary education was 83.5%, having increased 
by 15.9 pps since 2013. Eurostat: educ_uoe_enra21. 

(219) Croatian Ministry of Science and Education: Odluka o 

imenovanju Radne skupine za izradu Nacrta prijedloga 
Nacionalnoga kurikuluma za rani i predskolski odgoj i 
obrazovanjeh. 

(220) Ministry of Science and Education: Odluka o imenovanju 
Radne skupine za izradu Nacrta prijedloga Nacionalnog 
kurkuluma predškole 

(221) Matković, T., (2021), Ažurirana procjena kvantitativnih 

potreba za obrazovanjem i zapošljavanjem odgojitelja u 
sustavu ranog i predškolskog odgoja i obrazovanja, 
Ministarstvo znanosti i obrazovanja, Zagreb. 

(222) Students in rural schools achieved 58 points less in reading 
(EU 52), 63 in maths (EU 46), 57 (EU 46) in science. OECD 
(2023). PISA 2022 Results (Volume I). 

91 

 
 
 
 
 
 
 
(EU  average:  43%) (223).  To  better  monitor 
educational  outcomes,  national  exams  were 
extended in March 2024 to all fourth-grade pupils, 
covering  Croatian,  mathematics,  nature  and 
society and a national minority language. 

in  terms  of  equity.  The  gap 

The  country’s  education  system  performs 
well 
in 
underachievement  between  students  from  high 
and low socio-economic backgrounds is one of the 
lowest  in  the  EU  (14.9 pps  vs  EU  24.1 pps).  In 
2024,  2%  of  students  left  education  and  training 
in  the  EU (224). 
lowest  percentage 
early,  the 
Although  primary  education 
free,  some 
is 
materials  and  activities  are  not  accessible  to 
disadvantaged students. 

A  major  reform  to  move  towards  a  whole-
day  school  model 
is  underway. Croatia 
launched  a  pilot  project  in  2023,  implementing 
single  shift,  full-day  teaching  in  65  primary 
schools. The objective is to address low instruction 
time,  which  is  seen  as  a  key  driver  of  poor 
education outcomes. In this context, the Ministry of 
Education  allocated  EUR 2 million  to  support  the 
organisation  of  elective  activities  (sports,  creative 
or  IT  competencies)  in  schools  in  the  afternoon. 
The  RRP  is  also  supporting  the  development  of 
school  infrastructure  necessary  for  single  shift 
teaching  with  a  budget  of  EUR 303 million (225). 
Schools involved in the project are testing adapted 
curricula.  Full  implementation  of  the  whole-day 
school  model 
(supported  by  cohesion  policy 
investments  of  EUR 122 million)  is  expected  for 
the  2027/2028  academic  year.  It  could  result  in 
better  education  outcomes,  better  educational 
opportunities  for  disadvantaged  students  and 
more efficient use of resources (226). However, the 
reform  is  still  in  its  initial  phases.  Its  success  will 
largely depend on the implementation of the next 
phases, i.e. the completion of the curricular reform, 
preparing  teachers  for  its  implementation  and 
adapting the school infrastructure. 

(223) European Commission (2024). International Computer and 
Information Literacy Study (ICILS) in Europe – 2023. Main 
findings and educational policy implications. 

(224) Eurostat: edat_lfse_14. 

(225) Objava otvorenog Poziva za dodjelu bespovratnih sredstava 
„Izgradnja, rekonstrukcija i opremanje osnovnih škola za 
potrebe jednosmjenskog rada i cjelodnevne škole“. 

Croatia 
is  enhancing  the  labour  market 
relevance  of  VET.  The  share  of  learners  in 
medium-level  education  that  are  enrolled 
in 
vocational programmes is one of the highest in the 
EU  (70.6%  vs  EU  49.1%  in  2023).  However,  the 
employment  rate  of  recent  VET  graduates  lags 
behind  the  EU  average  (75.7%  vs  EU  average  of 
80.0%  in  2024) (227).  The  Croatian  VET  system  is 
learning-
changing 
outcome-oriented,  with  many  aspects  of  the 
reformed  system  currently  under  development. 
With  support  from  the  European  Social  Fund  Plus 
(ESF+), outdated subject-based curricula are being 
replaced  by  modular 
curricula  based  on 
occupational  standards  and  aligned  with  labour 
market needs.  

input-oriented 

from 

to 

The  VET  reforms  focus  on  relevance,  quality 
and attractiveness. Modular teaching connecting 
general  education 
subjects  with  vocational 
implemented.  Efforts  are 
is  being 
education 
underway  to  increase  participation  in  work-based 
learning  (38.3%  of  VET  graduates  aged  20-34  in 
the  EU  65.3% (228),  by 
2024,  compared  to 
providing incentives for learners and employers. In 
2023,  Croatia  finalised  the  development  of  a 
quality  assurance  system  in  adult  education  and 
continuous VET. The country is also reviewing self-
assessment of training providers in initial VET and 
expanding  the  scope  of  the  pilot  tracking  of  VET 
graduates.  These  reforms  are  significant  stepping 
stones  towards  a  comprehensive  VET  quality 
assurance  system.  Their  success  will  also  depend 
on  promoting  lifelong  learning  through  strategic 
planning  and  awareness  campaigns,  as  well  as 
active involvement of all stakeholders at local and 
national level. 

Higher  education  (HE)  is  not  supplying  the 
advanced  skills  needed  by  the  economy.  In 
Croatia,  higher  education  challenges  are 
low 
tertiary  educational  attainment  (TEA)  and  lack  of 
alignment  with  the  needs  of  the  labour  market, 
due to a mismatch with the fields of study chosen 
by  students.  The  tertiary  educational  attainment 
rate for people aged 25-34 was 39.4% in 2024 in 
Croatia (below the 44.2% EU average and 45% EU 
target). The gender gap in favour of women is high 
at  20.5 pps.  The  employment  rate  of  recent  HE 
graduates  in  2024  was  85.9%,  (vs  86.7%  EU 

(226) World Bank. (2023). Harnessing human capital for growth in 
Croatia - Unleashing Potential for Economic Take-off amid 
Demographic and Technological Change. 

(227) Eurostat: edat_lfse_24. 

(228) Eurostat: edat_lfs_9919. 

92 

 
 
 
average).  Students 
to  have  a  strong 
tend 
preference  for  social  sciences,  although  the 
interest in STEM is growing (229). Enrolment quotas 
are  not  sufficient  to  meet  the  demand  for 
pharmacists, doctors and STEM teachers (230).  

Tertiary attainment of young people living in 
rural areas is lower. That of young people living 
in  cities  is  20.7 pps  higher (231).  The  high  cost  of 
living poses an obstacle to studying, especially for 
students  from  lower  socio-economic  backgrounds 
in  rural  areas  of  Croatia.  Therefore,  EUR 47.6 
million from cohesion policy funds will be used to 
build and renovate student dormitories.  

Croatia  is  working  to  strengthen  the  quality 
of  HE  programmes  and  connect  them  to  the 
needs  of  the  labour  market.  Performance 
agreements  are  now  the  mandatory  method  of 
financing  for  all  public  universities.  This  new 
to  performance  and 
method 
fulfilment  of  certain  goals.  The  objective  is  to 
improve  quality  and  increase  internationalisation 
and relevance of higher education. The evaluation 
phase will start in 2026. 

links  financing 

Enrolment  in  STEM  studies  is  insufficient  to 
meet the growing demand. In 2022, the level of 
students  enrolled  in  STEM  subjects  as  a  share  of 
total tertiary enrolments in Croatia was 28.3% (EU 
27.1%).  Pupils  enrolled  in  medium-level  VET  in 
STEM  fields:  40.6%  for  Croatia  in  2022  (36.2% 
EU-wide).  Nevertheless,  with  a  low  TEA  level,  this 
is  not  enough  to  meet  the  demand  for  high-level 
skills  of  the  labour  market.  The  Ministry  of 
Education  provides  scholarships  for  students 
enrolled in STEM, using funding from the Recovery 
and Resilience Facility (RRF). In 2022, the share of 
students  enrolled  in  ICT  subjects  was  in  line  with 
the EU average (5.2%), of which 21.7% were girls. 
Boys  favour  computer  science  and  engineering, 
while  girls  favour  biomedicine  and  healthcare. 
Both share similar interest in natural sciences and 
mathematics.  Further  action  to  support  STEM 
careers  would  contribute  to  enhancing  Croatia’s 
innovation capacity. 

(229) MOZVAG, 2022, https://mozvag.srce.hr/preglednik/. 

(230) Croatian Employment Service (2024), Recommendations for 
Educational Enrolment Policy and Scholarship Policy for 2025 

(231) 

Eurostat: edat_lfs_9913. 

There is an unmet need for advanced digital 
skills  and  ICT  specialists  in  the  context  of 
digital transitions. The share of workers (25-64) 
with  at  least  basic  digital  skills  is  significantly 
higher  than  the  EU  average  (74.4%  vs  64.7%  in 
the  EU  in  2023)  and  the  share  of  ICT  specialists 
reached  the  EU  average  of  5.0%    in  2024 
However,  women  are  under-represented  in  the 
sector  (17.4%  in  2023  vs  the  EU  average  of 
19.4%).  Croatia  has  taken  steps  to  address  these 
challenges,  such  as  initiatives  under  its  RRP  to 
improve ICT-related education and promote digital 
upskilling.  Nevertheless,  efforts  to  increase  the 
enrolment  of  students  in  ICT  higher  education 
programmes 
workforce 
participation in ICT roles need  to be  intensified to 
meet the EU's Digital Decade targets. 

strengthen 

and 

Green  competences  are  being  developed  at 
all  levels  of  education.  Since  2019,  green 
competences  are  taught  as  cross-curricular topics 
in  primary  and  secondary  schools.  In  more  than 
half of Croatian schools (53.8%), nearly all eighth-
grade  students  have  participated  in  activities 
related  to  environmental  sustainability  (EU-17: 
48%) (232).  As  a  result,  Croatian  eighth-grade 
students’  knowledge  is  above  the  EU  average 
(519.8 points vs 506.7 points for the EU-17), with 
girls  and  students  with  highly  educated  parents 
having better scores (28.15 and 79.3 points more, 
respectively). 

