COMMISSION STAFF WORKING DOCUMENT 2026 Country Report - Croatia Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Croatia
Date: 2026-06-03
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, 3.6.2026  SWD(2026) 211 final  COMMISSION STAFF WORKING DOCUMENT 2026 Country Report - Croatia Accompanying the document Recommendation for a COUNCIL RECOMMENDATION  on the economic, social, employment, structural and budgetary policies of Croatia {COM(2026) 211 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC DEVELOPMENTS AND KEY POLICY 
CHALLENGES 

rising  trade  protectionism,  while  exports  of 
services  shrank  in  real  terms,  likely  due  to 
losses  in  price  competitiveness  in  tourism  in 
recent  years.  With 
imports  growing,  the 
contribution  of  net  exports  to  growth  turned 
negative. In future years, domestic demand is 
set  to  continue  growing but  at  a  slower  pace. 
Exports of goods and services are projected to 
pick  up,  leading  to  a  gradual  reduction  in  the 
drag of net external trade on growth. 

Graph 1.1: Croatia's GDP per capita and price 
level 

(1) Croatia's GDP per capita and price level 
Source: Eurostat 

In  2025, 

Inflation  in  Croatia  is  higher  than  the 
euro-area  average. 
inflation 
increased  to  4.4%  (3),  firmly  above  the  euro-
area  average,  which  fell  slightly  to  2.1%.  The 
gap  with  the  euro  area  was  mainly  driven  by 
inflation in the price of services, which fell only 
marginally  but  remained  high,  as  well  as  by 

(3)  As  measured  by  the  Harmonised  Index  of  Consumer 
Prices  (HICP).  According  to  Croatia’s  national  consumer 
price  index,  inflation  equalled  3.7%  in  2025.  The  main 
difference between the two indices is that the national 
index  corrects  to  account  for  the  consumption  by  non-
residents, i.e. foreign tourists. 

Robust economic momentum at 
decreasing rates 

Croatia’s  economy  continues  to  grow 
strongly. Croatia’s real  GDP grew by 3.4% in 
2025 (down from 3.8% a year ago), exceeding 
growth  in  the  rest  of  the  EU  for  a  fifth 
consecutive  year  (1).  This  enabled  Croatia  to 
continue  converging  toward  the  EU  average 
living  standards,  a  process  it  started  shortly 
after  joining  the  EU,  although  the  pace  of 
convergence  has  moderated  in  the  last  two 
years after rapid gains since 2020 (Graph 1.1). 
This  process  has  been  supported  by  the 
successive  integration  into  the  single  market, 
significant uptake of EU funds, including under 
the 
(RRP), 
accession  to  the  Schengen  area  and  to  the 
euro area in 2023. During most of this period, 
Croatia's  population  has  fallen,  but  this  trend 
reversed in 2023 due to stronger immigration 
(2).  Since  2022,  prices  have  also 
flows 
increased  toward  the  EU  average  (Graph  1.1). 
Solid economic growth is projected to continue 
at  gradually  decreasing  rates.  The  conflict  in 
the  Middle  East  and  heightened  geopolitical 
tensions  are  expected  to  weigh  on  the 
macroeconomic  outlook,  dampening  domestic 
demand. 

resilience  plan 

recovery  and 

Recent  growth  has  been  driven  by 
domestic demand. Economic growth in 2025 
remained  supported  by  strong  household 
consumption underpinned by rising income and 
employment, sustained investment growth and 
further  increases  in  government  consumption. 
Exports  of  goods  rose  significantly  despite 

(1)  Source: Eurostat (nama_10_gdp). 

(2)  Population growth continued in 2025. Source: Eurostat, 

(demo_pjan). 

2 

50556065707580in % of the EU aveargeGDP per capita (PPS, EU = 100)Price level (EU = 100) 
 
 
     
 
Box 1:  UN Sustainable Development Goals (SDGs)  

Croatia continues to make progress on all SDGs related to competitiveness (SDGs 4, 8, 
and 9), while it still needs to catch up with the EU average on all of them. Croatia is also 
improving on all SDGs related to macroeconomic stability (SDGs 8, 16 and 17) as well 
as on most SDGs related to social fairness (SDGs 1, 3, 4, 5, 8), except SDGs 7 and 10. 

Overall,  Croatia  is  improving  on  11  SDGs,  of  which  seven  are  below  the  EU  average. 
SDG  9  (Industry,  innovation  and  infrastructure)  shows  the  strongest  improvement, 
although  the  gap  with  the  EU  average  remains  wide  due  to  persisting  disparities  in 
indicators  such  as  R&D  expenditure,  patent  applications,  and  the  share  of  households 
with  high-speed  internet  connections.  For  the  remaining  six  SDGs,  mostly  related  to 
sustainability, Croatia is moving away from the target, though only two are below the 
EU  average.  In  particular  SDG  13  (Climate  action)  presents  opportunities  for 
improvement as it has the widest gap with the EU average among the SDGs (Annex 17). 

inflation,  which  accelerated  (4).  The 
food 
remaining  difference  is  due  to  energy  price 
inflation, which picked up due to the phase-out 
of  government  energy  support  measures  in 
2025.  In  early  2026,  some  energy  support 
measures  such  as  fuel  price  caps  were 
reintroduced to mitigate energy price increases 
due to the conflict in the Middle East. 

categories 

Price  caps  only  temporarily  slowed  down 
the  rise  in  food  prices.  In  response  to  high 
food inflation, Croatia brought in price caps for 
certain  food  items  in  2022,  subsequently 
expanded in 2023 and 2025 to 100 food and 
hygiene  product  categories.  These  caps  seem 
to  have  temporarily  slowed  price  growth  for 
food 
containing  price-capped 
products  in  2022  and  2023,  both  compared 
with  other  countries  and  with  other  foods  in 
Croatia,  but  since  2024,  price  increases  have 
converged 
It  would  be  beneficial  to 
reconsider  the  need  for  extended  food  price 
caps  as  they  may  have  harmful  effects  on 
food  supply  chains,  and  to  boost  efforts  to 
identify  and  tackle  the  root  causes  of  high 
food inflation (Annex 5).  

(5). 

tight. 

remains 

Employment  growth  is  slowing,  but  the 
labour  market 
The 
employment  rate  continued  the  upward  trend 
that started in 2014, reaching 74.4% in 2025 
and  thereby  reducing  the  gap  with  the  EU 
average  from  8.5  pps  to  1.7  pps  over  this 
period.  The  employment  rate  of  women 
overtook the corresponding EU average rate in 
2025  (71.8%  in  Croatia  vs  EU  average  of 
71.3%). Still, employment rates remain low for 
some  vulnerable  groups,  in  particular  people 
with disabilities, low-skilled, and older workers. 
Labour  market  participation  continued  to  rise, 
the 
in 
reaching 
unemployment rate fell further to 4.9%. Wage 
growth  decelerated  from  very  high  rates  but 
remained robust, also in real terms.  

72.4% 

2025 

and 

Labour  shortages  stabilised  but  remain 
elevated.  The  number  of  open  vacancies  (in 
industry,  construction  and  services)  per 
thousand  people  unemployed  decreased  from 
the  highs  reached  in  2024  and  remains  well 
below  the  EU  average  (6).  Over  the  past 
decade,  the  labour  market  has  transitioned 
from  high  unemployment  and  low  vacancy 
rates  to  historically  low  unemployment  and 
relatively  high  vacancy  rates.  While  this 
change  signals  an  improved  labour  market 

(4)  Data  for  recent  months  indicate  that  (annual)  food 
inflation  has  fallen  since  the  2025  average,  with  the 
annual rate of change of food prices (excluding alcohol 
and tobacco) closer to but still above the euro area rate. 

(5)  Own  analysis  based  on  mapping  the  food  products 
subject to price caps to Eurostat HICP 5-digit items. 

(6)  Labour shortages in Croatia reported in the BCS survey 
are  more  pronounced  than  for  the  EU  in  industry  and 
construction,  where  they  declined  slightly  in  2025.  For 
services, reported shortages decreased more visibly and 
came close to EU levels in 2025-Q4. 

3 

 
 
 
 
into 

them 

integrating 

maintain  this  momentum  and  develop  a 
framework  for  conducting  regular  spending 
reviews  and 
the 
budgetary  process,  including  at  local  level. 
Supplementary  pension  schemes  can  also 
contribute to improving the efficiency of public 
spending,  by 
increasing  pension  adequacy 
while  limiting  the  use  of  public  resources.  In 
Croatia, supplementary pensions play a limited 
role  in  providing  retirement  income.  Although 
take  up  of  the  mandatory,  privately  funded 
scheme is  high  and  financial  depth  is broadly 
in line with the EU average, expanding the role 
of  existing  voluntary  pension  funds  would 
improve  the  resilience  of  the  pension  system 
(Annexes 2 and 6). 

increase 

Defence  spending  in  Croatia  is  expected 
to 
steadily,  bolstered  by 
financial support from the EU. To facilitate 
an increase in public spending on defence, and 
at  the  request  of  Croatia,  the  Council  has 
activated the National Escape Clause (NEC) (7). 
Total  government  expenditure  on  defence 
amounted to 1.5% of GDP in 2024 and 2025, 
while  is  expected  by  the  Commission  to  be 
1.6% in 2026 (Annex 2). The EU also supports 
investments  in  defence.  Under  the  European 
Commission’s  ReArm  Europe  plan,  the  Council 
adopted Croatia’s request for EUR 1.7 billion in 
EU  loans  under  the  SAFE  (Security  Action  for 
Europe)  initiative  for  defence  procurement. 
Croatia  has  allocated  approximately  EUR 133 
million  of  RRP  loans  as  equity  injections  for 
the  Croatian  Bank  for  Reconstruction  and 
Development  (HBOR)  for an  investment  policy 
to  support  strategic  defence  and  security 
investments.  Croatia  also  receives  EUR 275 
million 
Regional 
Development Fund (ERDF) to support strategic 
defence  (dual-use  infrastructure  supporting 
military  mobility)  and  security  investments 
(border 
civil 
preparedness). 

surveillance, 

European 

digital 

from 

and 

the 

(7)  Activating the national escape clause provides Member 
States  with  budgetary  flexibility  needed  to  increase 
defence  expenditure,  without  an  immediate  need  to 
finance  the  increase  with  spending  cuts  or  revenue-
raising  measures.  The  flexibility  gives  Member  States 
the  time  needed  to  accommodate  higher  defence 
expenditure under national budgets. 

that  more  effectively  matches  job  seekers 
with  available  posts,  persistent  high  vacancy 
rates alongside falling unemployment suggest 
that the labour market remains tight. 