VET  teachers  are  offered  training  in  green 
skills.  The  Croatian  Agency  for  VET  and  Adult 
Education  offers  VET  teachers  training  in  green 
skills  via  VET  teacher  conferences,  sector-specific 
training and a teacher-training web portal. Training 
topics  include  the  circular  economy,  zero  energy 
sustainable 
and 
science 
development,  applied  environmental 
teaching,  sustainability 
industry, 
fashion 
pollution,  solar  and  electric  vehicles.  The  ESF+  is 
providing  support  for  aligning  VET  to  the  labour 
market needs of the green transition. 

construction, 

sustainable 

in 

is 

essential 

development 

Skills 
for 
competitiveness,  resilience  and  fairness,  in 
light  of  a  shrinking  labour  force  and  skills 
shortages.  Skills  mismatches  and  shortages 
remain a considerable challenge for the country. In 

(232) 

2022 International Civic and Citizenship Education 
Study (ICCS). The average in the 17 Member States surveyed 
was 48%. 

93 

 
 
 
to 

limit 

their 

the  macroeconomic 

2023, 
skills  mismatch 
remained  above  the  EU  average  (24%  vs  19%  in 
the EU), and 43% of Croatian employers reported 
major  difficulties  to  find  and  hire  staff  with  the 
right  skills  (vs  38%  in  the  EU) (233).  In  January 
2025,  the  share  of  employers  expecting  labour 
production  was 
shortages 
significantly  higher  than  the  EU  average 
in 
construction  (47%)  and  manufacturing  (40.6%) 
(234). High shortages are also reported in the public 
administration,  education  and  healthcare  sector. 
The  main  drivers  of  skills  shortages  are  the 
mismatch  between  education  and  labour  market 
needs,  the  digital  and  green  transitions,  the 
emigration of high-skilled workers and the ageing 
population.  Skills  mismatches  contribute  to  lower 
low-
employment  opportunities,  especially  for 
qualified  workers.  The  employment  rate  for  the 
low-qualified was only 41.3% in 2024, among the 
lowest  rates  in  the  EU.  Croatia’s  investments  in 
upskilling  and  reskilling  under  the  RRP  and  the 
ESF+,  including  with  a  view  to  creating  ILAs,  will 
need to be boosted to reduce skills shortages. 

refrigeration  mechanics (235). 

industries,  workers’  participation 

Within  the  broader  need  for  upskilling  and 
reskilling,  development  of  green  skills  in 
energy-intensive 
industries  needs  to  be 
strengthened.  In  2024,  labour  shortages  were 
reported  in  several  occupations  requiring  specific 
skills  related  to  the  green  transition,  including 
insulation  workers,  roofers  and  air  conditioning 
In  energy-
and 
intensive 
in 
education and training stood at only 3.7% in 2024, 
well  below  the  EU  average  (11.7%).  To  address 
these  gaps,  the  RRP  supports  upskilling  and 
acquisition of green skills through a national skills 
development  plan,  active  labour  market  policies, 
new adult learning programmes in construction for 
workers  from  non-EU  countries  and  by  using  the 
voucher 
for  adult  education.  RRP 
investments  in  green  skills  are  being  further 
reinforced through broader initiatives supported by 
the ESF+. 

system 

Graph A12.1: Development of underachievement in 
mathematics, reading and science in PISA 2012 - 
2022 (%) 

Source: OECD (2023). 

learning 

remains 

in  adult 

Adult  learning  needs  to  be  significantly 
enhanced  to  reduce  skills  mismatches  and 
support  Croatia’s  growth  potential.  Despite 
efforts  to  develop  a  high-quality,  labour-market-
learning  system,  the  rate  of 
relevant,  adult 
participation 
low, 
particularly  among  the  low-skilled,  elderly,  rural 
and  the  long-term  unemployed.  In  2022,  only 
23.3%  of  Croatians  aged  25-64  had  participated 
in  learning  in  the  previous  12 months  (excluding 
guided  on-the-job  training).  This  rate  was  down 
from 26.9% in 2016 and far below the EU average 
of 39.5% (236). Moreover, the rate of adult learning 
participation in 2022 varied greatly depending on: 
(i) gender  (19%  for  men  vs  27.5%  for  women); 
(ii) age (33.4% for those aged 25-34 years vs only 
and 
13.2% 
(iii) employment 
28.6%; 
unemployed:  12.2%;  inactive:  8.9%).  Croatia  is 
investing  (with  funding  from  the  RRF  and  the 
ESF+)  in  adult  learning  and  in  providing  labour 
market-relevant skills. However, further efforts are 
needed  to  reach  the  national  2030  target  of  at 
least  55%  of  all  adults  participating  in  training 
every  year,  contributing  to  the  economy’s  growth 
potential.  Expanding  the  existing  voucher  system 
towards  ILAs,  as  currently  planned,  may  help 
achieve these goals. 

(employed: 

55-64); 

status 

those 

aged 

for 

(233) Flash Eurobarometer FL537: SMEs and skills shortages. 

(234) Source: ECFIN European Business and Consumer Surveys. 

(235) European Labour Authority 2025 EURES Report on labour 

shortages and surpluses 2024, based on data from EURES 
National Coordination Offices. Skills and knowledge 
requirements align with the ESCO taxonomy on skills for the 
green transition, with examples analysed using the ESCO 
green intensity index. 

(236) Eurostat: Adult Education Survey- participation in education 

and training excluding guided on-the-job training. 

94 

1015202530352012201520182022%Mathematics  HRMathematics  EUReading HRReading EUScience HRScience EU2030 EU target 
 
   
 
ANNEX 13: SOCIAL SCOREBOARD 

Table A13.1:Social Scoreboard for Croatia 

(1) Update of 5 May 2025. 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 2025 for details on the 
methodology (https://employment-social-affairs.ec.europa.eu/joint-employment-report-2025-0). 
Source: Eurostat 

95 

23.32.059.010.65.94.9773.65.01.8131.521.719.321.641.03.730.21.3Critical situationTo watchWeak but improvingGood but to monitorOn averageAdult participation in learning (during the last 12 months, excl. guided on the job training, % of the population aged 25-64, 2022)Equal opportunities and access to the labour marketBest performersBetter than averageEarly leavers from education and training(% of  the population aged 18-24, 2024)Young people not in employment, education or training(% of the population aged 15-29, 2024)Gender employment gap(percentage points, population aged 20-64, 2024)Income quintile ratio (S80/S20, 2024)Dynamic labour markets and fair working conditionsSocial protection and inclusionShare of individuals who have basic or above basic overall digital skills(% of the population aged 16-74, 2023)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2024)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2024)Self-reported unmet need for medical care (% of the population aged 16+, 2024)Disability employment gap (percentage points, population aged 20-64, 2024)Housing cost overburden (% of the total population, 2024)At risk of poverty or social exclusion (AROPE) rate (% of the total population, 2024)Employment rate(% of the population aged 20-64, 2024)Unemployment rate(% of the active population aged 15-74, 2024)Long term unemployment(% of the active population aged 15-74, 2024)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2023)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2024) 
 
 
 
 
 
 
  
 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 

Croatia’s  health  system  faces  significant 
challenges. These need to be addressed if the 
country  is  to  improve  the  health  of  its 
population  and 
fairness,  while 
social 
boosting the competitiveness of its economy. 
Challenges  faced  by  Croatia  include  low  life 
expectancy  linked to  high treatable mortality,  and 
limited  access  to  care.  Both  of  these  issues  are 
associated with suboptimal funding, a lack of cost-
effectiveness  of  the  health  system,  insufficient 
focus on disease prevention, and shortages and an 
uneven  geographical  distribution  of  healthcare 
workers and healthcare resources.  

Life expectancy at birth in Croatia rebounded 
to its pre-COVID-19 level but was still among 
the  lowest  in  the  EU  in  2023  (see  Annex  15). 
Moreover, there are striking gender gaps in health 
outcomes.  Women  can  expect  to  live  6.3  years 
longer than men. This said, they can only expect to 
live  about  2.5  years  longer  than  men  in  good 
health.  Treatable  and  preventable  mortality  is 
among 
the  EU,  suggesting 
in 
shortcomings  in  the  effectiveness  of  the  health 
system. Croatia participates in several joint actions 
funded  by  EU4Health  aimed  at  reducing  the 
burden  of 
cancer, 
diabetes and respiratory diseases. 

cardiovascular  diseases, 

the  highest 

Graph A14.1: Life expectancy at birth, years 

Source: Eurostat (demo_mlexpec) 

Health  expenditure  per  capita  in  Croatia  is 
low.  Health  spending  per  inhabitant  in  2022 
remained one of the lowest in the EU (EUR 1 858 
vs  EUR  3  685  in  2022).  The  largest  share  goes 
towards  outpatient  care  (35%  of  total  health 
expenditure)  followed  by  inpatient  and  hospital 
day  care  (32%).  Croatia  has  a  high  number  of 
hospital  beds  (488  per  100 000  population  in 
2022, higher than the EU average), pointing to low 
cost-effectiveness. 
Investment  through  capital 
formation is low in Croatia, while EU funds provide 
substantial  support.  Under  the  Croatian  recovery 

96 

reforms  and 

and  resilience  plan  (RRP),  around  EUR 354 million 
related 
is  planned  for  health 
investments.  In  addition  to  the  RRP,  funding  for 
healthcare  (EUR 226 million)  is  planned  under  the 
EU  cohesion  policy  funds  in  2021-2027.  These 
funds invest in cancer care, hospital infrastructure 
and  equipment,  quality  improvements  to  hospital 
care  and  measures  to  improve  the  accessibility, 
effectiveness  and  resilience  of  the  health  system 
(see Annex 16). Reforms transferred ownership of 
general hospitals from the county to the state with 
the  aim  of  strengthening  hospital  management, 
ensuring  financial  sustainability,  and  integrating 
hospitals 
into  the  state  treasury  for  better 
oversight.  Also,  Croatia’s  national  development 
strategy  outlines  priorities  for  strengthening 
primary  healthcare,  restructuring  the  hospital 
system,  and  improving  access  to  palliative  care 
and essential medicines (237).  