Improving the quality of public 
finances to meet spending needs 

The 

fiscal 

Growing  fiscal  deficits  indicate  the  need 
recent 
consolidation. 
for 
expansionary  fiscal  stance  drove  the  general 
government deficit to narrowly exceed the 3% 
deficit  threshold  for  2025.  The  deficit  is 
expected  to  slightly  decrease  for  the  next 
(Annex  2).  Despite  strong  revenue 
years 
collection  supported  by  solid  growth 
in 
nominal  GDP  and  employment,  spending  on 
investments,  wages,  pensions  and  social 
assistance 
inclusive 
particular 
allowance)  drove  the  general  government 
deficit  higher.  Fiscal  commitments  by  Croatia 
under  its  medium-term  fiscal  structural  plan 
(MTFSP)  for  2025-2028  would  lead  to  an 
improvement of the structural primary balance 
of  1.1  pps,  from  -1.3%  of  GDP  in  2025  to  -
0.2%  in  2028.  This  would  in  turn  ensure  that 
Croatia  maintains  its  debt  below  the  60% 
threshold. 

the 

(in 

increasing 

With  limited  fiscal  space  and  competing 
spending 
the 
priorities, 
efficiency  of  public  spending 
is  key. 
Croatia  conducts  spending  reviews,  which  are 
currently limited in scope and transparency. To 
increase  spending  efficiency,  sectors  such  as 
health  and  education,  where  expenditure  is 
relatively  high  and  outcomes  are  in  some 
cases  below  the  EU  average,  would  be  good 
candidates  for  coverage  by  the  spending 
reviews.  Croatia’s  high  exposure  to  climate 
change  risks,  combined  with  a  low  rate  of 
insurance penetration, also warrants attention. 
Public  administration  workforce  management 
could be also reviewed, as public employment 
has  increased  sharply  in  recent  years  while 
core  structures  in  the  central  government 
remain  short-staffed,  including  the  spending 
technical  support 
review  department.  A 
instrument  (TSI)  project  is  currently  underway 
to  strengthen  the  limited  capacity  to  conduct 
spending  reviews (Annex  2).  It  is important  to 

4 

 
 
A fairer and more efficient tax 
system  

by  reviewing  the  effectiveness  and  adjusting 
tax  expenditures,  or  replacing  them,  with 
targeted social spending. 

is  distortive  as 

There is scope to broaden property taxes 
to 
tax 
improve  progressivity.  Recent 
reforms  on  immovable  property,  implemented 
under  the  National  Housing  Policy  Plan,  were 
an important step to encourage the utilisation 
of  unused  residential  properties  and  promote 
long-term  rentals.  However,  the  property  tax 
applies  only  to  vacant  and  holiday  properties 
and  is  based  on  location  rather  than  market 
value.  This  approach 
it 
effectively  favours  owners  of  high-value 
assets.  A  sizeable  number  of  dwellings  are 
unoccupied  despite  a  wide  gap  in  supply 
(Annex  16).  Bringing  in  a  market  value-based 
component into the property tax, and gradually 
extending it to all properties, while considering 
the  ability  to  pay,  would  generate  more 
revenue  and  promote  a  fairer,  more  efficient 
tax  structure.  It  would  also  provide  greater 
incentives  to  put  unoccupied  dwellings  on  the 
housing  market.  The  new  population  register 
under development by the Croatian authorities 
implementation  of 
could  help  shape  the 
property  taxation  in  a  progressive  way  that 
could  account  for  income  levels  and  socio-
economic disparities. 

Tax expenditures are sizeable, sometimes 
ineffective  and  poorly  targeted.  Overall 
tax  expenditure  came  to  EUR 3.5  billion  in 
2023, slightly above 12% of total tax revenue. 
Two  thirds  of  the  tax  expenditure  are  due  to 
VAT  reduced  rates  (EUR 2.2  billion)  (Annex  3). 
Reduced  VAT  rates  can  be  inefficient  and 
poorly  targeted  at  reducing  inequality  (by 
granting benefits to wealthy households). They 
also  created  loopholes  for  tax  evasion  by 
misclassified  goods  and  services.  Complex 
conditions can undermine the effectiveness of 
corporate 
expenditures.  A 
tax 
microsimulation  study  shows  that  personal 
income tax (PIT) expenditures amount to 21% 
of  total  PIT  revenues,  but  the  impact  on  the 
average  disposable  household  income  is  less 
than  1%  (8).  Better  results  could  be  achieved 

income 

(8)  Turrini et al., (2024), Tax Expenditures in the EU: Recent 

Trends and New Policy Challenges. 

5 

to 

reduce 

reporting. 

transaction 

Croatia  made  progress  in  digitalising  the 
tax  administration 
the 
persisting  shadow  economy.  Croatia  has 
made  progress  in  the  digitalisation  of  its  tax 
administration,  with  investments  under  the 
RRP  and  underpinned  by  the  Digital  Croatia 
Strategy  2032.  The  “Fiscalisation  2.0”  reform 
introduced  mandatory  e-invoicing  and  real-
Furthermore, 
time 
Croatia is currently upgrading and modernising 
the  Tax Administration 
Information  System 
which  will  further  reduce  the  administrative 
burden  of  taxpayers,  related  to  reporting  and 
record-keeping obligations. Croatia has above-
EU-average  rates  of  electronically  submitted 
tax  returns  from  corporate  income  tax  and 
value added tax. The most recent data on the 
VAT compliance gap indicates 7.7% of the VAT 
total 
strong 
improvement  compared  with  11.4%  in  the 
previous year (Annex 3). However, the shadow 
economy is estimated to account for 29.7% of 
GDP in 2022, one of the largest in EU (Annex 
3),  pointing  to  structural  inefficiencies  that 
warrant further investigations. 

in  2023,  a 

liability 

tax 

Sustaining growth will require 
further increases in productivity 

Productivity  growth  in  Croatia  has  been 
solid  but  it  lags  behind  several  of  its 
peers.  Since  Croatia  joined  the  EU,  labour 
productivity has been catching up with the EU 
average, but  at  a  slower pace  than in  several 
Member States with similar initial productivity 
levels.  Aggregate  labour  productivity  growth 
in 
was  mainly  shaped  by 
productivity  in  wholesale  and  retail  trade, 
transport,  accommodation  and  food  service 
activities, which largely reflected the dynamics 
of the tourism sector (Graph 1.2). After 2023, 
the importance of these sectors for aggregate 
productivity  growth  subsided,  with 
their 
contribution  temporarily  turning  negative  in 
relatively 
2024.  Manufacturing  made  a 
to 
modest 
that 
productivity 

improvements 

contribution 

suggesting 

growth, 

volatile 

and 

 
 
real  terms  but  still  increasing  in  nominal 
terms. Overall, past productivity gains seem to 
have helped Croatia maintain competitiveness 
over the medium term despite higher inflation 
than the level in Croatia's trade partners (10). 

to 

tourists,  and 

The  Croatian  economy  benefits  from 
tourism  but  developing  other  sources  of 
growth  would  boost  economic  resilience. 
The  tourism  sector  plays  an  important  role  in 
Croatia’s economy. It makes the highest direct 
contribution to GDP in the EU at 11.8%, largely 
tourism-
driven  by  foreign 
connected sectors contribute around a quarter 
(11).  Tourism  also 
of  gross  value  added 
contributes 
government 
significantly 
through  VAT,  and 
revenues,  particularly 
productivity  levels  are  similar  to  the  overall 
economy.  However, 
the  high  degree  of 
dependence  on  exports  of  tourism  services 
creates vulnerabilities. For example, it exposes 
the  economy 
shocks  and 
to  external 
contributes  to  labour  shortages  and  housing 
price pressure in  coastal areas  where  tourism 
is  concentrated  (Annex  18),  thus  exacerbating 
regional disparities. Developing new sources of 
growth  in  higher  value-added  services  and 
industrial  sectors  could  strengthen  economic 
resilience. 
under 
preparation  is  an  opportunity  for  Croatia  to 
build on recent growth of industrial output and 
the 
increase 
manufacturing sector (Annex 5).    

low  productivity 

industrial 

plan 

The 

the 

in 

Efforts are underway to tackle 
economic security challenges 

Croatia  faces  challenges  related  to 
in  various  sectors. 
economic  security 
Croatia  has  significantly 
in  gas 
infrastructure to diversify supply and increase 

invested 

(10)  Výškrabka  M.  and  Bodea  A.  2026,  'After  the  Inflation 
Shock.  Taking Stock  of  Price  and Cost  Competitiveness 
in  the  EU',  Economic  and  Financial  Affairs  European 
Economy Discussion Paper 240, January 2026. 

(11)  Eurostat:  Tourism  Satellite  Accounts  (TSA)  in  Europe  – 
2023  edition,  based  on comparison  of  2022  TSA  data 
for  available  countries  and  Croatian  Bureau  of 
Statistics.  

productivity-enhancing investment and policies 
are needed to tap the full potential to achieve 
higher  living  standards  (Annex  5).  Several 
reforms  and  investments  implemented  under 
the Croatian RRP aim to boost productivity and 
economic  security,  although  the  full  extent  of 
their  economic  impact  will  only  materialise  in 
the medium- to long-term. 

Graph 1.2: Labour productivity growth and 
sectoral contributions 

(1) Productivity growth: annual change in gross value 
added per worker (in 2020 prices). C: Manufacturing, F: 
Construction, G-I: Wholesale and retail trade, transport, 
accommodation and food service activities, J:Information 
and communication, other: other sectors, reallocation: 
effects from reallocation across industries with different 
productivity levels and growth rates. 
Source: Commission calculations based on Eurostat data 
and the methodology applied in the OECD Compendium 
of Productivity Indicators 2023. 

than 

grew 

Wages 
labour 
faster 
productivity  in  2025.  This  led  to  a  further 
appreciation  of  the  real  effective  exchange 
rate (REER) vis-à-vis the euro area, suggesting 
some  loss  of  competitiveness  (9).  However, 
when  deflated  by  producer  prices,  the  REER 
depreciated, indicating that goods exports may 
have  remained  more  competitive.  This 
is 
reflected  in  the  continued  solid  growth  of 
goods  exports  despite 
trade 
protectionism  in  2025.  By  contrast,  services 
exports appear to have been more affected by 
the  loss  in  price  competitiveness,  declining  in 

increased 

(9)  According to several measures of the REER, i.e. deflated 

by unit labour costs, HICP and GDP deflator. 

6 

-8-6-4-2024681012141516171819202122232425in %CFG-IJother sectorsreallocation effectstotal productivity growth 
     
 
 
it 

production, 

hydropower 

remains 
regional  energy  security,  but 
dependent  on  fossil-fuel  imports  (Annex  9). 
transport  and  energy  sectors, 
Croatia’s 
especially 
are 
vulnerable  to  climate  change  impacts  (Annex 
10).  Risks  could  be  mitigated  by  accelerating 
the  roll-out  of  renewable  energy  and  by 
further  improving  climate  resilience.  Croatia’s 
level  of  material  import  dependency  has 
increased in recent years and is above the EU 
average (Annex 5). Increasing circular material 
use,  which  is  less  than  half  the  EU  average 
reduce 
(5.9% 
dependencies 
resource 
productivity.  

vs  12.2%), 
and 

could  help 
improve 

Making housing more affordable is 
a policy priority 

long-term 

Housing  affordability  in  Croatia  remains 
a concern despite notable income growth. 
in  house  prices 
increase 
The 
accelerated  in  2025,  with  prices  rising  by 
14.1%.  Price 
increases  over  recent  years 
broadly  matched  rises  in  income,  hindering 
affordability  improvements  (Annex  16).  Prices 
are increasing despite a slowdown in demand, 
including  by  foreign  buyers,  and  the  increase 
in supply in response to rising prices. Supply is 
constrained  by  a  high  share  of  vacant 
dwellings 
(nearly  30%  of  dwellings  for 
permanent  living  are  unoccupied)  and  short-
rentals.  Croatia  has  acknowledged 
term 
housing  as  a  policy  priority  and  adopted  a 
national  plan  for  housing  policy  until  2030 
(Annex 16). Croatia already implemented some 
of the measures, such as the affordable rental 
program  and  housing  tax  reforms  (property 
tax  on  properties  not  used  for  permanent 
living,  partial  tax  refunds  for  young  buyers), 
but further reforms are needed to improve the 
housing  market  and  increase  affordability.  In 
addition,  Croatia  lacks  a  national-level  policy 
framework 
is 
decentralised and managed at local level (12).  

social  housing; 

this 

for 

Regional disparities persist in 
income and public service 
provision  

There are significant regional differences 
in  several  important  areas.  Disparities  in 
GDP  per  capita  levels  persist  between  the 
more developed capital region, at 131% of the 
average  EU  living  standards  in  2024,  and  the 
rest  of  the  country.  Average  incomes  per 
capita in some counties in the least developed 
Panonska  Hrvatska  are  less  than  half  the  EU 
average  (Annex  18).  Employment  rates  and 
labour  productivity  differ  similarly  at  regional 
level.  This  reflects  several  factors  including 
differences  in  regional  economic  structures, 
for  example  the  high  level  of  reliance  on 
the 
tourism 
relatively  strong  industrial  activity  in  Sjeverna 
Hrvatska,  which 
fastest 
productivity  growth.  Other  dimensions  where 
deep  regional  disparities  are  clearly  visible 
include  housing  affordability,  research  and 
development, 
the 
capacity of the local public administration and 
healthcare.  These  differences  undermine 
economic  prospects  and  residents’  right  to 
stay in the regions concerned.  

in  Jadranska  Hrvatska,  or 

infrastructure, 

recorded 

digital 

the 

funding 

instruments 

competitiveness, 

provide 
EU 
considerable  resources  to  Croatia.  They 
support investments and structural reforms to 
enhance 
environmental 
sustainability,  human  capital,  social  fairness 
and  economic  security,  while  helping  to 
address challenges identified in the CSRs. Key 
the  Recovery  and 
instruments 
Resilience  Facility  (see  Box  2)  and  Cohesion 
policy  funds  (see  Box  3).  In  addition,  the 
Common  Agricultural  Policy  (CAP)  provides 
Croatia  with  an  EU  contribution  of  EUR  3.4 
billion under the CAP strategic plan for 2023-
2027(13),  while  EUR  244  million  are  allocated 

include 

Croatia,  but  more  favourable  along  most  dimensions 
relative to the same group in the EU. 

(13)  An overview of Croatia ’s formally approved strategy to 
the  EU’s  common  agricultural  policy 
at 

implement 
nationally 
https://agriculture.ec.europa.eu/cap-my-country/cap-
strategic-plans/croatia_en. 

found 

can 

be 

(12)  Housing affordability and deprivation indicators are less 
positive for the vulnerable group at risk of poverty and 
social  exclusion  than  for  the  general  population  in 

7 

 
 
 
 
under  the  Common  Fisheries  Policy  (CFP).  A 
further  EUR  511  million  are  available  under 
the  Asylum,  Migration  and  Integration  Fund 
(AMIF),  together  with the Border  Management 
and  Visa  Instrument  (BMVI)  and  the  Internal 
Security Fund (ISF). Other EU programmes also 
support 
for 
instance  through  open  calls  under  Horizon 
Europe and the Connecting Europe Facility.  

competitiveness 

in  Croatia, 

Box 2:   Key achievements of the recovery and resilience plan 

Croatia’s recovery and resilience plan (RRP) has a total envelope of EUR 10.04 billion, corresponding to 
12.9% of GDP for 2023. The aim of this funding is to support reforms and investments contributing to 
the  green  and  digital  transitions,  strengthening  economic  and  social  resilience  and  addressing  long-
standing structural challenges identified in the European Semester. 

As of 30 March 2026, EUR 7.3 billion (around 73% of the total allocation) have been disbursed to Croatia, 
of  which  EUR 2.4  billion  in  loans,  following  the  satisfactory  fulfilment  of  253  milestones  and  targets. 
Effective  implementation  has  progressed  steadily,  with  a  rising  number  of  reforms  and  investments 
already fulfilled and tangible results delivered on the ground.  

Highlights and impact of the plan 

•  Improved  business  environment.  A  broad-based  reform  to  reduce  administrative  costs  for 
businesses by cutting parafiscal and non-tax charges, simplifying administrative procedures and easing 
requirements  for  regulated  professions.  Almost  300  simplification  measures  have  been  implemented, 
resulting in direct cost relief to the private sector of around EUR 650 million (14). These measures focus 
on the efficiency of business-to-government services and requirements for different productive sectors. 
•  Digital  transformation  of  public  administration.  New  digital  public  services  for  citizens  and 
businesses,  such  as  the  digital  identity  card,  supported  by  comprehensive  reforms  to  improve  public 
administration efficiency via better resources management including 100% state exams and new online 
civil servant recruitment using a centralised IT system. 

•  Improved  energy  efficiency  in  buildings.  Energy  renovation  of  over  0.7  million  m2  of  multi-
apartment  buildings  and  over  1.3  million  m2  of  public  buildings.  This  is  expected  to  contribute  to  an 
overall  30%  increase  in  primary  energy  savings,  complemented  by the  creation  of  one-stop  shops  on 
energy  renovation  and  the  development  of  educational  programmes  to  upgrade  the  skills  of 
construction professionals.  

•  Modernisation  of  healthcare infrastructure.  Renovations  or  equipment procurement  that  improve 
access  to  and  quality  of  healthcare  in  40  hospitals  as  well  as  17  medical  centres  and  their  local 
branches, building on reforms  to bring in new hospital  management and  a telemedicine framework, a 
funding scheme for specialisation in primary care, as well as joint procurement and functional mergers 
of hospitals.  

•  Improved  water  management.  Putting  in  place  a  water  sector  regulatory  framework  and 
benchmarking system. This will include action to improve the efficiency of water operator companies by 
merging nearly 200 service providers into 41 regional utilities, supported by investment  in renovating 
and constructing over 1000 km of public water supply and over 850 km of wastewater networks.  

(14)  Based on standardised projections. 

8 

 
 
 
 
 
 
Box 3:   Contribution of cohesion policy funds 

EU  cohesion  policy  funding  is  supporting  Croatia’s  efforts  to  boost  competitiveness, 
environmental sustainability, skills and social fairness. In 2021-2027, EU cohesion policy funds(15) 
are providing EUR 8.7 billion (amounting to EUR 10.1 billion paired with national co-financing) or 10.1% of 
2024  GDP,  to Croatia.  This  makes  cohesion  policy  one  of  the  main  sources  of  public  investment  in  the 
country.  The  value  of  selected  projects  corresponded  to 80.2%  of  the total  allocation  as  of  March  2026, 
with additional calls for projects in the pipeline. 
• 

Innovation,  business  environment  and  productivity.  Over  EUR 1.5  billion  are  allocated  to  boost 
investments in research and innovation, SMEs competitiveness and digitalisation, also though financial 
instruments expected to support over 2 700 companies and leverage private funding. In addition, it will 
support companies outside the capital region to accelerate the regional industrial transition pathways, 
including though upskilling.  

•  Decarbonisation,  energy  affordability  and  sustainability.  Over  EUR 3  billion  in  EU  funding  is 
allocated  to  accelerate  the  implementation  of  the  green  transition  and  increase  environmental 
sustainability,  with  almost  EUR 900  million  to  water  management  projects.  EUR 340  million  are 
earmarked for sustainable urban transport, including for new battery trains, new tram lines, trams and 
electric  buses.    Over  EUR 650  million  is  allocated  to  action  to  increase  energy  efficiency  in  public 
buildings,  housing  stock  and  companies,  including  through  financial  instruments  for  multi-apartment 
buildings. 

•  Skills, quality jobs and social fairness. Under the European Social Fund, ESF+, EUR 533 million is 
allocated to improving the labour market relevance of education and training systems, EUR 951 million 
is allocated to improving access to employment, traineeships, upskilling and reskilling, particularly for 
vulnerable groups, women and young people. On social policy, EUR 634 million is earmarked to develop 
community-based social  services, in particular long-term care, and  to  provide social  inclusion support 
for  vulnerable  groups,  while  a  further  EUR 74  million  is  allocated  to  action  to  tackle  material 
deprivation.  

The mid-term review (16) increased by nearly EUR 688 million the contribution that cohesion policy makes 
to  emerging  strategic  priorities.  Over  one  third  of  this  amount  is  earmarked  for  defence  and  civil 
preparedness, particularly dual-use infrastructure to support military mobility. To boost the competitiveness 
of  less  developed  Croatian  regions,  Cohesion  Funds  will  support  technology  development  under  the 
Strategic Technologies for Europe Platform (STEP) and manufacturing and STEP-related skills development. 
Additional  investments  in  the  water  sector  will  help  improve  the  water  supply  and  extend  wastewater 
management  systems  across  the  county.  Additional  investments  in  affordable  housing  will  help  mitigate 
the decline in housing affordability, especially in certain urban areas. The mid-term review also resulted in 
the  need  to  increase  ESF+  investments  in  priority  policy  areas  by  increasing  allocations  in:  active 
employment policy measures with a focus on vulnerable and inactive groups including upskilling/reskilling, 
interventions in  adult  education  schemes  including quality  assurance  of the  system  and preparing  to  roll 
out  individual  learning  accounts,  and  investment  in  preventing  institutionalisation  and  providing 
community-based  social  services,  in  particular  for  long-term  care.  In  addition  to  cohesion  policy  funding, 
Croatia  will  be  allocated  up  to  EUR 1.26  billion  under  the  Social  Climate  Fund  over  2026-2032  to  help 
mitigate  the  social  impact  of  the  new  emissions  trading  system  (ETS2).  This  will  provide  support  to 
vulnerable households, vulnerable transport users and small businesses. 

(15)  ERDF, ESF+, CF and JTF. 

(16)  Undertaken 

the 

through 

halfway 

2021-2027 
programming  period,  the  mid-term  review  is  a  formal 
assessment  process  required  under  Article  18  of  the 
Common  Provisions  Regulation 
the 
implementation of a programme and, where necessary, 
propose  adjustments  to 
its  performance, 
ensure  relevance  in  light  of  new  and  emerging  needs 
and maintain coherence with other EU policies. 

to  assess 

improve 

9 

 
 
 
 
INNOVATION, BUSINESS ENVIRONMENT AND 
PRODUCTIVITY 

system, 

country-specific 
2025 
The 
(CSRs)  for  Croatia 
recommendations 
identified 
reduce 
to 
need 
the 
fragmentation in the public research and 
boost 
higher-education 
investment  in  research  and  innovation, 
broaden  growth  financing  and  deepen 
capital  markets,  simplify  regulation  and 
reduce  the  administrative  burden  for 
businesses  through  digitalisation  and 
stronger  local  administrative  capacity. 
Croatia has made some progress with support 
from  the  recovery  and  resilience  plan  (RRP) 
and cohesion funding. However, further action 
business 
is 
improve 
to 
to  growth 
environment,  extend  access 
financing  for  SMEs,  strengthen  the  research 
the 
and 
administrative 
the 
remaining gaps, which are local administrative 
capacity,  the  efficiency  of  the  justice  system 
and digital infrastructure. 

reduce 
tackle 

innovation 

system, 

needed 

burden 

and 

the 

Boosting productivity and new 
engines of growth 

Creating  new  engines  of  growth  requires 
improvements  to  productivity  together 
with  business dynamism.  The rate of new 
business  registrations  significantly  exceeded 
the  EU  average  between  2021  and  2025, 
while  the  rate  of  bankruptcies  fell  (Annex  5). 
The share of public and private investment to 
GDP has been on the rise and now exceeds the 
EU average, supported in part by EU funds. By 
although 
contrast, 
increasing, remains well below the EU average 
(69%),  particularly  in  manufacturing  (40%). 
Strong  expansion  and  productivity  increase  in 
in  some  medium-high 
the  past  decade 
technology industrial sectors such as electrical 
equipment indicate innovation potential in the 

productivity, 

labour 

manufacturing sector, where low and medium-
low  technology  is  predominant.  A  shift  to 
higher  value-added 
industrial  production, 
including  in  clean-tech  industry,  could  help 
develop  new  sources  of  growth  and  diversify 
the  economy,  including  in  less  developed 
regions (Annex 18).  

to 

investment, 

is  essential 

framework  conditions 

for 
Improving 
innovation  and 
business 
expansion 
to  upgrade 
industry  and  diversify  the  economy. 
Croatia  is  preparing  a  national  industrial  plan 
for  2027-2034 
increase  production, 
investment and innovation in industry (Annex 5 
and  Annex  8).  For  this  plan  to  translate  into 
productivity gains, implementation will need to 
tackle the practical constraints that companies 
frequently  flag:  shortages  of  skilled  staff, 
availability  of  growth  financing,  delays  and 
complexity  in  the  procedures  needed  to  scale 
up, such as permitting for plant expansion and 
investment projects. The regional dimension is 
also  important,  as  the  availability  of  skilled 
labour,  infrastructure,  administrative  capacity 
and  the  speed  of  procedures  can  vary  based 
on location. These differences influence where 
investment  can  be  made  and  how  quickly 
companies 
to  market 
developments.  

respond 

can 

system 

activities, 

is  making  good  progress 

in 
Croatia 
advancing  the  research  and  innovation 
(R&I) 
but 
and 
weaknesses  persist.  According  to  the  2025 
European  Innovation  Scoreboard  (17),  Croatia 
has  undertaken  significant 
reforms  and 
transition 
from  being  classified  as  an 
emerging  innovator  to  a  moderate  innovator 
(Graph  2.1).  However,  structural  weaknesses 
to  foster 
continue 

its  ability 

to  hinder 

(17)  European Innovation Scoreboard, 2025. 