Graph A14.2: Treatable mortality 

Age-standardised death rate (mortality that could be 
avoided through optimal quality healthcare) 
Source: Eurostat (hlth_cd_apr) 

Croatia  places  insufficient  focus  on  disease 
prevention.  In  2022,  spending  on  prevention 
accounted  for  5.3%  of  total  spending  on  health, 
lower  than  the  EU  average  of  5.5%.  Suicide  rates 
have decreased over time, but the rates in Croatia 
remain  among  the  highest  in  the  EU.  Mortality 
from  cardiovascular  diseases  and  especially 
cancer is among the highest in the EU, due in part 
to  behavioural  risk  factors.  Mortality  linked  to  air 
pollution  is  also  high  (see  Annex  7).  Furthermore, 
Croatia  is  among  the  countries  with  the  highest 
smoking  rates,  the  lowest  consumption  of  fresh 
fruit  and  vegetables,  and  the  lowest  level  of 
physical  activity  outside  working  time  (238).  Little 
progress  has  been  made  on  reducing  smoking 

(237) National Development Strategy of the Republic of Croatia 

until 2030. 

(238) Health at a Glance: Europe 2024, Chapter 4. 

78.677.676.677.778.681.380.480.180.681.420192020202120222023CroatiaEU133.1128.3130.8139.7133.591.389.291.793.389.720182019202020212022per 100 000 populationCroatiaEU 
 
        
        
 
 
 
Table A14.1:Key health indicators 

*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 based on 2022 (or latest 2021) data except for Luxembourg (2017). Doctors’ density data refer to practising 
doctors in all countries except Greece, Portugal (licensed to practise) and Slovakia (professionally active). Density of nurses: data 
refer to practising nurses (EU recognised qualification) in most countries except France and Slovakia (professionally active) and 
Greece (hospital only). **‘Available hospital beds’ covers somatic care, not psychiatric care. ***The EU median is used for patents. 
Source:  Eurostat database; European Patent Office; ****European Centre for Disease Prevention and Control (ECDC) for 2023. 

rates,  due  to  lenient  anti-tobacco  policies  (239). 
Croatia’s RRP includes reforms to promote healthy 
lifestyles  and  prevent  diseases,  and  investments 
for  the  training  of  health  professionals  in  public 
health  and  the  purchase  of  equipment  for  the 
prevention,  diagnosis  and  treatment  of  cancer. 
Croatia  has  developed  national  cancer  screening 
programmes and released a national plan against 
cancer  for  2020-2030 
the 
incidence of and mortality from cancer among the 
population (240). 

to  reduce  both 

and 

is  a  challenge 
are 

in 
Access  to  healthcare 
geographical 
Croatia, 
there 
in  unmet  medical  needs. 
differences 
Comparatively  high  unmet  needs  for  medical 
examination  are  reported  in  Croatia’s  rural  areas. 
This  may  be  linked  to  the  average  distance  to 
travel to healthcare facilities in these areas, which 
exceeds the EU average (21.8 km vs 14.4 km) (see 
Annex 17). Croatia also has a major gap in unmet 
needs  between  people  living  above  and  people 
living below the poverty threshold.  

limit 

staff 

Shortages  of  health 
the 
availability  of  care.  The  density  of  doctors  in 
Croatia  (4.0  per  1 000 population  in  2022)  was 
below  the  EU  average  of  4.2  per  1 000,  with  an 
uneven distribution between regions. Croatia has a 
low  share  of  general  practitioners (16% vs  an  EU 
average  of  21%).  It  also  has  one  of  the  lowest 
shares  of  practising  nurses  in  the  EU  (2.4  per 
1 000 population  in  2022  vs  an  EU  average  of 

(239) OECD/European Observatory on Health Systems and Policies 
(2023), Croatia: Country Health Profile 2023, State of Health 
in the EU, p. 7. 

(240) National Strategic Framework against cancer by 2030.  

97 

7.6), which presents a significant challenge to the 
country’s  health  and  long-term  care  systems  (see 
Annexes  10  and  12)  (241).  Despite  having  more 
newly  graduated  nurses  than  the  EU  average, 
outflow  of  health  workers  contributes  to  staff 
shortages.  Moreover,  between  2020  (Q1)  and 
2024  (Q3)  employment  in  healthcare  fell  in 
Croatia, compared to an overall increase in the EU 
of 11.3%. One of the health reforms set out in the 
Croatian RRP for 2021-2026 is the introduction of 
a system for the strategic management of human 
resources  in  health.  This  system  aims  for  a  more 
even  geographical  distribution  of  health  workers, 
including in rural and less populated areas, with an 
emphasis  on  primary  care  staff.  The  government 
training  for 
has  also 
introduced  specialised 
emergency  medicine  nurses  and 
technicians. 
Croatia participates in the HEROES joint action (242) 
under  EU4Health,  through  which  EU  countries 
share  knowledge  and  experience  on  health 
workforce planning. 

innovation  and 

The  Croatian  health  system’s  potential  to 
drive 
industrial 
foster 
development 
in  the  EU  medical  sector 
remains largely untapped. Croatia is among the 
EU countries that report rather low public spending 
on  health  research  and  development.  This  is 
reflected  in  the  low  number  of  European  patents 
granted:  only  two  in  2023  in  the  combined  areas 

(241) Under the newly adopted Eurostat definition of nurses (in line 
with Directive 2005/36/EC on the recognition of professional 
qualifications) nurse density numbers are significantly lower 
than those arrived at when using a broader definition, for 
example that used for OECD health statistics.  

(242) JA HEROES | Health workforce planning project. 

20192020202120222023EU average* (latest year) Cancer mortality per 100 000 population311.0303.9308.2302.4n.a.234.7 (2022)Mortality due to circulatory diseases per 100 000 population 572.8 590.9 601.3 591.7n.a.336.4 (2022)Current expenditure on health, purchasing power standards, per capita1 3891 4561 8021 858n.a.3 684.6 (2022)Public share of health expenditure, % of current health expenditure 81.9 84.2 85.5 85.3n.a.81.3 (2022)Spending on prevention, % of current health expenditure 3.03.14.45.3n.a.5.5 (2022)Available hospital beds per 100 000 population** 488 490 482 488n.a.444 (2022)Doctors per 1 000 population*3.63.63.84.0n.a.4.2 (2022)*Nurses per 1 000 population* 1.9 2.0 2.2 2.4n.a.7.6 (2022)*Mortality at working age (20-64 years), % of total mortality16.215.115.214.315.214.3 (2023)Number of patents (pharma / biotech / medical technology)2014229 (2023)***Total consumption of antibacterials for systemic use,                    daily defined dose per 1 000 inhabitants****18.815.718.220.221.220.0 (2023) 
 
 
 
        
 
 
of  pharmaceuticals,  biotechnologies  and  medical 
devices (vs an EU-level median of 29) (243). Clinical 
trial activity in Croatia is also limited (244). 

Croatia is lagging behind on the uptake of e-
health  and  the  overall  digitalisation  of  its 
health system, and has yet to overcome gaps 
in  data  storage  and  sharing.  For  example,  in 
2024,  the  share  of  the  population  using  online 
health  services  (excluding  phone)  instead  of  in-
person consultations was among the lowest in the 
EU  (see  Annex  17).    Despite  the  above  average 
overall  technical  deployment  of  electronic  health 
records  (see  Annex  6),  their  use  by  patients  is 
comparatively  low:  the  share  of  people  in  Croatia 
who access their personal health records online is 
lower  than  the  EU  average  (26.2%  vs  27.7%). 
Investments  are  planned  under  the  RRP  and 
cohesion policy to boost the digital transformation 
of the healthcare sector in Croatia. Measures focus 
on: (i) improving management capacities through a 
more effective use of data; (ii) innovative solutions 
in healthcare; (iii) increasing the digital capacity of 
health institutions at all levels; (iv) improving data 
management; and (v) accelerating the adoption of 
telemedicine,  including  by  vulnerable  populations 
and  in  rural  areas.  These  initiatives  aim  to  equip 
health  institutions  with  necessary  digital  health 
infrastructure,  improve  access  to  health  data, 
reduce  fragmentation,  and  improve  the  quality  of 
healthcare services. Croatia participates in several 
EU4Health-funded  projects  which  facilitate  the 
implementation  of  the  European  Health  Data 
Space (245) and strengthen digital infrastructure in 
Croatia (246).  

(243) European Patent Office, Data to download | epo.org. 

(244) EMA (2024), Monitoring the European clinical trials 

environment, p. 9. 

(245) Second Joint Action Towards the European Health Data 

Space – TEHDAS2 - Tehdas, Project | Xt-EHR 

(246) MyHealthEUxHR: expansion of MyHealth@EU Digital Service 

Infrastructure with new services in Croatia; CHDC: 
Establishment of Croatia Health Data Access Body: Croatian 
Health Data Centre. 

98 

 
 
HORIZONTAL 
ANNEX 15: SUSTAINABLE DEVELOPMENT GOALS 

social 

fairness 

This  Annex  assesses  Croatia’s  progress  on 
the  Sustainable  Development  Goals  (SDGs) 
along  the  dimensions  of  competitiveness, 
and 
sustainability, 
macroeconomic stability. 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 
inequalities  and  tackle  climate 
poverty,  fight 
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. 

Croatia  is  improving  on  all  the  SDGs  related  to 
competitiveness  but  still  needs  to  catch  up  with 
the  EU  average  in  all  of  them  (SDGs 4,  8,  9). 
Regarding SDG 4, Croatia is lagging behind the EU 
in  several  indicators  like  participation  in  early 

Graph A15.1: Progress towards the SDGs in Croatia 

kindergarten 

childhood  education  and 
tertiary  educational 
attainment.  A  significant  part  of the  recovery  and 
resilience plan (RRP) investments is earmarked for 
construction  and 
schools  and 
renovation,  which  will  contribute  to  improving 
these  indicators.  Croatia  is  lagging  behind  the  EU 
average  on  the  share  of  households  with  a  high-
internet  connection  and  all  the  R&D 
speed 
indicators  from  SDG  9,  like  R&D  expenditure, 
patent application, R&D personnel, etc. Taking this 
into  account,  the  RRP  has  measures  dedicated  to 
increasing  broadband  access  for  households  and 
stimulating 
Employment 
indicators  for  SDG 8  (Decent  work  and  economic 
growth),  which  improved  in  recent  years,  are  still 
below  the  EU  average;  10.6%  of  young  people 
aged 15-29 were not in education, employment or 
training  in  2024  (EU  average:  11.0%),  and  the 
employment  rate  for  the  population  aged  20-64 
was 73.6% in 2024 (EU average: 75.8%). 

investments. 

R&D 

Croatia  is  improving  on  almost  all  the  SDGs 
related to sustainability (SDGs 2, 7, 9, 11, 12, 

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 
five 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 28 April 2025. Data refer mainly to the period 2018-2023 or 2019-2024. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

99 

 
 
 
 
 
 
 
15)  and,  while  moving  away  from  its  target 
on SDG 6, 13 and 14, is doing relatively well 
on SDG 6 and 14. However, it still needs to make 
additional efforts to catch up with the EU average 
in some of them, especially SDGs 2, 9, 11, 12 and 
13.  Although  moving  away  from  the  target, 
Croatia  performs  better  than  the  EU  average 
(71.8%  vs  57.1%)  on  SDG 14  (Life  below  water) 
and on SDG 6 (Clean water and sanitation) (60.5% 
vs  56.4%).  It  also  outperforms  the  EU  average  in 
SDG  15  (Life  on  land  –  82.3%  vs  58.1%),  in 
particular  performing  well  in  indicators  protected 
areas, at risk of soil erosion and drought impact on 
ecosystems.  Croatia 
improving  on  SDG 7 
is 
(Affordable and clean energy), despite the increase 
in  energy  import  dependency  (up  from  52.7%  in 
2018  to  55.7%  in  2023).  Croatia’s  RRP  includes 
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.  Although  the  share  of  households  with 
high-speed 
increased 
internet  connection  has 
significantly (up from 17.8% in 2017 to 67.8% in 
2023 vs 78.8% at EU level), the country is lagging 
significantly behind the EU average on the overall 
SDG 9 (Industry, innovation and 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 development.  

improve  some  of 

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 
behind  the  EU  average  on  SDG 2  (Zero  hunger). 
This is mainly due to higher obesity rate and lower 
sustainable  agricultural  production  indicators,  in 
particular real factor income in agriculture. Croatia 
could 
its  environmental 
indicators  under  SDG  2  (e.g.  area  under  organic 
farming), while it has a better situation compared 
to the EU average for indicators such as ammonia 
emissions per hectare or risk of land erosion.    The 
RRP  envisages  measures 
these 
shortcomings,  with  a  dedicated  component  to 
improve  waste  management  and  recycling,  and 
investments to boost the green transition and the 
circular  economy.  Croatia  needs  to  catch  up  on 
SDG 12 (Responsible consumption and production). 
This  is  in  particular  due  to  stagnation  in  gross 
value  added  in  the  environmental  goods  and 
services  sector  (1.7%  in  2022;  EU  average  for 
2022:  3.3%),  simultaneously  with  increases  in 

improve 

to 

generation  of  waste  (even  if  below  EU  average), 
and material footprint in tonnes per inhabitant. 

Croatia  is  improving  on  all  SDGs  related  to 
social fairness (SDGs 1, 3, 4, 5, 7, 8, 10) but 
still  needs  to  catch  up  with  the  EU  average 
on SDGs 3, 4, 5, 8,  and 10. While improvements 
were  made  on  many  poverty  indicators  (SDG 1) 
(See Annex 11), the in-work at-risk of poverty rate 
- most likely driven by high food inflation recorded 
in recent years  - increased from 5.2% in 2018 to 
6.2% in 2023, remaining below the EU average of 
8.3%. Croatia is performing well on SDG 7: almost 
all  indicators  are  above  the  EU  average,  in 
particular access to affordable energy and energy 
consumption indicators.  

Although Croatia has made improvements, it 
is  still  performing  below  the  EU  average  on 
SDG 3  (Good  health  and  well-being),  SDG 4 
(Quality  education),  SDG 5  (Gender  equality), 
SDG 8  (Decent  work  and  economic  growth) 
and  SDG  10  (Reduced  inequalities).  This  is 
particularly  the  case  for  healthy  life  expectancy 
(SDG 3;  60.3  years  in  2022;  EU  average:  62.6 
years),  participation  in  early  childhood  education 
(SDG 4;  85.7%  of  children  aged  3  and  over  in 
2023;  EU  average:  94.6%)  and  adult  participation 
in learning (6.6% of the population aged 25-64 in 
2024 vs EU average of 13.3%). The RRP envisages 
measures to tackle these issues through dedicated 
components  on  healthcare  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  and  amendments  to  the  Act  on  early 
childhood  education  and  care  (ECEC)  adopted  in 
2022; 
the  construction  and 
reconstruction  of  ECEC  facilities;  and  a  model  for 
state co-financing of ECEC facilities. Croatia is also 
improving  on  SDG 10,  although  the  urban-rural 
gap for risk of poverty or social exclusion remains 
well above the EU average (HR 13.3% vs EU 0.2% 
in  2023),  meaning  that  social  transfers  could  be 
better targeted. 

investments 

in 

Croatia  is  improving  on  SDGs  related  to 
macroeconomic stability (SDGs 8, 16, 17) but 
still  needs  to  catch  up  with  the  EU  average 
on  all  of  them.  One  of  the  indicators  linked  to 
sustainable  economic  growth  under  SDG  8, 
investment share of GDP increased significantly in 
recent  years  and  reached  the  EU  average level  in 
2023, supported also by the RRP and structural EU 

100 

 
this 

funds. Croatia has made significant improvements 
on its long-term unemployment rate (SDG 8; from 
3.4% of the active population in 2018 to 1.8% in 
2024,  close  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 
channels 
including  the  Rule  of  Law  Report.  In  addition,  the 
to 
RRP 
modernising the justice system and preventing and 
combating  corruption.  General  government  gross 
debt (SDG 17) was 57.6% of GDP in end of 2024, 
below the EU average of 81.0%. The debt-to-GDP 
ratio is expected to drop further in 2025, driven by 
strong  nominal  growth 
that  also  supports 
government revenues (see also Annex 1). 

through  different 

components 

dedicated 

two 

has 

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

101 

 
ANNEX 16: CSR PROGRESS AND EU FUNDS IMPLEMENTATION 

cohesion  policy  programmes  has  accelerated, 
while significant volumes of investment are yet to 
be mobilised. 

to 

ensure 

The  Croatian  RRP  contains  157  investments 
and  78  reforms  to  stimulate  sustainable 
growth,  support  post-earthquake  recovery, 
and  to  maximise  the  benefits  of  the  digital 
social 
transformation  and 
cohesion.  A  year  before  the  end  of  the  RRF 
timespan,  implementation  is  well  on  its  way  with 
44.7% of the funds disbursed. Croatia has fulfilled 
36% of the milestones and targets in its RRP (251). 
Sustained efforts are needed to ensure completion 
of  all  RRP  measures  by  31 August  2026.    It  is 
important  for  Croatia  to  address  implementation 
administrative 
challenges, 
capacity,  complex  public  procurement  procedures, 
protracted  permitting  processes  and  insufficient 
coordination 
regional 
authorities. 

including 

between 

limited 

local 

and 

Croatia  also  receives  funding  from  several 
other  EU  instruments,  including  those  listed 
in  table  A16.1.  Most  notably,  the  common 
agricultural  policy  (CAP)  provides  Croatia  with  an 
EU  contribution  of  EUR 3.4  billion  under  the  CAP 
strategic  plan  for  2023-2027  (252).  Furthermore, 
operations  amounting  to  EUR  380  million  (253) 
have  been  signed  under  the  InvestEU  instrument 
backed  by  the  EU  guarantee,  improving  access  to 
financing for riskier operations in Croatia. 

recommendations 

Croatia faces structural challenges in a wide 
range  of  policy  areas,  as  identified  in  the 
country-specific 
(CSRs) 
addressed  to  the  country  as  part  of  the 
European  Semester.    They  refer,  among  other 
things, 
public 
administration,  taxation  policy,  renewable  energy, 
transport,  skills  and  vocational  training,  and 
healthcare. 

environment, 

business 

to 

The Commission has assessed the 2019-2024 
CSRs  considering  the  policy  action  taken  by 
Croatia  to  date  and  the  commitments  in  its 
recovery  and  resilience  plan  (RRP).  At  this 
stage,  Croatia  has  made  at  least  ‘some  progress’ 
on 62% of the CSRs (247), and ‘limited progress’ on 
36% (Table A16.2). 

to 

by 

competitiveness, 

EU funding instruments provide considerable 
supporting 
Croatia 
resources 
investments  and  structural  reforms  to 
increase 
environmental 
sustainability  and  social  fairness,  while 
helping  to  address  challenges  identified  in 
the CSRs. In addition to the EUR 10 billion funding 
from  the  Recovery  and  Resilience  Facility (RRF)  in 
2021-2026,  EU  cohesion  policy  funds  (248)  are 
providing  EUR 8.7  billion  to  Croatia  (amounting  to 
EUR 10.2  billion  with  national  co-financing)  for 
2021-2027 (249) to boost regional competitiveness 
and  growth.  Support  from  these  instruments 
combined  represents  around  24%  of  2024  GDP 
(250).  The  contribution  of  these  instruments  to 
different  policy  objectives  is  outlined  in  Graphs 
A16.1  and  A16.2.  This  substantial  support  comes 
on  top  of  financing  provided  to  Croatia  under  the 
2014-2020  multiannual 
framework, 
which  financed  projects  until  2023  and  has  had 
significant benefits for the economy  and  Croatian 
society.  Project  selection  under  the  2021-2027 

financial 

(247) 11% of the 2019-2024 CSRs have been fully implemented, 
9% substantially implemented, and some progress has been 
made on 42 %. 