10 

 
 
 
institutes  and  polytechnics,  leaving  out  the 
highly  fragmented  system  of  universities  and 
autonomous  faculties.  This  dilutes  resources, 
limits  collaboration  and  hinders  the  quality  of 
scientific  research.  Further  action,  including 
policy  changes  and  improving  the  incentive 
scheme  to  reduce  fragmentation,  based  on  a 
solid  analysis,  would  help  improve  Croatia’s 
research performance and competitiveness. 

to 

low 

lead 

Delays  in  the  governance  system  for 
public  R&I 
levels  of 
coordination  and  suboptimal  design  of 
calls  for  projects.  Croatia  put  in  place  the 
new  governance  system  for  the  S3  in  2024, 
but implementation is delayed. The S3 support 
unit  within  HAMAG-BICRO  is  operational,  the 
European  Centre  for  Innovation,  Advanced 
Technologies  and  Skills  Development,  a  key 
tool  providing  analytical  support  and  greater 
coordination, is only in the process of being set 
up  (Annex  4).  Likewise,  membership  in  the 
thematic  innovation  councils,  paramount  for 
discovery 
entrepreneurial 
continuous 
procedure,  has  only  been  confirmed  in  March 
2026.  While  ministries  have  ensured  that 
funding from NRRP and Cohesion policy cover 
all TRLs, coordination across schemes remains 
a  key  challenge.  With  several  ministries  and 
agencies  involved  in  the  design  of  public  R&I 
policies  and  investments,  a  lack  of  a  proper 
regular 
coordination  mechanism  prevents 
availability  and  sequencing  of  calls  across 
different  technology  readiness  levels,  leading 
to  high  perceived  risk  from  beneficiaries  due 
to  unclarity  of  future  funding.  This  leads  to 
high  perceived  risk  from  beneficiaries  due  to 
the  lack  of  clarity  of  future  funding  options. 
The  public  R&I  funding  system  is  evolving 
towards  greater  flexibility  and  design  of  new 
funding  schemes,  however  the  rigidity  of 
procedures  continues  to  affect  the  speed  of 
implementation  and 
tape, 
especially  when  trying  to  transfer  lessons 
learnt  between  calls  funded  from  different 
sources.  Croatia 
is  exploring  alternative 
sources  of  financing  for  public  R&I,  but 
progress  remains  limited,  especially  in  terms 
of 
leveraging  financing  from  commercial 
banks.  Alternative  sources  could  improve  the 
ownership  of  projects  by  beneficiaries  and 
leverage additional private R&I investment.  

increases 

red 

and 

innovation(18), 
in  research  and 
investment 
commercialise 
increase 
research 
competitiveness. There is a significant regional 
dimension  too  as  most  R&I  activities  are 
carried  out  in  Zagreb  while  the  main  regional 
university  centres  show  potential  to  become 
champion  hubs  in  specific  niche  areas  of  the 
(S3)  and 
smart 
and 
potential 
competitiveness  (Annex  18).  Regional  impact 
should  be  considered  taking  into  account  the 
assessment  of  programme  agreements  and 
industrial transition plans. 

specialisation 

excellence 

strategy 

drive 

to 

Graph 2.1: European Innovation Scoreboard 
Index and ranking among EU Member States 

Source: European Innovation Scoreboard 2025 

limits 

investment 

A  highly  fragmented  public  R&I  system 
the 
limits  performance  and 
potential  for  excellent  research.  This 
challenge is directly covered by the 2025 CSR 
on  fostering 
in  research  and 
innovation  and  addressing  fragmentation  in 
the  public  research  system.  Under  the  RRP, 
Croatia has put in place a reform of the public 
R&I 
research 
excellence.  However,  limited  action  has  been 
taken  to  reduce  the  number  of  public  R&I 
entities,  with  progress  on  merging  limited  to 
six  entities  (Annex  4)  out  of  over  120. 
Moreover,  the  focus  is  on  public  research 

towards 

system, 

shifting 

(18)  Despite strong increases between 2017 and 2022, R&D 
expenditure as share of GDP remains significantly 
below EU average and slightly declined between 2022 
and 2024. 

11 

23rd22nd21st21st21st21st21st21st506070809010011012020182019202020212022202320242025CroatiaCzechiaSloveniaEstoniaEU average 
   
 
Increasing  productivity  will  require  more 
business innovation, with effective public 
support  for  business  R&D  and  faster 
uptake  of  digital  technologies.  Business 
expenditure on research & development (R&D) 
intensity  has  plateaued  over  the  past  three 
years  and  remains  relatively  low  at  around 
0.74%  of  GDP  in  2024,  well  below  the  EU 
average  of  1.49%.  There  are  also  significant 
regional disparities (Annex 18). The number of 
researchers employed by businesses is around 
a  quarter  of  the  EU  average  and  the  level  of 
international  patent  activity  is  modest  (Annex 
4). Public support for business R&D is very low, 
although this  may increase following a recent 
reform  under  the  RRP  to  improve  the  tax 
incentives for R&D. Direct schemes to support 
business  R&D  are  fragmented  and  do  not 
always allow firms to plan. Diffusion of digital 
technologies in businesses is still below the EU 
average  in  many  areas,  especially  in  SMEs 
(Annex 4). Encouraging businesses to innovate 
and adopt new technologies would support the 
value-added 
transition 
manufacturing  and  services.  On  total  R&D 
expenditure  too,  regional  differences  across 
the country persist (Graph 2.2). 

higher 

to 

Graph 2.2: R&D expenditure as a share of GDP, 
by Croatian region, 2023 

Source: Eurostat, GERD (gross domestic expenditure on 
R&D), by NUTS 2 region, 2023. 

Simplification, digitalisation and 
justice: reducing the burden where 
it matters 

and 

foster 

related 

regulation 

competitiveness, 

report  difficulties 

is 
especially  for  SMEs.  This  challenge 
the  2025  CSR  on 
directly  covered  by 
simplifying 
reducing 
administrative  burden  through  digitalisation, 
and  on  increasing  capacity  and  efficiency  at 
local  level.  Almost  half  of  businesses  (46% 
(19)) 
to  public 
administration services, leading to operational 
delays  (32%),  higher  costs  (24%)  and  lost 
business opportunities (8%). Waiting times and 
document  preparation  remain  key  challenges, 
with  delays in  operations reported  by  32%  of 
firms,  one  of  the  highest  shares  in  the  EU. 
Easing  the  administrative  requirements  in  the 
implementation  of  posting  of  workers  rules 
could  reduce  regulatory  fragmentation  in  the 
single  market,  facilitate  cross-border  mobility 
and 
without 
undermining worker protection  Another major 
obstacle that companies face is understanding 
the  applicable  legislation,  and  late  payments 
remain  a 
concern.  Business-to-business 
transactions have the longest payment periods 
in the EU, averaging around 64 days in 2024, 
reflecting  both 
long  contractual  payment 
terms  and  increasing  payment  delays  (Annex 
5).  Under  the  RRP  and  the  Technical  Support 
Instrument,  Croatia  has  pursued  successive 
action  plans  to  reduce  the  administrative 
burden  (the  5th  action  plan  adopted in  March 
2024).  Implementation  has  progressed  with 
implemented  by  November 
44  measures 
2025.  In  addition,  the  number  of  ex  ante 
impact  assessments  conducted 
in  2025 
increased  compared  to  2024,  while  public 
consultations  have  been  strengthened  and  ex 
post 
been 
reinforced. This marks progress in reducing the 
administrative burden. However, the continued 
together  with 
complexity  of  procedures, 
fragmented  permitting  procedures  across 
authorities,  lengthy  licensing  processes  for 
setting  up  a  business  and 
limited 
interoperability  of  digital  systems  indicate 
there is scope to further simplify and integrate 
administrative  processes  to  better  support 
business activity.  

evaluation 

capacities 

have 

the 

in  Croatia 
The  administrative  burden 
remains high, and fragmented procedures 
to  expand, 
limit  companies'  ability 

(19)  European Commission, Flash Eurobarometer 567/ 568 
on satisfaction with administrative services (2026). 

12 

1.372.171.930.680.490.00.51.01.52.02.5% 
   
 
 
of 

effectiveness 

digitalisation 
The 
depends  on  end-to-end  redesign  and 
better  coordination  across 
levels  of 
government.  Croatia’s  performance  in  digital 
public  services  for  businesses  remains  below 
the  EU  average  (20)  (65.3%  of  the  key 
administrative  steps  are  fully  online,  against 
the EU average of 83.2%) and down slightly in 
recent  years,  mainly  due  to  weaker  cross-
border  online  services.  Despite  ongoing 
support  for  digitalisation  under  EU  funds, 
businesses  also  make  limited  use  of  online 
public services (35%, the lowest  in the EU,  vs 
70% on average), relying more on email (74%) 
and  phone  (51%)  to  communicate  with public 
administrations.  The  benefits  of  digital  public 
services  for  businesses  remain  limited  when 
procedures are split across multiple authorities 
and  where  'once-only'  delivery  is  not  yet 
operational  in  practice.  Progress  on  tackling 
specific  workflow  bottlenecks  –  particularly  in 
permitting and licensing – would especially aid 
investment  in  manufacturing  and  clean-tech 
related projects, where the time-to-permit and 
administrative  certainty  can  be  decisive  in 
running and scaling up projects (Annex 5).  

Croatia  has  made  significant  strides  in 
digital  public  services  for  citizens  but 
gaps  remain.  Notable 
improvements  are 
evident  in  the  e-citizens  platform  and  in  the 
above-EU-average  level  of  access  to  e-health 
records. Despite improvements to the national 
information infrastructure under the RRP, such 
as  the  new  central  interoperability  system, 
administrative  inefficiencies  persist.  76%  of 
citizens are still asked for redundant data and 
32%  of  businesses  face  delays  from  slow 
processes, among the highest rates in the EU. 
The  use  of  e-government  fell  from  82.9%  to 
75.3%  in  2025,  underlining  issues  with  user-
friendliness and data reuse (Annex 7). 

Although Croatia continues to upgrade its 
connectivity 
coverage 
remains  uneven.  In  2025,  the  share  of 

infrastructure, 

(44%)  but 

Croatian  firms  citing  digital  infrastructure  as 
an  obstacle  (36%)  is  now  below  the  EU 
average 
very  high-capacity 
networks  (VHCN)  coverage  (78.9%)  and  rural 
VHCN  (49.1%)  still  trailed  the  EU  benchmarks 
of 82.5% and 61.9% in 2024. Although fibre-
to-the-premises  (FTTP)  coverage  has  reached 
75.4%,  above  the  EU  average,  rural  FTTP 
(44.4%)  is  still  below  average  (58.8%).  While 
overall  5G  coverage,  at  94.2%,  is  broadly  in 
line  with  the  EU,  mid-band  coverage  remains 
limited  at  45.2%  nationally  and  only  8.5%  in 
rural  areas,  compared  to  EU  averages  of 
67.7% and 26.2% (Annex 5). Progress towards 
balanced  coverage  has  been  stalled  by  the 
termination 
broadband 
contracts  and  by  the  removal  of  a  major 
investment  under  cohesion  policy  designed  to 
bring  broadband  backhaul  infrastructure  to 
50.2%  of  all  rural  and  suburban  areas.  These 
investment  setbacks  significantly  delayed 
overall  broadband  infrastructure  development 
and  access  in  suburban  and  rural  areas,  and 
the funding gap persists (Annex 5). In addition 
issues  of  funding,  complex  permitting 
to 
procedures,  spatial  planning  constraints  and 
the  unresolved 
legacy 
infrastructure  delay  progress.  Further  policy 
action  would  be  needed,  in  particular  to  roll 
out broadband in rural areas.  

legal  status  of 

RRF-funded 

of 

The  justice  system  continues  to  face 
efficiency  challenges.  This  challenge  was 
covered in the 2019 and 2020 country reports 
and  Croatia  has  advanced  with  reforms, 
including on the digitalisation of justice (Annex 
7)  (21).  However,  despite  some  progress  and 
improvements  in  recent  years,  supported  by 
reforms  and 
investments  under  the  RRP, 
Croatia  continues  to  have  one  of  the  longest 
backlogs and duration of civil and commercial 
cases  in  first  instance  courts  in  the  EU 
(Annexes  5  and  7)  (22).  This  has  a  negative 
effect  on  the  business  environment  and 
competitiveness.  The  perception  of  corruption 
when doing business also remains high (Annex 
7)  (23).  These  issues  indicate  the  need  to 
continue to improve the efficiency in resolving 

(20)  Report  on  the  State  of  the  Digital  Decade  2025.  KPI 
captures  online  provision  of  key  public  services  for 
entrepreneurs,  the  share  of  administrative  steps  that 
can be completed fully online for major life events. 