(248) In 2021-2027, cohesion policy funds include the European 
Regional Development Fund, the Cohesion Fund, the 
European Social Fund Plus and the Just Transition Fund. . The 
information on cohesion policy included in this annex is 
based on adopted programmes with the cut-off date of 5 
May 2025. 

(249) European territorial cooperation (ETC) programmes are 

excluded from the figure. 

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

(251) As of mid-May 2025, Croatia has submitted 6 payment 

requests, the last one being under assessment. 

(252) An overview of Croatia’s formally approved strategy to 

implement the EU’s common agricultural policy nationally 
can be found at: https://agriculture.ec.europa.eu/cap-my-
country/cap-strategic-plans/croatia_en  

applicable. GDP figures are based on Eurostat data for 2024. 

(253) Data reflect the situation on 31.12.2024. 

102 

 
 
 
 
 
 
Graph A16.1: Distribution of RRF funding in Croatia 
by policy field 

Framework,  and  development  of 
individual 
learning accounts. ESF+ also supports modernising 
vocational education. 

in 

rail 

and 

are 

contributing 

infrastructure 

in  Croatia,  for 

Other 
funds 
to 
instance 
competitiveness 
through  open  calls.  The  Connecting  Europe 
Facility  has  financed  strategic  investments  for 
the 
instance 
modernisation  of  Croatia’s  maritime  and  inland 
waterways  transport  network;  energy  market 
integration,  decarbonisation  of  the  energy  system 
and security of energy supply; as well as capacity, 
resilience  and  security  of  backbone  digital 
infrastructure  and  advancing  the  deployment  of 
5G in smart communities, enabling smart logistics 
in  port  transport.  Horizon  Europe  has  supported 
research 
scientific 
innovation, 
breakthroughs  to  scaling  up  innovations,  with 
Widening  participation  and  spreading  excellence, 
Climate,  Energy  and  Mobility  and  Digital,  Industry 
and  Space  as  top  priorities  in  Croatia.  In  Croatia, 
the  Technical  Support  Instrument  (TSI)  is  focused 
on  combating  irregularities  and  fraud  as  well  as 
the digitalisation of the justice system.  

from 

and 

to 

the 

Croatia’s  RRP  also  contains  ambitious 
measures 
business 
improve 
environment  and  competitiveness.  As  part  of 
the  measures  covered  by  payment  requests 
submitted over the past year, Croatia completed a 
investments  across 
number  of  reforms  and 
several areas relevant for businesses, such as the 
digitalisation  of  the  SME  Impact  Assessment  Test 
and the Tourism Act establishing a framework for 
monitoring and development of the tourism sector. 
Furthermore,  major  investments  were  completed 
for  the  digitalisation  of  services  to  businesses 
such  as  the  one-stop-shop  to  provide  improved 
services  for  businesses  and  citizens  and  a  new 
platform 
for  conducting  public  procurement 
procedures. 

EU  funds  are  playing  a  significant  role  in 
promoting  environmental  sustainability  and 
green transition in Croatia during the current 
seven-year  EU  budget  (multiannual  financial 
framework).  As  a  result  of  cohesion  policy 
investment, thousands of residents in the Karlovac 
area  will  benefit  from  enhanced  flood  protection, 
while  hundreds  of  thousands  will  gain  access  to 
improved water supply and wastewater treatment, 
primarily  in  larger  cities  along  the  Croatian  coast. 
Over  2 600  private  dwellings  and  nearly  300 
improved  energy 
public  buildings  will  see 

(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 circle 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. 
Source: European Commission 

Graph A16.2: Distribution of cohesion policy 
funding across policy objectives in Croatia 

Source: European Commission 

Cohesion  policy  funds  aim  to  increase  the 
productivity and competitiveness of Croatian 
firms and improve the business environment. 
The  European  Regional  Development  Fund  (ERDF) 
provides  funding  to  boost  investment  in  research, 
innovation  and  digitalisation,  primarily  through 
financial  instruments,  with  the  aim  of  reaching 
over  1 800  companies.  Additionally,  more  than 
1 600 small and medium-sized enterprises (SMEs) 
outside  the  capital  region  will  receive  support  to 
accelerate  industrial  transition  and  upskilling.  The 
European Social Fund Plus (ESF+) addresses labour 
market challenges through two main investments: 
EUR 630  million  for  active  labour  market  policies 
integration  of 
supporting  employment  and 
vulnerable  groups,  and  EUR 600  million  for 
addressing  skills  mismatches 
through  adult 
learning.  The  latter  includes  education  reforms, 
new  curricula  based  on  the  Croatian  Qualification 

103 

Green transitionDigital transformationSmart, sustainable andinclusive growthSocial & territorial cohesionHealth & resilienceNext generationSmarter EuropeGreener EuropeConnected EuropeSocial EuropeEurope closer to citizensJTF specific objective 
       
 
      
particularly  benefiting  disadvantaged  students.  In 
addition,  the  TSI  supports  Croatia  to  promote 
mental health by addressing the risks of gambling 
and gaming. 

initiatives, 

performance.  Additionally,  public  bodies  and 
households will receive support to purchase micro-
solar panels and heat pumps. In addition, Croatia’s 
CAP strategic plan allocates EUR 540 million (37% 
of rural development funds) to environmental and 
climate 
landscape 
preservation,  conservation  of  native  breeds  and 
genetic  resources,  animal  welfare  and  organic 
farming. A further EUR 470 million (25% of direct 
payments) 
supports  eco-schemes  promoting 
sustainable  practices  like  crop  rotation,  nitrogen-
landscape  maintenance,  natural 
fixing  crops, 
manure  use,  pasture  grazing  and  soil  erosion 
prevention. 

including 

Croatia’s  RRP,  including  the  REPowerEU,  has 
a  comprehensive  set  of 
reforms  and 
investments  for  the  green  transition.  Croatia 
adopted  a  plan  to  promote  advanced  biofuels  in 
transport,  emphasising  market  assessments  and 
innovative  models 
like  algae-based  biofuels. 
Investments  in  wastewater  and  water  supply  aim 
to  enhance  rural  services  and  reduce  leakages. 
Additionally,  published  guidelines  support  energy 
renovation  of  culturally  significant  buildings, 
detailing 
technical  solutions  and  procedural 
guidance for necessary permits. 

Promoting  fairness,  social  cohesion  and 
improving  access  to  basic  services  are 
among  the  key  priorities  of  EU  funding  in 
Croatia. ERDF support will provide access to new 
or  modernised  healthcare  facilities  for  over  4.2 
million  people  annually,  enhancing  the  healthcare 
system’s  capacity.  It  will  also  create  additional 
classroom space in educational  facilities for more 
than  15 000  people.  The  ESF+ 
investing 
EUR 600 million in community-based services and 
social inclusion, focusing on children at risk, people 
with  a  disability  and  vulnerable  groups.  This 
includes  EUR 200  million  for  teaching  assistants 
and personal assistance services for people with a 
disability.  

is 

Croatia’s  RRP  contains  several  reforms  and 
investments  related  to  fairness  and  social 
policies. Croatia introduced a support scheme for 
food banks, improving infrastructure and boosting 
food  donations  by  43.8% in  2023.  Social  Welfare 
Act amendments enhanced support for vulnerable 
groups  by  raising  guaranteed  minimum  benefit 
amounts and eliminating repayment requirements. 
Education 
learning 
outcomes  through  a  full-day  teaching  model, 

reforms  aim 

improve 

to 

104 

 
 
 
Table A16.1:Selected EU funds with adopted allocations - summary data (million EUR) 

(1) The cut-off date for data on disbursements under the RRF is 31 May 2025. 
(2) Cohesion policy 2014-2020 allocations include REACT-EU appropriations committed in 2021-2022. 
(3) These amounts relate only to disbursements made from 2021 onwards and do not include payments made to the Member 
State before 2021.  Hence the figures do not comprise the totality of payments corresponding to the 2014-2020 allocation. The 
cut-off date for data on disbursements under EMFAF and EMFF is 29 April 2025.  The cut-off date for data on disbursements 
under cohesion policy funds, AMIF, BMVI and ISF is 5 May 2025. 
(4) AMIF - Asylum, Migration and Integration Fund; BMVI- Border Management and Visa Instrument; ISF - Internal Security Fund. 
(5) Expenditure outside the CAP strategic plan is not included. 
(6) The cut-off date for data on EARDF disbursements is 5 May 2025. The information on EAGF disbursements is based on the 
Member State declarations until March 2025.  Disbursements for the Direct Payments (EAGF) started in 2024. 
Source: European Commission 

105 

Instrument/policyDisbursed since 2021   (1)             RRF grants (including the RepowerEU allocation)3 691.9RRF loans795.9 Instrument/policyAllocation 2014-2020 (2)Allocation 2021-2027 Disbursed since 2021 (3)    (covering total payments to the Member State on commitments originating from both 2014-2020 and 2021-2027 programming periods) Cohesion policy (total)9 114.98 706.66 089.1European Regional Development Fund (ERDF)4 833.15 404.73 056.5Cohesion Fund (CF)2 130.81 182.41 484.5European Social Fund (ESF, ESF+) and the Youth Employment Initiative (YEI)2 151.01 933.61 490.6Just Transition Fund (JTF) 185.9 57.6European Maritime, Fisheries and Aquaculture Fund (EMFAF) and the European Maritime and Fisheries Fund (EMFF) 252.6 243.7154.8Migration, border management and internal security - AMIF, BMVI and ISF (4)128.5 298.8137.7The common agricultural policy under the CAP strategic plan (5)Disbursements under the CAP Strategic Plan (6)Total under the CAP strategic plan 815.4European Agricultural Guarantee Fund (EAGF) 619.1European Fund for Agricultural Development (EAFRD) 196.3Allocation 2021-2026 3 384.91 926.81 458.15 786.54 254FisheriesMigration and home affairsAllocation 2023-2027 
 
 
     
 
Table A16.2:Summary table on 2019-2024 CSRs 

(Continued on the next page) 