(21)  2025 Rule of Law Report on Croatia. 

(22)  See also: 2025 EU Justice Scoreboard. 

(23)  See also: 2025 EU Justice Scoreboard. 

13 

 
 
 
 
civil  and  commercial  court  cases  and  assess 
the  scope  for  further  action,  in  particular  by 
implementing  additional  reforms,  for  example 
case management reforms. 

Strengthening capital markets to   
support productivity, innovation 
and economic diversification  

in 

(including 

investment 

The  limited  depth  and  liquidity  of  capital 
markets  constrain  financing  sources.  The 
2025  CSR  calls  for  broader  sources  of 
financing,  stronger  capital  markets,  easier 
the  bond 
retail 
market), fewer barriers to listing and stronger 
corporate  governance.  Driven  by  the  Strategic 
Framework  for  Capital  Market  Development 
(2025-2030)  and  the  first  related  action  plan 
(2025-2026),  supported  by  the  RRP,  Croatia 
has  taken  steps  towards  regional  capital 
market integration,  seeking to achieve market 
scale  and  positioning.  It  has  strengthened  the 
corporate  governance  framework  for  state-
owned  enterprises  and  broader  action 
is 
underway to raise the investment readiness of 
companies.  In  2025,  several  successful  initial 
public  offerings  (IPOs)  on  the  Zagreb  Stock 
Exchange attracted both retail and institutional 
investors. Strong public take-up of government 
continued.  However, 
securities 
further  action 
is  needed  as  Croatian 
companies still rely heavily on traditional bank 
funding (Annex 6).  

issuances 

financing 

Capital  market 
remains 
relatively  underdeveloped  for  start-ups, 
SMEs and innovative firms. Venture capital 
(VC)  and  private  equity  (PE) 
investments 
remain significantly below the EU average. VC 
investments  averaged  0.015%  of  GDP  in 
2022-2024 vs the EU average of 0.064%. PE 
investments  averaged  0.251%  in  2022-2024, 
vs  the  EU  average  of  0.487%  (Annex  6). 
international 
Investments  rely  heavily  on 
initiatives and support from the Croatian Bank 
for  Reconstruction  and  Development  (HBOR), 
which  plans  to  create  an  IPO  fund  to  boost 
SME growth financing. The VC/PE ecosystem is 
dominated  by  relatively  small  funds  that  lack 

the capacity to fund the scale-up of innovative 
companies (Annex 4 and Annex 6). 

the 

flexible 

funding 

institutional 
Stronger  participation  of 
is  needed  to 
investors  and  citizens 
diversify 
environment. 
Investment  funds,  insurance  companies  and 
pension  funds  play  a  limited  role  in  providing 
equity  finance  due  to  conservative  asset 
allocation  strategies  (Annex  4  and  Annex  6). 
The  plan  to  simplify  the  requirements  for 
investment  funds  and  the  recent,  (as  of 
rules  on 
1 January 2024)  more 
portfolio  diversification  for  pension  funds 
could  yield  positive  trends.  However,  a  long-
term  preference  for  a  prudent  approach  may 
play  a  role.  For  example,  pension  funds  in 
Croatia  committed  6%  of  new  PE  and  VC 
funds  raised  in  the  period  from  2007-2023, 
combined  with  two  other  central  and  eastern 
EU  countries  (EU  average  15%)  (24).  As  of 
31 October 2025,  the  exposure  of  Croatian 
pension funds to alternative investment funds 
remains  moderate,  below  the  regulatory  caps 
(Annex  6).  Croatian  households  also  hold  a 
comparatively  high  share  of  their  assets  in 
cash and deposits (43.6% of household assets 
at  end-2024  vs  EU  average  of  31.7%,  Annex 
6),  which  limits  the  pool  of  domestic  capital 
available  for  market-based  financing.  Direct 
investments in additional financial instruments 
could  be  further  incentivised.  For  example, 
investment funds hold only 3.3% of household 
wealth vs the EU average of 11.1%. Incentives 
could  include  schemes  to  improve  financial 
literacy and an enabling regulatory framework 
such as the Savings and Investment Accounts 
tabled under the national strategy. 

More efficient local administration 
for people and business 

Regional  fragmentation 
in  the  public 
administration  reduces  efficiency  and 
leads  to  suboptimal  service  delivery.  This 
linked  to  the  2025 
challenge 

is  directly 

(24)  ECMI, 2024, Closing the gaping hole in the capital 

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

14 

 
 
regional  fragmentation  remains  continues  to 
curb the local potential for development (27). 

reforms 

Translating  the  well-designed  reform  of 
the  civil  and  public  service  to  the  local 
level  is  a  key  step  to  improving  the 
capacity  and  service  delivery.  Under  the 
RRP, 
national-level 
administration  brought  in  competency-based 
recruitment, evaluation and promotion, as well 
as  a 
remuneration  system. 
Propagating  these  changes  to  the  local  level 
could give a further boost to capacity in LGUs 
and improve the delivery of public services. 

transparent 

the 

of 

including 

efficiency  of 

capacity  and 

country-specific  recommendation  to  improve 
the 
local 
administration, 
through  mergers. 
Croatia  has  127  cities  and  428  municipalities 
responsible  for  providing  key  public  services. 
Under  the  RRP,  Croatia  launched  reforms  to 
encourage  mergers  of  local  government  units 
(LGUs) backed by financial incentives and an IT 
for 
platform  providing  analytical  data 
municipalities considering mergers. 

not 

has 

The  system 
to  encourage  mergers 
remains  lacklustre.  Although  135  LGUs  are 
involved  in  functional  mergers,  progress  on 
full-scale  mergers 
advanced. 
Stakeholders cite obstacles such as short-lived 
financial  incentives  and  eligibility  rules  that 
restrict  cooperation  between 
larger  and 
smaller municipalities. Public reluctance is also 
a  major  issue,  driven  by  scant  awareness  of 
the  benefits  of  consolidating  municipalities 
and  fears  of  losing  specific  advantages  and 
identity. Targeted awareness campaigns could 
local 
resistance 
reduce 
administrative  organisation. 
current 
system  also  lacks  a  gradual  approach  to 
bridge  between  functional  and  full-scale 
mergers (25). 

improve 
The 

and 

and 

less 

smaller 

Administrative  and  financial  capacities 
vary  across  local  authorities,  especially 
developed 
in 
municipalities.  Many  LGUs  face 
limited 
human  resources  and  budgetary  constraints 
for  strategic  planning  and  investment.  The 
demographic  decline  in  some  regions  further 
hampers  service  delivery  (Annex  18).    The 
sharp  drop 
in  skilled  and  working-age 
residents  in  some  counties  is  a  concern, 
their  economic  potential  and 
threatening 
jeopardising  public  service  delivery  (26).  Most 
cities  have  only  limited  capacity  to  provide 
that 
core  municipal  services,  suggesting 

(25)  Such  approaches  have  been  used  in  other  Member 
States,  such  as  Germany,  with  the  aim  of  providing 
support to LGUs that have already opted for functional 
mergers in their transition to a full-scale merger. 

(26)  Towards  Balanced  Regional  Development  in  Croatia 

(EN). 

(27)  Slijepcevic, S., Broz, T., & Rasic, I. (2024), The Capacities 
and Sustainability of Croatian Cities in Performing 
Municipal Services, Sustainability, 16(17), 7277.  

. 

15 

 
 
 
 
DECARBONISATION, ENERGY AFFORDABILITY AND 
SUSTAINABILITY 

prices, 

further 

country-specific 
2025 
The 
recommendations 
(CSRs)  for  Croatia 
identified  the  need  to  address  high 
electricity 
upgrade 
electricity grids, streamline permitting, to 
simplify  the  procedures  for  installing 
in  multi-
solar  photovoltaic  facilities 
accelerate 
buildings, 
apartment 
implementation  of  energy  efficiency 
measures,  reduce  reliance  on  fossil fuels 
in  the  transport  sector,  phase  out  fossil 
fuel  subsidies  and  revise  the  rules  for 
biofuels.  Significant  measures  have  been 
implemented 
the  uptake  of 
increase 
renewables,  upgrade  grid  storage  and  smart 
meters, improve energy efficiency, decarbonise 
in 
transport  and  to  address  the  decline 
biofuels,  but 
for 
improvement. 

there 

room 

still 

to 

is 

High electricity prices hinder 
competitiveness and 
decarbonisation 

renewable  energy  projects. 

Croatia’s high wholesale electricity prices 
continue  to  hold  back  competitiveness. 
The 2025 CSRs identified the need to address 
high  electricity  prices  for  businesses  by 
accelerating  deployment  and  grid  connection 
of 
In  2025, 
electricity prices for  households and industrial 
consumers  stayed  below  the  EU  average. 
However,  despite  fossil  fuels  accounting  for a 
decreasing  share  of  electricity  generation 
(23.6%  of  generation  in  2025),  they maintain 
a dominant role in setting wholesale electricity 
prices,  keeping  costs  elevated.  This  leads  to 
pronounced  price  spikes  and  contributes  to 
Croatia  having  the  sixth  highest  wholesale 
electricity  prices  in  the  EU  (Annex  9).  Faster 
roll-out  of new renewable energy capacity,  by 
improving  grid  connection  of  renewables,  and 

16 

solutions 

flexibility 

such  as 
non-fossil 
electricity storage and demand response, could 
help  reduce  wholesale  prices.  On  27  April 
2026, the Croatian energy regulatory authority 
adopted  updated  grid  connection  fees.  This 
could  speed  up  the  deployment  of  renewable 
energy  and  help  unblock  up  to  3.5  GW  of 
utility-scale  renewable  projects  stranded  for 
over three years due to unpredictable charges.  

Despite  obstacles,  Croatia  expanded  its 
renewable  energy  capacity  in  2025.  Wind 
generation  rose  to  25%  of  total  production 
thanks  to  strong  wind  conditions  and  the 
opening of two new wind farms. Solar energy 
also  increased,  with  417 MW  of  new  capacity 
added  (mostly  rooftop  installations),  bringing 
the total to 1 255 MW (Annex 9). Despite this 
progress, Croatia does not make full use of its 
wind  and  solar  potential,  with  projects  facing 
connection 
lengthy  permitting  and  grid 
procedures  as  well  as  grid 
capacity 
constraints. The revised recovery and resilience 
plan  (RRP)  in  2025  includes  an  additional 
EUR 74 million for strategic green investments 
such  as  solar,  wind  and  geothermal  energy. 
Investment  is  also  planned  under  cohesion 
policy,  amounting  to  EUR 66  million,  but  this 
has yet to be implemented. 

Industrial  decarbonisation  is  progressing 
but is  slowed down  by gaps  in the  policy 
toolkit  and  electricity  prices.    Greenhouse 
gas 
emissions  generated  by  Croatia’s 
manufacturing  industry  fell  by  20%  between 
2019  and  2024,  a  greater  reduction  than  the 
EU  average  (-16%),  but  emission  intensity 
remains  among  the  highest,  especially  due  to 
process-related 
has 
emissions. 
recognised the potential of carbon-capture and 
storage  (CCS)  technologies  and  renewable 
hydrogen  to  decarbonise  industry  by  enabling 
carbon  storage  through  legislative  changes, 
carrying out  feasibility  studies under Croatia's 
RRP,  adopting  a  long-term  hydrogen  strategy 
and  increasingly  supporting  projects  via  EU 

Croatia 

 
 
to 

funds.  To  tap  the  potential,  it  would  also  be 
beneficial  to  promote  demand  for  low-carbon 
industrial  products,  consider  using  carbon 
contracts 
tackle 
for  difference,  and 
decarbonisation challenges in a more coherent 
and  targeted  way  in  the  upcoming  industrial 
strategy  (Annex  8).  Croatia  also  has  scope  to 
speed  up  the  reduction  of  energy-related 
the  viability  of 
emissions  by 
electrification  and  green  hydrogen,  which  is 
constrained  by  a  high  electricity-to-gas  price 
ratio,  and  by  developing  clean  technology 
manufacturing capacities (Annexes 5 and 9).  

improving 

Electricity grids and permitting 
procedures remain bottlenecks 

to 

further 

upgrade 

despite 

Croatia’s  drive  to  expand  renewable 
energy  is  hampered  by  persistent  grid 
weaknesses, 
recent 
improvements. The 2025 CSRs identified the 
need 
electricity 
transmission  and  distribution  grids,  invest  in 
electricity storage and advance the roll-out of 
smart meters. The RES Act in May 2025 eased 
the  rules  for  electricity  storage  and  hybrid 
renewable  plants,  and  Croatia  has  made 
significant investments under the RRP, such as 
upgrades of high-voltage lines and submarine 
cables connecting six islands to the mainland. 
However,  this  is  not  sufficient  to  tackle  the 
country’s  grid  congestion  and  high  industrial 
electricity  prices.  The  400  kV  grid  -  essential 
for  unlocking  Dalmatia’s  wind  and  solar 
potential 
remains 
underdeveloped. Plans for a new 2x400 kV line 
between  Konjsko  and  Tumbri  substations  are 
still  at  an  early 
stage  and  ageing 
infrastructure continues to pose reliability risks 
(Annex 9).  

(Annex 

18) 

- 

to 

scheme 

remains  slow.  In  addition  to  the  existing 
270 MW  Velebit  pumped  hydro  plant,  Croatia 
is  developing  a  450 MW  Vrdovo  pumped 
storage  project,  its  first  grid-scale  battery 
(60 MW/120  MWh),  and  it  launched  a  EUR 50 
million  RRP-funded 
support 
100 MWh  of  business-led  battery  storage  in 
October  2025  (Annex  9).  Dynamic  electricity 
contracts,  which  could  help  consumers  and 
businesses  benefit  from  cheaper  off-peak 
prices and reduce peak consumption, have yet 
to  be  introduced.  Without  long-term  plans  to 
invest  in  the  400kV  grid,  urgent  development 
of  large-scale  storage,  and  full  smart  meters 
deployment,  the  roll-out  of  renewable  energy 
in Croatia will remain limited. 

Croatia  has  amended  its  legislation  to 
simplify  some  permitting  procedures, but 
there  are  still  implementation  gaps  and 
bottlenecks that slow down progress. The 
2025  CSRs  identified  the  need  to  streamline 
permitting,  including  for  energy  communities, 
and  to  simplify  the  procedures  for  installing 
solar photovoltaic facilities in multi-apartment 
buildings.  Legislative  amendments  in  2025 
clarified  the  role  of  energy  communities  and 
updated  spatial  planning  rules  for  certain 
renewable 
However, 
operational obstacles seem to remain in place 
as  only  three  such  communities  have  been 
registered  to  date,  none  are  fully  operational 
and  there  were  no  new  registrations  in  2025 
(Annex 9). The roll-out of photovoltaic systems 
on  multi-apartment 
remains 
cumbersome, 
negligible  and 
blocking  a  key  route  to  expand  decentralised 
solar energy.  

procedures 

buildings 

projects. 

energy 

Decarbonising the building stock 
warrants private investment 

Enhancing  grid  flexibility  would  improve 
the  integration  of  renewable  energy  and 
reduce  electricity  prices.  The  roll-out  of 
smart  meters  is  advancing  (100 000 installed 
under the RRP) but it still lags well behind the 
EU’s  80%  target.  Private  user  coverage  is 
around  50%,  delaying  much-needed  demand-
side  flexibility.  On  electricity  storage,  some 
projects  are  being  implemented  but  progress 

laws  to 
Croatia  adopted  three  key 
strengthen  the 
legal  framework  for 
sustainable  construction  and  energy 
efficiency. The 2025 CSRs identified the need 
to  accelerate 
implementation  of  energy 
efficiency  measures,  especially  in  residential 
buildings, to reduce dependence on fossil fuels 
in the heating sector, and to accelerate the use 

17 

 
increases  in  the  EU  (28).  In  2023,  80%  of 
passengers  travelled  by  car,  with  rail  and bus 
transport  accounting  for  just  3.9%  and  8.2% 
respectively.  Despite  high  levels  of  EU  co-
funding for green mobility, progress is uneven 
and  slow.  The  uptake  of  electric  vehicles 
uptake  stagnated  in  2025  (one  of  the  lowest 
rates  in  the  EU),  deterred  by  high  public 
interoperability  and 
charging  costs,  poor 
scarce  private  charging,  especially  in  multi-
apartment buildings (Annex 8).  

in 

Increasing 

investment 

investments  are  underway 

Decarbonising  transport  requires  action 
to  prioritise  zero-emission  alternatives. 
Substantial 
in 
electric  transport  and  in  upgrading  of  rail 
infrastructure  under  the  RRP.  They  include  a 
double-track  railway  line  from  Kustošija  to 
Zagreb Glavni Kolodvor, battery trains, 30 new 
trams,  around  200  electric/hydrogen  buses, 
(EVs)  and  1 300 
2 000  electric  vehicles 
charging  stations,  also  using  other  EU  funds 
(29). 
charging 
infrastructure  for  EVs  in  urban  areas,  revising 
company tax benefits for EVs and maintaining 
the  EV  incentives  could  help  expand  electric 
road transport. As transport emissions and car 
ownership are rising, it is necessary to step up 
sector  by 
action 
accelerating 
rail 
infrastructure and electrified rolling stock. It is 
also  essential  to  prioritise  public  transport, 
optimise  traffic  on  existing  rail  lines  and 
integrate  rail  into  urban  transport  systems. 
Croatia  made  significant  progress  on  biofuels 
as in early 2026, the decree that reduced the 
penalties 
for  not  mixing  biofuels  was 
discontinued upon expiry. 

to  decarbonise 
the 

development 

the 

of 

(28)  Based  on  final  GHG  inventories  notified  in  2026, 
Croatia’s  effort  sharing  emissions  in  2024  were  9.4  % 
above the levels of 2005. The assessment of progress 
under the Effort Sharing Regulation will be established 
after the publication of the European Semester country 
report. 

(29)  The  overall  amount  allocated  to  decarbonisation  of 
transport  under  cohesion  policy  amounts  to  EUR  340 
million. 

of  efficient  and  green  solutions  such  as  heat 
pumps.  Three  laws  entered  into  force  in 
January  2026:  (i)  the  Construction  Act,  which 
supports  energy  efficiency  in  the  building 
sector;  (ii)  the  Energy  Efficiency  Act,  which 
brings in stricter energy-saving obligations for 
public bodies and businesses and embeds the 
'energy  efficiency  first'  principle  into  national 
in 
policy;  and 
Buildings  Act,  which  further  aligns  national 
legislation  with 
energy 
performance  of  buildings  and  sets  a  path  to 
decarbonise the building stock by 2050. These 
measures  are  supported  by  EU  funding, 
including  the  RRP,  which  allocates  around 
EUR 2 billion to building renovation and energy 
efficiency measures.  

(iii)  the  Energy  Efficiency 

rules 

EU 

on 

for 

the 

Funding  for  building  renovation  is  not 
mobilising  sufficient  private  investment. 
Further action is needed beyond EU funding to 
achieve 
building 
targets 
decarbonisation,  given  the  high  share  of  the 
building  stock  that  still  requires  renovation, 
especially 
buildings. 
multi-apartment 
Renovation  programmes  currently  focus  on 
grants  with  a  significant  private  investment 
gap,  partly  explaining  the  limited  residential 
energy savings made between 2019 and 2024 
(Annex  9).  Reducing  overall  reliance  on  grants 
and  shifting  to  financial  instruments  would 
maximise  the  impact  of  public  funds.  In 
addition, grants could be better targeted to the 
most  vulnerable  households  and  to  energy 
inefficient buildings.  

Towards more sustainable 
transport  

Croatia’s  transport  sector  continues  to 
rely heavily on fossil fuels. The 2025 CSRs 
identified the need to reduce reliance on fossil 
fuels  and  energy  demand  in  the  transport 
sector  by  promoting  sustainable  urban 
transport,  rail  and  the  electrification  of  road 
transport, 
including  by  reviewing  targeted 
taxation  incentives,  as  well  as  to  revise  the 
rules  for  biofuels  that  led  to  a  decline  in  the 
in  transport. 
share  of  renewable  energy 
Emissions  from  road  transport  increased  by 
42%  from  2005  to  2024,  one  of  the  biggest 

18 

 
 
Fossil fuel subsidies 

Graph 3.1: Recycling rates in Croatia vs EU-27 

Croatia  maintains  a  significant  level  of 
macroeconomically  relevant  fossil  fuel 
subsidies. The 2025 CSRs identified the need 
to take concrete steps to phase out fossil fuel 
subsidies,  in particular in  the  transport  sector. 
Certain  progress  was  made  when 
the 
government-imposed  fuel  price  caps  were 
phased  out 
in  July  2025.  However,  on 
9 March 2026, Croatia decided to reinstate the 
fuel  price  cap,  amid  soaring  oil  prices  due  to 
the  conflict 
the  Middle  East.  Other 
significant fossil fuel subsidies, such as partial 
in 
refunds  of  excise  duties 
commercial  transport,  continue  and  there  are 
no  plans  to  phase  them  out  before  2030 
(Annex 9). 

for  diesel 

in 

Better resource management 
would improve economic resilience 

economy 

potential 

It  has  brought 

Croatia  still  makes  limited  use  of  its 
despite 
circular 
reform progress. Croatia is advancing well in 
terms  of  reforms  to  improve  circularity  and 
in 
waste  management. 
economic instruments, such as a landfilling tax 
and  eco-modulation  for  fees  on different 
types of  packaging  materials. 
Investments 
have been made in these areas with the use of 
cohesion  and  RRP 
funding.  Nonetheless, 
Croatia’s  circular  material  use (at  5.9%  in 
2024, a drop from 6.2% in 2023) is below the 
EU  average  (12.2% in  2024)  and  it  fails  to 
reach  the  EU  recycling  and  landfilling  targets 
(Annex  8),  despite  recent  progress.  Further 
policy  action  is  therefore  needed.  It  would  be 
the 
beneficial 
conditions  needed  to  invest  more  into  repair 
and  reuse  centres,  adopt  measures  and/or 
incentives 
raw 
integrate 
materials  into  new  products  to  reduce  import 
dependency  on  primary  materials.  Action  on 
these  fronts  are  needed  both  at  national  and 
local 
levels  to  tackle  significant  regional 
disparities,  including  between  the  coast  and 
mainland (Annex 18).  

if  Croatia 

secondary 

create 

could 

to 

Source: Eurostat 

is 

lost  before 

infrastructure 

Despite  significant  investment  in  recent 
is  partly 
years,  water 
obsolete  and  incomplete.  Nearly  half  of 
drinking  water 
it  reaches 
consumers, indicating substantial inefficiencies 
in the water management system. Croatia has 
carried  out  major  reforms  under  the  RRP,  for 
example  to  consolidate  water  utilities  and 
adopt a national water loss reduction strategy, 
with 
regional  plans  under  preparation. 
However,  as  recent  investments  have  largely 
focused  on  extending  the  drinking  water 
network  to  cover  rural  and  remote  areas, 
ageing  networks  result  in  high  water  losses 
across  major  urban  centres  such  as  Zagreb 
and coastal cities. On wastewater, Croatia has 
the lowest level of compliance with the Urban 
Wastewater  Treatment  Directive  in  the  EU, 
although recent and ongoing investments may 
lead  to  improvements.  There  is  scope  to 
accelerate  investment  in  water  infrastructure, 
prioritising  high-impact  areas  and  to  invest  in 
flood  protection,  which  could  help  the  country 
make greater use of nature-based solutions. 