106 

CroatiaAssessment in May 2025Relevant SDGs2019 CSR 1Limited progressReinforce the budgetary framework and monitoring of contingent liabilities at central and local level. Some progressSDG 8, 16Reducetheterritorialfragmentationofthepublicadministrationandstreamlinethe functional distribution of competencies.Limited progressSDG 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 progressSDG 4, 5Consolidate social benefits and improve their capacity to reduce poverty. Limited progressSDG 1, 2, 10Strengthen labour market measures and institutions and their coordination with social services. Substancial progressSDG 8In consultation with the social partners, introduce harmonised wage-setting frameworks across the public administration and public services.Full implementationSDG 82019 CSR 3Some progressFocus investment-related economic policy on research and innovation, Some progressSDG 9, 10, 11sustainable urban and railway transport, Limited progressSDG 10, 11energy efficiency, renewables and environmental infrastructure, taking into account regional disparities.Limited progressSDG 6, 7, 9, 10, 11, 12, 13 Increase the administration's capacity to design and implement public projects and policies.Some progressSDG 162019 CSR 4Some progressImprove corporate governance in State-owned enterprises and intensify the sale of such enterprises and non-productive assets.Limited progressSDG 9Enhancethepreventionandsanctioningofcorruption,inparticularatthelocallevel. Some progressSDG 16Reducethedurationofcourtproceedingsandimproveelectroniccommunication in courts. Some progressSDG 16Reduce the most burdensome parafiscal chargesSubstantial progressSDG 8, 9 and excessive product and services market regulation.Some progressSDG 92020 CSR 1Some progressInlinewiththegeneralescapeclause,takeallnecessarymeasurestoeffectivelyaddressthepandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuringdebtsustainability, while enhancing investment.Not relevant anymoreSDG 8, 16Enhancetheresilienceofthehealthsystem.Promotebalancedgeographicaldistributionofhealthworkersandfacilities,closercooperationbetweenalllevels of administration and investments in e-health.Some progressSDG 32020 CSR 2Some progressStrengthen labour market measures and institutionsSome progressSDG 8and improve the adequacy of unemployment benefits and minimum income schemes.Limited progressSDG 1, 2, 10Increase access to digital infrastructure and services.Some progressSDG 9Promote the acquisition of skills.Some progressSDG 42020 CSR 3Some progressMaintain measures to provide liquidity to small and medium-sized enterprises and the self-employed.Full implementationSDG 8, 9Further reduce parafiscal charges andSubstantial progressSDG 8, 9restrictions in goods and services market regulation.Some progressSDG 9Front-load mature public investment projectsSubstancial progressSDG 8, 16and promote private investment to foster the economic recovery.Substancial progressSDG 8, 9Focusinvestmentonthegreenanddigitaltransition,inparticularonenvironmental infrastructure, Limited progressSDG 6, 12, 15sustainable urban and rail transport,Limited progressSDG 11clean and efficient production and use of energyLimited progressSDG 7, 9, 13and highspeed broadband.Some progressSDG 9 
 
 
  
 
Table (continued) 

(Continued on the next page) 

107 

2020 CSR 4Some progressReinforcethecapacityandefficiencyofthepublicadministrationtodesignandimplement public projects and policies at central and local levels.Some progressSDG 16Improve the efficiency of the judicial system.Some progressSDG 162021 CSR 1Not relevant anymoreIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilienceFacility,andpreservenationallyfinancedinvestment.Keepthegrowthofnationallyfinancedcurrentexpenditureundercontrol.Not relevant anymoreSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainabilityinthemedium term.Not relevant anymoreSDG 8, 16At the same time, enhance investment to boost growth potential Payparticularattentiontothecompositionofpublicfinances,bothontherevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasures,toensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,notablysupportingthegreenand digital transition.Not relevant anymoreSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,includingbystrengtheningthecoverage,adequacy,andsustainability of health and social protection systems for all.Not relevant anymoreSDG 8, 162022 CSR 1Not relevant anymoreIn2023,ensurethatthegrowthofnationallyfinancedprimarycurrentexpenditureisinlinewithanoverallneutralpolicystance,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadytoadjust current spending to the evolving situation.Not relevant anymoreSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseof the Recovery and Resilience Facility and other Union funds.Not relevant anymoreSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachievingprudentmedium-term fiscal positions.Not relevant anymoreSDG 8, 162022 CSR 2Proceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestonesandtargetsincludedintheCouncilImplementingDecisionof20July 2021.SwiftlyfinalisethenegotiationswiththeCommissionon2021-2027cohesionpolicy programming documents with a view to starting their implementation.2022 CSR 3Limited progressDiversify fossil-fuel imports and reduce overall reliance on fossil fuels.Some progressSDG 7, 9, 13Accelerate the deployment of renewables, focussing in particular on wind, solar andgeothermalsources,includingthroughsmall-scalerenewableenergyproductionanddevelopingenergycommunities,mainlybystreamliningprocedures for administrative authorisation and permits.Limited progressSDG 7, 8, 9, 13Furtherupgradeelectricitytransmissionanddistributiongridsandinvestinelectricity storage.Some progressSDG 7, 9, 13Stepupeffortstoreduceenergydemandbyincreasingenergyefficiencyinindustry and in private and public building stock.Some progressSDG 7and transport sectors.Limited progressSDG 112023 CSR 1Some ProgressWinddowntheenergysupportmeasuresinforcebytheendof2023,usingtherelatedsavingstoreducethegovernmentdeficit.Shouldrenewedenergypriceincreasesnecessitatesupportmeasures,ensurethatthesearetargetedatprotectingvulnerablehouseholdsandfirms,fiscallyaffordable,andpreserveincentives for energy savings.Limited progressSDG 8, 16Ensureprudentfiscalpolicy,inparticularbylimitingthenominalincreaseinnationally financed net primary expenditure in 2024 to not more than 5.1%.No ProgressSDG 8, 16PreservenationallyfinancedpublicinvestmentandensuretheeffectiveabsorptionofRRFgrantsandotherEUfunds,inparticulartofosterthegreenand digital transitions.Full implementationSDG 8, 16Fortheperiodbeyond2024,continuetopursueamedium-termfiscalstrategyofgradualandsustainableconsolidation,combinedwithinvestmentsandreformsconducivetohighersustainablegrowth,toachieveaprudentmedium-term fiscal position.Full implementationSDG 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) 

Source: European Commission 

108 

2023 CSR 2ContinuethesteadyimplementationofitsrecoveryandresilienceplanandswiftlyfinalisetheREPowerEUchapterwithaviewtorapidlystartingitsimplementation.Proceedwiththespeedyimplementationofcohesionpolicyprogrammes,inclosecomplementarityandsynergywiththerecoveryandresilience plan.2023 CSR 3Some progressReduce overall reliance on fossil fuelsLimited progressSDG 7, 9, 13byacceleratingthedeploymentofrenewables,inparticularwind,solar,andgeothermalsources,finalisingtheincompletelegislativeframework,streamliningadministrativeproceduresforpermitting,simplifyingtheproceduresforinstallingrenewableenergysources(i.e.solarphotovoltaicfacilities) in multi-apartment buildings and providing more legal certainty.Limited progressSDG 7, 8, 9, 13Support small-scale renewable energy generation capacity.Some progressSDG 7, 9, 13Furtherupgradeelectricitytransmissionanddistributiongrids,inparticularbyimprovingthetransmissionlinksbetweenthenorthandsouthofthecountry,and advancing the roll-out of smart meters.Some progressSDG 7, 9, 13Acceleratetheimplementationofenergyefficiencymeasures,includingtheinstallation of heat pumps.Some progressSDG 7, 9, 13Reducedependenceonfossilfuelsinthetransportsectorbypromotingsustainable solutions, in particular rail and the electrification of road transport.Limited progressSDG 7, 11Stepuppolicyeffortsaimedattheprovisionandacquisitionoftheskillsneeded for the green transition.Limited progressSDG 42024 CSR 1Full implementationSubmit the medium-term fiscal-structural plan in a timely manner. Full implementationSDG 8, 16InlinewiththerequirementsofthereformedStabilityandGrowthPact,limitthegrowthinnetexpenditurein2025toarateconsistentwith,interalia,maintainingthegeneralgovernmentdeficitbelowthe3%ofGDPTreatyreferencevalueandkeepingthegeneralgovernmentdebtataprudentlevelover the medium term.Full implementationSDG 8, 162024 CSR 2StrengthenadministrativecapacitytomanageEUfunds,accelerateinvestmentsandmaintainmomentumintheimplementationofreforms.Addressrelevantchallengestoallowforcontinued,swiftandeffectiveimplementationoftherecoveryandresilienceplan,includingtheREPowerEUchapter,ensuringcompletionofreformsandinvestmentsbyAugust2026.Acceleratetheimplementationofcohesionpolicyprogrammes.Inthecontextoftheirmid-termreview,continuefocusingontheagreedprioritieswhileconsideringtheopportunitiesprovidedbytheStrategicTechnologiesforEurope Platform initiative to improve competitiveness.2024 CSR 3Limited ProgressTostrengthencompetitiveness:(i)boostaccesstodiversesourcesoffinancingandpromotecapitalmarketsbyfurtherfacilitatingtheparticipationofretailinvestorsinthebondmarket,andaddressingbarrierstolistingandstrengtheningcorporategovernancetoimprovetheattractivenessofthestockmarket;Some progressSDG 8, 9(ii)reducelabourandskillsshortagesbystrengtheningbasicskills,enhancingupskilling and reskilling,Limited ProgressSDG 8, 4and improving access to formal home- and community-based long-term care;Limited ProgressSDG 8,10and (iii) address the fragmentation of public institutions that carry out research, development and innovation activities by ensuring a comprehensive and binding approach to merging various support functions, bolstering the financial incentives for mergers, and ensuring the promotion of relevant strategic goals under the performance agreements between the Ministry of Science and Education and Youth and public research and higher education institutions.Limited progressSDG 9RRP 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.RRP 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. Progress with the cohesion policy programming is monitored in the context of the Cohesion Policy of the European Union 
 
  
 
ANNEX 17: COMPETITIVE REGIONS 

A positive economic context provides Croatia 
with  an  opportunity  for  further  convergence 
through  leveraging  its  regional  competitive 
advantages  in  key  sectors.  Addressing  skills 
shortages,  housing  affordability  as  well  as 
improving  circularity  and  clean  energy  transition 
are crucial in securing fair and sustainable growth 
for Croatian regions. 