Croatia is highly exposed to climate risks, 
which are having an increasing impact on 
the economy. As one of the EU’s climate risk 
hotspots,  the  country  faces  growing  exposure 
to  heatwaves,  droughts,  floods  and  wildfires. 
For  example,  the  increasing  frequency  of 
seasonal  water  shortages  and  heatwaves  are 
already  affecting  ecosystems  and  the  activity 
and  competitiveness  of  water-dependent 
sectors. This is particularly acute in agriculture, 
fisheries  and  electricity  production,  while 
transport 
highly 
vulnerable  to  extreme  weather  events  (Annex 

infrastructure 

remains 

19 

0102030405060201020112012201320142015201620172018201920202021202220232024Recycling Rate (%)EU27HR 
  
for 

needs 

improved 

investment 

10).  Croatia  has  the  highest  number  of  heat-
related  deaths  in  the  EU  in  recent  years. 
Annual 
climate 
adaptation  are  estimated  at  around  0.8%  of 
GDP,  above  the  EU  average  of  0.5%.  Croatia 
has 
its  climate  adaptation  and 
disaster  risk  management  framework,  but 
implementation 
across 
remains 
sectors  and  governance  levels.  Adopting  a 
specific  action  plan  for  priority  investments, 
including 
private-funded 
investment,  coupled  with  a  comprehensive 
monitoring  and  reporting  system,  would  help 
track progress and boost resilience. 

uneven 

public- 

and 

Economic 
losses  from  weather-  and 
climate-related  events  are  significant, 
historically  mostly  borne  by  the  state 
budget. Between 1980 and 2023, cumulative 
losses  reached  almost  6%  of  GDP,  exceeding 
levels  in  most  other  Member  States.  At  the 
same time, insurance coverage against climate 
risks remains very low, at around 2% (against 
an  EU  average  of  19%),  with  households  and 
small  farmers  particularly  exposed.  Past 
reliance  on  state  disaster  relief  may  have 
reduced  the  incentives  for  uptake  of  private 
insurance. Expanding insurance coverage could 
help reduce exposure, potentially by expanding 
mandatory 
and 
awareness-raising  activities,  combined  with 
targeted support for vulnerable households.  

insurance 

schemes 

20 

 
SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS 

ensure 

long-term 

shortages, 

country-specific 
The 
2025 
(CSRs)  for  Croatia 
recommendations 
identified  the  need  to  tackle  skills  and 
labour 
stronger 
educational  foundations  at  every  level, 
enhance  upskilling  and  reskilling,  for 
labour  market  policies  and  coordination 
with  social  services,  reduce  poverty  and 
income inequality, and improve access to 
deinstitutionalised 
care, 
promote  geographical  balance  of  health 
workers,  invest  in  e-health  and  public 
administration  cooperation  on  health 
policy.  Croatia  has  stepped  up  reforms  and 
investments, including under the recovery and 
resilience plan (RRP), the European Social Fund 
(ESF+)  and  European  Regional  Development 
Fund 
implementation 
remains  uneven,  with  new  aspects  gaining 
importance  and  capacity  constraints  risking 
slowing  delivery  and  limiting  the  impact.  As  a 
result, there is room for improvement in these 
policy areas (Annex 1).  

(ERDF).  However, 

21 

Labour market shifts: from 
shortages to broader participation 

Graph 4.1: Labour force participation 

(1) Age group 15-64 
Source: Eurostat 

gaps 

Croatia’s  labour  shortages  persist,  and 
among 
employment 
underrepresented  groups  remain  a  key 
constraint  on 
inclusive  growth.  This 
challenge  is  covered  by  the  2025  CSR  that 
calls for Croatia to help vulnerable groups join 
the  labour  market.  Over  the  past  decade,  the 
labour market has shifted from high  levels of 
unemployment  and  low  job  vacancy  rates  to 
historically  low  unemployment  and  relatively 
high  job  vacancy  rates.  Sustained  elevated 
vacancy 
decreasing 
unemployment suggest that the labour market 
remains tight. The employment rate in Croatia 
reached 74.4% in 2025, reducing the gap with 
the  EU  from  8.5  pps  to  1.7  pps  from  2014-
2025.  Nonetheless,  the  employment  rates 
remain  low  for  some  vulnerable  groups,  in 
particular  people  with  disabilities,  low-skilled, 
and  older  workers.  There are  also  pronounced 
regional  differences  in  overall  employment 
rates. 
gap 
decreased in 2025, but it remains particularly 
wide (39.7 pp. vs 24.2 pp. in the EU), signalling 

employment 

alongside 

disability 

rates 

The 

60626466687072747678802016201720182019202020212022202320242025EUHRPanonska HrvatskaJadranska HrvatskaGrad ZagrebSjeverna Hrvatska 
 
   
that  current  measures  to  integrate  these 
groups are not yet sufficiently targeted. While 
Croatia  continues to  use  active  labour market 
policies  and  EU-funded  measures  to  support 
employability  and  training,  it  could  make  the 
support  more  effective  by  putting  more 
emphasis  on  groups  with  low  labour  market 
participation and by better linking job schemes 
to  related  reskilling  and  upskilling  pathways 
(Annex  11).  Policy 
implementation  has 
advanced  through  expanded  programmes  and 
skills-related  measures,  including  tools  linked 
to the adult learning voucher scheme and the 
plan  to  gradually  bring  in  individual  learning 
accounts.  However,  gaps  remain  in  outreach 
and take-up among vulnerable groups, limited 
employer  engagement  in  training  offers,  and 
unequal  regional  access,  where  provision  is 
more  concentrated  in  urban  centres,  leaving 
rural  areas  and  islands  underserved  (Annex 
11). More targeted support and better delivery, 
such as tailored counselling, closer cooperation 
with  employers  and  better  matching  between 
local demand and training based on enhanced 
skills  intelligence,  would  help  ensure  that  job 
schemes  translate  into  stable  employment 
outcomes  for  people  who  are  furthest  away 
from the labour market. 

Wages are rising faster than 
productivity  

Strong  wage  growth  has  supported 
incomes but could weigh on the country's 
competitiveness. Given the weak productivity 
dynamics,  recent  wage  growth  may  increase 
cost  pressures  and  constrain  competitiveness 
if  the  gap  persists.  Wages  have  increased 
sharply in  recent  years,  also  in  real  terms  (by 
4.8%  in  2023,  4.3%  in  2024  and  6.0%  in 
2025).  Nonetheless,  wages  remain  relatively 
low  compared  with  other  EU  Member  States, 
and  the  recent  pace  of  wage  growth  has 
outpaced  productivity,  contributing  to  higher 
unit  labour  costs.  This  calls  for  continued 
attention  on 
the  underlying  drivers  of 
productivity  and  skills,  so  that  wages  remain 
compatible  with  sustainable  competitiveness. 
Boosting  the  supply  of  skills  based  on  more 
effective  skills 
improving  the 
intelligence, 
take-up  of  technology  and  innovation,  and 

important 

easing  the  transition  to  higher  value-added 
jobs  would  help  align  wage  dynamics  with 
productivity growth over time (Annex 11).  It is 
particularly 
monitor 
developments  across  sectors,  given  Croatia’s 
structural  labour  shortages  and  the  need  to 
increase  employment  in  higher-productivity 
sectors,  especially  in  less  developed  regions 
(Annex 18). 

to 

Increasing education to develop 
human capital  

in 

the 

levels 

in  2024) 

  undermines 

in  particular 

development 
Comparatively 

of 
at  multiple 
Challenges 
education  have  a  negative  impact  on 
and 
human 
capital 
competitiveness. 
low 
participation  in  early  childhood  education  and 
care  (ECEC)  (88.7%  vs  the  EU  average  of 
(30) 
95.0% 
the 
development of foundational competencies as 
a  starting  point  for  basic  skills  development. 
Shortages  of  teachers  in  ECEC  and  subject 
teachers undermine the quality of education in 
science, 
general, 
technology,  engineering  and  mathematics 
(STEM)  fields  that  are  increasingly  needed  to 
boost  the  competitiveness  of  the  economy. 
in  both 
level  of  underachievement 
The 
is  high, 
mathematics  and  digital  skills 
indicating  a  clear  need  for 
improvement. 
Underachievement  in  reading  and  science, 
while better than the EU average, is still much 
higher  than  the  European  Education  Area 
target of under 15% by 2030. Implementation 
is  underway  of  the  education  reforms  under 
the  RRP  to  increase  participation  in  ECEC  and 
move  to  single-shift  teaching.  However,  the 
transition  to  full-day  teaching  model  is  likely 
to  be  postponed  due  to  delays  in  school 
construction (Annex 13).  

There  are  skills mismatches  in  STEM  and 
digital  areas.  More  graduates  are  needed  in 
most  study programmes that require stronger 

(30)  Croatia  measures  the  third  lowest  participation  rate  in 
ECEC facilities for pupils from age 3 to the starting age 
of  compulsory  education  at  primary  level.  Source: 
Eurostat [educ_uoe_enra21]. 

22 

 
 
reform 
fields.  A  comprehensive  curricula 
implemented  since  the  2025/26  school  year 
learning-outcome-
shifts  VET  to  modular, 
oriented 
with 
programmes 
occupational  and  qualification  standards,  with 
support from the ESF+ (Annex 13). 

aligned 

step 
indicate 

Limited  work-based  learning  remains  an 
obstacle  to  VET  graduate  employability. 
Although  the  VET  reforms  mark  an  important 
labour  market 
forward, 
structural 
outcomes 
implementation 
that 
challenges  remain.  The  employment  rate  of 
recent VET graduates is below the EU average 
(74.5% in 2025 versus 80.2% in the EU), and 
participation  in  work-based  learning  remains 
significantly  lower  (38.7%  of  VET  graduates 
aged 20-34 in 2025 compared with 66.0%).  

Further measures are needed to make the 
reforms effective in the long term. Croatia 
plans  to  expand  the  network  of  companies 
providing  work-based 
learning,  strengthen 
support  for  in-company  mentors  and  enhance 
cooperation  between  VET  providers  and 
employers.  Ensuring  effective  delivery  will 
require  reducing  administrative  barriers  for 
companies,  creating  greater  incentives  for 
employer  participation  and  supporting  VET 
institutions in implementing new curricula and 
profiling  programmes  in  line  with  regional 
labour market needs. Further action to improve 
access  for  learners  with  disabilities  and  other 
vulnerable groups would also help ensure that 
the  VET  system  contributes  both  to  the 
country's competitiveness and social inclusion. 