Croatia shows strong growth momentum but 
also  significant  regional  disparities.  In  2023, 
the  capital  region  of  Zagreb  had  a  GDP  per  head 
(in purchasing power standard – PPS) of 125% of 
the  EU  average,  significantly  higher 
than 
Jadranska Hrvatska (72%) and more than twice as 
much  as  Sjeverna  Hrvatska  (62%)  and  Panonska 
Hrvatska (53%). 

Competitiveness 

Despite  overall  positive  trends,  with  all 
regions growing faster than the EU average, 
structural 
substantial 
challenges  with 
productivity  gaps  remain.  The  capital  region, 
the country’s strongest performer, is at 84% of EU 
average  (GDP  per  hour  worked)  while  Panonska 
Hrvatska  reached  just  53%  in  2022.  As  regards 
the trends in productivity over 2014-2023, internal 
disparities  in  productivity  decreased  between  the 
two  more  developed 
regions,  Zagreb  and 
Jadranska  Hrvatska,  and  the  two  less  developed 
regions, Sjeverna Hrvatska and Panonska Hrvatska. 
This  reduction  is  mainly  due  to  the  encouraging 
catching-up  process  of  Sjeverna  Hrvatska,  while 
convergence remains slow for Panonska Hrvatska. 

Graph A17.1: Labour productivity per hour 

Creating  opportunities  across  Croatian 
regions  would  help  increase  their  productive 
base  and  growth  potential,  simultaneously 
addressing  negative  demographic  trends. 
Regional  demographic  trends  mirror  economic 
disparities. Against the national population decline 
of  average  10 per 1 000  residents  per  year  in 
2013-2022,  Panonska  Hrvatska  faces  severe 
losses (-19), while Zagreb shows more resilience (-
3). Jadranska and Sjeverna regions face moderate 
declines (-8). 

for 

potential 

it  across 

the  country 

strengthening 

Alongside  boosting  traditional  sectors,  there 
the 
is 
competitiveness  of  Croatian  regions 
in 
priority  niches  and  regional  value  chains, 
such  as  agri-food,  blue  economy  and 
advanced manufacturing. Heavily dependent on 
tourism,  Croatia’s  path  to  increasing  its  potential 
and  sustainability  lays  in its  diversification  and  in 
spreading 
(Panonska 
Hrvatska) as well as across seasons, particularly in 
Jadranska  Hrvatska,  which  also  has  significant 
potential  for growth in the blue economy and the 
health  sector  (254).  The  agri-food  sector  plays  an 
important role in Panonska Hrvatska where smart 
solutions  can  boost  agricultural  productivity  and 
sustainability.  Sjeverna  Hrvatska,  characterised  by 
having  the  largest  share  of  industrial  activity  in 
the  country,  has  opportunities 
in  developing 
industry  4.0  and  the  automotive  sector.  The  ICT 
sector shows potential in all regions, particularly in 
Panonska  Hrvatska  with  significant  growth  rates. 
Croatian  regions  show  promising  capabilities  in 
clean  tech  manufacturing,  particularly  in  wind 
energy  components  (AC  generators,  pipe  fittings), 
solar  value  chain  (aluminium  alloy  plates/sheets, 
plastic  components),  and  heat  pump  technologies 
(water heaters) (255). 

landscape 

innovation 

Croatia’s 
shows 
positive  momentum  across  regions,  with 
particular potential to extend beyond Zagreb 
to  other  university  cities.  The  presence  of 
major  universities  in  Osijek,  Rijeka,  and  Split 
knowledge-based 
creates 
research 
development, 
capabilities  and  talent  pools.  The  capital  region, 

for 
leveraging  academic 

opportunities 

Unit: Real GDP per hour worked (EUR, 2015 prices) 
Source: ARDECO (JRC) 

(254) Industrial transition plans of Panonska, Sjeverna and 

Jadranska Hrvatska. 

(255) 2024 World Bank, EU Regular Economic Report, Clean Tech 

Value Chains. 

109 

1015202530354045201220132014201520162017201820192020202120222015 EUR per hour workedOther NUTS 2 regionsCapital regionNational averageEU27 
 
  
 
 
 
 
Table A17.1:Selection of indicators at regional level in Croatia 

Source: Eurostat and JRC, DG REGIO estimation of employment 

innovator 

with  its  concentration  of  public  research  capacity, 
(256), 
is  positioned  as  a  strong 
performing  above  the  EU  average.  Innovation 
performance  has  also  increased  at  a  higher  rate 
than  that  of  the  EU  (8.5  percentage  points)  in 
Sjeverna  Hrvatska  and  Jadranska  Hrvatska,  while 
in  Panonska  Hrvatska  the  increase  has  been 
slower. Knowledge spillovers through tech transfer 
and  strategic  public-private  partnership,  including 
between  Zagreb  and  other  regions,  represent 
opportunities 
the  overall 
innovation  performance  and  diffusion  (257)  (See 
Annex 3). 

strengthening 

for 

innovation  and  human  capital 
Regional 
patterns reveal a complex landscape beyond 
Zagreb outperformance. While the capital leads 
in R&D expenditure (2.6% of GDP - gross domestic 
expenditure  on  R&D  -  GERD),  Sjeverna  Hrvatska 
shows  remarkable  catching-up  dynamics  with 
GERD  at  1.7%  and  business  R&D  expenditure  at 
1.6% – above the EU average of 1.5%. In contrast, 
Panonska and Jadranska Hrvatska lag significantly 
(0.5%  and  0.6%  GERD, 
respectively).  These 
disparities  mirror  the  ones  in  tertiary  education 
attainment,  with  Zagreb  at  15  percentage  points 
above  and  Panonska  Hrvatska  at  18  percentage 
points  below  the  2024  EU  average.  High-tech 
employment  follows  similar  regional  divides  in 
2024,  from  12%  in  Zagreb  to  just  2.5%  in 
Panonska and 3.0% in tourism-focused Jadranska 
Hrvatska.  However,  knowledge-intensive  services 
show  a  more  balanced  regional  distribution, 
suggesting 
broader-based 
development. 

potential 

for 

The  capital  region  is  well  equipped  to  keep 
pace  with  the  rest  of  the  EU  and  even 
outperform  it,  while  the  rest  of  the  country 
shows  a  reduced  ability  to  keep  pace  with 
growth  trends  in  dynamic  and  advanced 
sectors.  However,  emerging  evidence  on  the 
catching-up  process  of  Sjeverna  Hrvatska  may 
make this duality more nuanced. Investing in high-
tech  sectors  and  human  capital  would  be 
regional  economic 
instrumental 
low 
performance  as 
participation  in  adult  learning,  especially  outside 
the capital region, are key challenges that hamper 
sustainable growth in Croatian regions. It would be 
beneficial  to  further  strengthen  planned  cohesion 
policy measures  targeting  upskilling  and  reskilling 
in  priority  areas, 
the  smart 
specialisation  strategy  (S3)  and  the  green  and 
digital transitions (see also Annex 12). 

shortages  and 

to  boosting 

line  with 

skills 

in 

of 

quality 

Improving  Croatia’s 
local 
government, and its ability to deliver quality 
services efficiently would help boost regional 
level  competitiveness  and  uphold  people’s 
rights to stay in their regions. The local public 
administration  is  responsible  for  providing  basic 
services and capital investments in various sectors 
in Croatia, but the process is hampered by uneven 
institutional and financial/operational capacity (258) 
and  administrative  fragmentation.  With  556  local 
government 
428 
including 
municipalities, 
administrative-territorial 
structure  weakens  economies  of  scale  in  public 
service  delivery.  Therefore,  improved  strategic 
planning and stronger coordination between LGUs 

(LGUs), 

units 

the 

(256) Regional Innovation Scoreboard, 2023. 

(257) 2024  European  Innovation  Scoreboard  (EIS),  country  profile: 

Croatia. 

(258) Subnational B-READY Report Croatia, World bank, 2024. The 
report offers actionable insights for improving administrative 
processes  and  regulatory  frameworks  directly  affecting 
businesses at local level in five Croatian cities. 

110 

GDP per head (PPS)Real GDP per head growthProductivity - GDP per person employed (PPS)Real productivity growth (per person employed)Productivity - GDP per hour worked (PPS)Real productivity growth (per hour worked)Employment growthEmployment in knowledge-intensive servicesPopulation with high educational attainmentParticipation in lifelong learningEmployment rate 20-64Female employment rate 20-64At-risk-of-poverty or social exclusionAccess to alternative fuel infrastructurePassenger rail transport performanceIndex EU-27 = 100Average annual % changeIndex EU-27 = 100Average annual % changeIndex EU-27 = 100Average annual % changeAverage annual % change% of total employment% of population aged 25-64% of population aged 25-64% of population aged 20-64% of women 20-64% of total populationPoints per million inhabitants % of population within 1h30min  reach 20232014-202320232014-202320222013-20222014-202320242024202420242024202420212019European Union (27 MS)1001.61000.61000.91.141.536.113.375.870.821.0120.315.7Croatia763.8841.6691.81.638.130.46.673.670.621.753.14.8Panonska Hrvatska533.9661.3531.60.733.317.94.467.262.931.031.22.3Jadranska Hrvatska723.5801.5701.62.137.231.05.773.170.422.994.32.4Grad Zagreb1253.21031.7841.31.151.551.312.479.780.211.128.018.7Sjeverna Hrvatska624.4842.2633.10.630.423.54.976.070.618.339.65.8 
 
 
 
      
 
the  principles  of 

and  perhaps  full  mergers in  some  cases  could  be 
considered  as  a  viable  solution  to  strengthen  the 
capacity to deliver public services more efficiently 
and  improve  the  uptake  of  investments,  in  line 
with 
territorial 
development  and  partnership.  This  is  particularly 
crucial for smaller cities and bodies implementing 
new  territorial  tools,  including  in  the  two  Just 
Transition Fund territories of Istarska and Sisačko- 
moslavačka counties and on the islands. 

integrated 

Social fairness 

regions 

narrowed, 

While the overall employment rate increased 
in  all  Croatian  regions  in  2024  and  gap 
between 
regional 
variations  in  labour  market  conditions  are 
significant.  The  employment  rate  ranges  from 
levels  close  to  the  EU  average  in  Sjeverna 
Hrvatska and even above in Grad Zagreb, to levels 
below 
(-2.7 
percentage  points  difference  (pps))  and  Panonska 
Hrvatska  (8.6  pps).  The  unemployment  rate  in 
2024 ranges from around 3% in the capital region 
and  Sjeverna  Hrvatska  to  6-7%  in  Jadranska 
Hrvatska and Panonska Hrvatska. 

the  EU  average 

in  Jadranska 

Young  people’s  participation  in  the  labour 
market  is  a  concern  in  the  less  developed 
regions.  While  the  national  unemployment  rate 
for  15-24-year-olds  in  2024  was  16.8%,  just  2 
pps above the EU average, in Panonska Hrvatska it 
was 20.8%, two and a half times higher than that 
of Zagreb (7.9%). The employment rate of women 
shows similar picture, with more than 17 pps of a 
difference between the city of Zagreb (80.2%) and 
Panonska Hrvatska (62.9%). These figures coincide 
with the low rates of children in formal  childcare, 
which  continue 
to  place  greater  caregiving 
responsibilities  on  women.  In  2024,  70%  of 
children  below  the  age  of  3  did  not participate  in 
early  childhood  education  and  care,  with  the 
participation  rate  being  the  lowest  in  Panonska 
Hrvatska, and the highest in the capital region. By 
harnessing  talents  and  mobilising  inactive  people, 
especially  young  people  and  women  outside  the 
capital 
have 
considerable  potential  to  address  key  challenges 
to medium-term growth prospects. 

country  would 

region, 

the 

Annex 6), insufficient administrative capacity 
impedes  local  and  regional  potential  for 
inclusive  and 
sustainable  development, 
creating  deficiencies  in  the  accessibility  and 
quality  of  public  services.  The  rate  of  the 
Croatian  population  at  risk  of  poverty  slightly 
increased  in  2024  (21.7%),  with  continued  stark 
interregional  contrasts  (see  Annex  11).  Panonska 
Hrvatska  had  poverty  rates  of  31%,  substantially 
above  the  national  figure and  almost  three  times 
higher  than  the  city  of  Zagreb  (11.1%).  Access  to 
healthcare  facilities  in  Croatian  regions  remains 
below  the  average  for  the  EU's  less  developed 
regions,  especially  in  Jadranska  Hrvatska  where 
only  7.9%  of  the  population  lives  within  a  10-
minute  drive  of  the  nearest  health  centre  (vs 
28.8%  of  EU  average).  In  this  region  the  coastal 
geography  plays  a  role  and  requires  tailor-made 
solutions. Telemedicine deployment could increase 
healthcare  accessibility,  but 
it  would  require 
investments  in  digital  infrastructure  as  well  as  in 
the development of digital skills. 

Affordable  housing  remains  a  persistent 
challenge  in  Croatia,  the  issue  being  more 
pronounced 
in  main  urban  centres  and 
touristic  coastal  areas.  Challenges  related  to 
rising house prices and the thin rental market have 
led to housing shortages and overcrowding (31.7% 
vs EU average of 16.9% in 2024). Unused property 
(25%  of  total  housing  stock)  and  high  secondary 
home  use,  especially  in  main  cities  and  coastal 
areas,  further  reduce  dwelling  availability.  The 
housing  affordability  index  at  NUTS 3  level  (Map 
A17.1)  shows  that  houses  are  least  affordable  in 
Jadranska  Hrvatska,  especially  on  the  southern 
Dalmatian  coast  due  to  the  pressure  of  tourism. 
Most  recent  data  on  the  housing  gap  per  county 
(259)  show  a  slightly  different  picture  with  a 
significant number of housing units missing in the 
capital  region  and  the  surrounding  counties  in 
Sjeverna  Hrvatska,  as  well  as  in  the  Osječko-
baranjska  and  Splitsko-dalmatinska  counties. 
Given  that  the  challenges  are  specific  to  local 
areas,  addressing  them  at  the  appropriate  level 
would  be  instrumental.  Evaluating  current  policy 
choices  and  measuring  the  housing  stock  and 
investment  needs  are  crucial  to  improving  the 
local  communities  and 
overall  prosperity  of 
encouraging 
urban 
development in the long term. 

sustainable 

and 

fair 

Despite  recent  efforts  and  steps  to  improve 
the  quality  of  public  administration  (see 

(259) Croatian national housing policy plan (2030).  

111 

 
 
Map A17.1:  House prices relative to income, 2019 

Source: European Commission, Mapadomo 

Sustainability 

Notwithstanding  significant  challenges  due 
to  delays  in  complying  with  the  EU  acquis 
and exposure to climate change-related risks 
(see also Annex 9), all Croatian regions have 
good  prospects  in  terms  of  achieving  more 
sustainable development. This is thanks to their 
untapped  potential  for  renewables  and  room  to 
introduce more effective measures for making the 
the 
economy  more  circular  and 
greening of the transport sector. 

increasing 

Croatia’s  overall  energy  mix 
in  2023 
remained heavily reliant on fossil fuels while 
its  renewable  energy  mix,  representing 
27.8%  of  the  overall  energy  mix, 
is 
dominated  by biomass and  hydropower, with 
limited shares of solar, wind and geothermal 
energy. There is a strong potential for developing 
renewable energy production at regional and local 
level  (i.e.  Jadranska  Hrvatska  for  solar  and  wind, 
Panonska Hrvatska for geothermal) that is largely 
untapped  (wind  at  20%  and  solar  below  2%  of 
electricity generation). Croatia’s decentralisation of 

energy  production  is  progressing  slowly  with  only 
three  energy  communities  registered  by  end  of 
2024.  Existing  administrative  challenges  are 
slowing  down  renewable  energy 
investments, 
including on the islands. 

A  comprehensive  circular  economy  strategy 
would  be  an  opportunity  to  put  in  place  an 
efficient  waste  management  system  and 
increase  the  level  of  reuse  and  recycling. 
Despite  improvements,  the  waste  management 
system  in  Croatia  still  relies  on  landfilling,  with 
52% of the municipal waste produced ending up in 
one  of  the  77  active  landfills  in  the  country  in 
2023  (260).  This is mainly  due  to  the  slow  roll  out 
of  the  regional  waste  management  centres  and 
limited  capacities  of  the  authorities  to  take  up 
complex  and 
investments. 
large-scale  waste 
Separating  and  processing  municipal  waste 
remains  a  challenge,  with  the  stark  disparities  at 
county level, going from 55% separately collected 
municipal  waste  in  Međimurska  county  to  only 
5,5% in Dubrovačko-neretvanska county.  

of 

to  complete 
water 

The  implementation  and  quality  of  water 
utility  services  significantly  vary  among 
Croatian  regions  and  cities.  Only  84%  of  the 
country’s  population  has  access  to  water  supply 
and  only  47%  to  sanitation  services.  Larger  cities 
in  Jadranska  Hrvatska,  such  as  Dubrovnik,  Split, 
Zadar  and  Rijeka,  have 
the 
sanitation 
their 
construction 
infrastructures  as  per  the  EU  accession’s  treaty 
commitments.  The  capital  region  has  one  of  the 
lowest  compliance rates with EU water legislation 
(6%)  and  faces  the  highest  investment  needs  to 
reach  and  maintain  compliance.  Despite  some 
progress  made 
(wastewater 
treatment  increased  in  2023  by  2.1%),  public 
water network leakages (261) and insufficient urban 
wastewater  treatment,  especially  in  Jadranska 
Hrvatska  (almost  12%  of  urban  wastewater  not 
collected),  continue.  Stepping  up  efforts to  extend 
and  modernise  drinking  water  and  wastewater 
infrastructure, and to ensure sustainable service at 
a reasonable price would be beneficial. 

in  recent  years 

(260) Municipal Waste Report for 2023. Ministry of Environmental 

Protection and Green Transition, 2024.  

(261) European  Commission,  The  World  Bank  (2023),  Technical 
assistance on support to reduce water loss within the reform 
of the water sector in Croatia. 

112 

 
 
 
 
 
Croatia’s  significant  share  of  Natura  2000 
sites  (36.7%,  the  second  largest  in  the  EU) 
highlights  the  positive  role  of  effective 
nature protection and the implementation of 
restoration  legislation.  It  is  key  to  achieve  the 
birds and habitats directives’ objectives, especially 
in  Jadranska  Hrvatska  (50.3%).  Cohesion  policy 
investments  in  the  biodiversity  sector  provide  an 
in 
opportunity 
maintaining  or  restoring  favourable  conservation 
status 
local 
administrative 
developing 
knowledge  and  human  resources  in  charge  of 
managing these sites. 

to  make  significant  progress 

strengthening 

capacities 

habitats, 

and 

of 

Greening  the  transport  sector  presents  an 
opportunity  to  counter  the  last  decade’s 
increasing  greenhouse  gas  (GHG)  emissions, 
while  contributing  to  the  competitiveness  of 
Adriatic  ports.  With  only  7%  of  core  rail  TEN-T 
network,  compared  to  an  EU  average  of  60%,  a 
strong  shift  from  mainly  road-based  transport  to 
underdeveloped  rail 
infrastructure  would  help 
reduce  GHG  emissions,  particularly  in  Panonska 
and Jadranska Hrvatska, where GHG emissions are 
above the EU average. Moreover, modernising and 
improving  rail  infrastructure  would  help  increase 
the  development  and  competitiveness  of  the 
regions,  for  example,  the  port  of  Rijeka,  and  its 
strategic position as a gateway for cargo entering 
central  and  eastern  Europe.  Improving  access  to 
alternative  fuel  infrastructure  in  urban  centres 
across  the  country,  would  contribute  further 
towards  more  sustainable  mobility  and  reduced 
emissions,  as  electric  vehicle  charging  stations 
points  are  far  below  EU  average,  especially  in 
Panonska  Hrvatska  and  the  capital  region  (see 
Table A17.1). 

113