Adult learning: unlocking potential 
across the workforce 

in  adult 
Low  rates  of  participation 
learning contributes to skills mismatches. 
This challenge is covered by the 2025 CSR on 
reducing 
increasing 
upskilling and reskilling schemes. Participation 
in adult learning remains low in Croatia overall 
(in  2022,  23.3%  of  adults  aged  between  25 

shortages  by 

skills 

is 

issue 

to  meet 

long-term 

STEM  skills  (31).  Despite  initiatives  planned  in 
its  RRP  to  improve  ICT-related  education, 
Croatia  still  faces  the  challenge  of  increasing 
student  enrolment  in  specialised  ICT  and  VET 
targets. 
programmes 
Another 
the  significant  gender 
imbalance  in  the  tech  sector  (18.4%  in  2025, 
against  the  EU  average  of  19.5%).  There  are 
still  mismatches  between  the  number  of 
places  offered  at  different  studies,  students’ 
interest and labour market needs, producing a 
negative  effect  on  the  economy.  Performance 
agreements  signed  with  all  nine  public 
universities  this  year  might  help  improve  the 
situation in the future. 

Education challenges also vary by region, 
with  greater  obstacles  in  remote  and 
rural areas. Teachers’ shortages are higher in 
remote  and  underdeveloped  areas,  where 
frequent. 
teachers  are  more 
unqualified 
Students  in  rural  areas  score  significantly 
lower  on  basic  skills.  At  tertiary  education 
level,  they  also  face  additional  challenges  of 
insufficient 
student  housing  and  high 
accommodation  costs,  despite  the  significant 
investment made under the ERDF, contributing 
to  educational  differences  (Annex  18).  There 
are  significant  regional  differences  in  tertiary 
education attainment, and the share of young 
people with a tertiary education in rural areas 
is  significantly  smaller.  Despite  having  strong 
levels of digital proficiency overall, Croatia has 
a pronounced digital divide in rural areas. 

Vocational education and training 
(VET): bridging the gap between 
school and work 

The  recent  VET  reform  increases  the 
quality, attractiveness and labour market 
relevance  of  VET.  Croatia  has  one  of  the 
highest  shares  of 
in 
in  2024 
vocational  programmes 
against  the  EU  average  of  52.9%),  and  a 
relatively  high  share  of  VET  learners  in  STEM 

learners  enrolled 

(71.2% 

(31)  https://www.hzz.hr/app/uploads/2024/12/preporuke_24-

1.pdf.  

23 

 
 
and 64 vs 39.5% in the EU)(32) and particularly 
among  people  with  low  levels  of  skills,  older 
people,  rural  populations  and  the  long-term 
unemployed. 
the 
effectiveness  of  upskilling  and  reskilling  in 
tackling  labour  and  skills  shortages  and  risk 
widening inequalities in access to training.  

reduce 

These 

gaps 

and 

across 

Further  action  is  needed  to  boost  adult 
learning.  Croatia  has  taken  significant  steps, 
notably with the voucher scheme and reforms 
that  strengthen  skills  intelligence  and  training 
design,  supported  by  the  RRP  and  the  ESF+. 
Nevertheless,  the  current  system  still  faces 
constraints: the  training  offer  remains  uneven 
geographically 
occupations; 
employer  involvement  in  providing  and/or  co-
financing  training  remains  limited;  and  there 
are  still  access  barriers  for  groups  most  in 
need  of  support.  Further  action  to expand the 
scope  of  the  offer,  strengthen  guidance  and 
outreach  and  secure  sustainable  funding, 
including  by  mobilising  private  contributions, 
would  help  the  plan  to  gradually  move  to 
individual 
into 
higher  rates  of  participation  and  greater 
labour market relevance (Annex 11 and 13).  

learning  accounts  translate 

Social protection: tackling poverty 
and vulnerability 

increasing 

reducing  poverty  by 

Inadequate  social  protection  contributes 
to  persistent  risks  of  monetary  poverty. 
This challenge is addressed by the 2025 CSRs 
on 
the 
adequacy  of  social  benefits.  In  2025,  social 
transfers  (excluding  pensions)  only  reduced 
poverty by  23.5%,  one  of the lowest  levels  in 
the  EU  and  well  below  the  EU  average  of 
33.2%.  Croatia's  low  levels  and  impacts  of 
social  benefits  hinder  progress  towards  the 
2030  poverty  reduction  target  and  leave 
vulnerable  groups, 
including  older  people, 
people with disabilities, lower levels of income 
and  rural  communities  without  adequate 
support.  High  rates  of  poverty  among  these 

(32)  Eurostat:  Adult  Education  Survey  -  participation  in 
education  and  training  excluding  guided  on-the-job 
training. 

24 

groups highlight the need for a more effective 
social  protection  system  that  can  reduce 
inequalities and tackle the multiple aspects of 
poverty, including housing (Annex 16). 

access 

transfers  are 

Croatia  has  initiated  reforms  to  bolster 
social  welfare.  Changes  were  supported  by 
the RRP and European Social Fund Plus (ESF+) 
and  include  revised  benefits  structures,  better 
targeting  and  accessibility  and  new  in-kind 
benefits.  However,  the  system  still  faces 
significant  constraints.  The  efficiency  and 
limited, 
impact  of  social 
spending  remains  below  EU  standards,  and 
in 
regional 
persist, 
disparities 
particularly  affecting 
rural  areas.  Action 
underway to increase the adequacy of benefits 
through  incremental  reforms  is  promising  but 
further  measures  are  needed  to  extend 
coverage  and  increase  support.  A  more  far-
reaching  and  comprehensive  approach  based 
on strategic and clear policy objectives, better 
targeting  of  resources  and  fuller  stakeholder 
participation  would  help  Croatia  lift  more 
people  out  of  poverty.  This  approach  should 
focus on improving the efficiency and efficacy 
of  the  social  protection  system,  increasing 
adequacy  and  improving  governance,  base 
setting,  targeting  and  coverage  of  social 
benefits, including benefits in kind. 

Pensions: improving adequacy and 
ensuring sustainability 

Pension  adequacy  in  Croatia  remains  a 
challenge. This is evidenced by a persistently 
low aggregate replacement ratio (ARR) (0.37 in 
2025  compared  to  the  EU's  0.6)  which 
contributes  to  a  high  risk  of  poverty  among 
pensioners  (36.3%  in  2025  vs  EU's  15.4%  in 
2024) and high old-age poverty rates. Factors 
such  as  short  working  lives  and  limited  years 
of pension contribution are at the root of these 
issues.  Future  pension  adequacy  projections 
also raise concerns, with a substantial decline 
expected  by  2062.  The  2025  country-specific 
recommendations  called  for  action  to  reduce 
poverty  and  income  inequality  by  increasing 
the  adequacy  of  pensions,  while  maintaining 
to  promote 
fiscal  sustainability.  Policies 
longer  working 
healthy  ageing, 

incentivise 

 
 
lives, and tighten early retirement options are 
important 
labour  market 
participation  and  overall  employment  rates 
among older workers. 

in  enhancing 

in 

The 

Pension 

incentives 
2026 

the  minimum  pension, 

The  effects  of  recent  reforms  are  yet  to 
be  seen.  Croatia  has  implemented  reforms 
including  an 
with  support  from  the  RRP 
tax 
increase 
for  deferred 
reductions  and 
retirement. 
Law 
Amendment brought in further adjustments. It 
changed 
the  minimum  pension, 
raised 
indexation  methods  and  provided  annual 
supplements  linked  to  years  of  insurance. 
While  it  is  too  early  to  assess  the  full  impact 
of  these  gradual  adjustments,  a  EUROMOD 
simulation indicates a reduction in the rate of 
pensioners  at  risk  of  poverty  by  3.3pp 
compared  with  the  baseline  rate  (33). 
In 
Croatia, participation in supplementary pension 
schemes  is  significant,  offering  potential  to 
boost  and  diversify  retirement  income  (see 
Annex 2). 

Long-term care (LTC): improving 
access and affordability 

significant 

availability 

Access  to  long-term  care  is  undermined 
by 
and 
affordability  challenges.  The  2025  CSRs 
identified  the  need  to  improve  access  to 
formal  home-  and  community-based  long-
term care. Public spending on LTC is one of the 
lowest in the EU and predominantly geared to 
supporting  residential  care.  Community-based 
and  homecare  services  remain  inadequate. 
The  percentage  of  dependants  aged  65  and 
over and receiving home or residential care is 
strikingly  low  compared  with  the  EU  average, 
reflecting high levels of unmet care needs and 
financial  barriers  affecting  access.  26.4% 
people  report  great  difficulties  in  affording 
homecare (against 8.2% on average in the EU 
in  2024).  Out-of-pocket  expenses  for  LTC  are 
notably  high,  exacerbating  poverty  risks  for 
people  with  severe  needs.  Croatia  has  high 

(33)  Estimations  performed  by  the  European  Commission, 
Joint Research Centre, based on EUROMOD version J2.0. 

25 

rates  of  older  people  with  unmet  care  needs, 
as  a  result  of  financial  constraints  and 
affordability issues. 

social  plans 

Implementation  of  the  operational  plan 
for  LTC  faces  challenges.  The  LTC 
operational  plan  adopted  in  2025  covers 
workforce  planning,  governance  frameworks 
and implementation of LTC services supported 
by  RRP,  ESF+  and  ERDF  funds.  Counties  have 
adopted 
to  guide  needs 
assessments  and  regional  development  of 
community-based  services.  Tackling  structural 
policy  challenges  in  governance,  pricing  and 
access and incorporating strategic approaches 
with social economy actors, could significantly 
improve  effectiveness.  Nonetheless,  Croatia's 
LTC  system 
faces  workforce  challenges, 
including low staffing ratios and poor working 
conditions.  Overcoming  these  challenges  is 
essential  to  improving  personal  assistance, 
care and social services. 

Croatia’s health system continues 
to grapple with substantial 
challenges 

over 

Reducing  preventable  mortality 
is  a 
pressing concern. Preventable mortality rate 
was  high  in  2023  and  has  only  slightly 
improved  compared  to  10  years  ago.    The 
expenditure  on  prevention  as  share  of  total 
current health expenditure was 4.8% in 2023, 
remaining  slightly  above  the  EU  average 
(3.7%).  Treatable  mortality  is  higher  than  the 
EU  average (126.1 per  100 000  population in 
improvement 
2023)  with  only  a 
achieved 
years. 
10 
the 
Cardiovascular  mortality,  cancer,  and  suicide 
rates  are  one  of  the  highest  in  the  EU. 
According to 2022 data, Croatia has one of the 
highest  daily  smoking  rates  (22%  of  adults, 
above  the  EU  average),  the  highest  mortality 
rates  due  to  air  pollution  (6%  of  all  deaths 
attributed  to  air  pollution),  and  one  of  the 
lowest 
levels  of  physical  activity  outside 
working  time  (57%  of  the  population  never 
practice physical activity, vs the EU average of 
31.6%).  Croatia  has  taken  some  measures 
under  the  RRP  to  improve  diagnosis  and 

limited 
last 

 
 
and 

procuring 

treatability,  for  example  by  setting  up  a 
national  oncology  network,  an  oncology 
database 
cardiological 
equipment. Further measures should  focus on 
improving  treatability,  strengthening  disease 
prevention and promoting healthy lifestyles to 
of 
tackle 
non-
prevalence 
high 
communicable  diseases.  This 
could  be 
complemented  by  closer  cooperation  with 
other  parts  of  the  public  administration  to 
work with individuals before there is a need to 
seek medical care.  

the 

Shortages  of  healthcare  professionals 
persist,  as  do  regional  disparities.  Croatia 
faces  a  shortage  of  healthcare  professionals 
and  has  a  significant  urban-rural  divide.  The 
number  of  practising  nurses  is  one  of  the 
lowest in the EU,  as is the number of general 
practitioners.  Moreover,  with  42%  of  nurses 
aged 45 or older (2023) generational turnover 
needs to be monitored. The overall shortage is 
compounded by regional disparities, with more 
acute  shortages  in  rural  and  remote  areas 
(Annex 18). The distance to facilities in remote 
areas (21.8 km vs 14.4 km EU average) is the 
main  reason  for  unmet  medical  needs  in 
Croatia.  Additionally,  the  challenge  to  meet 
medical  needs  is  particularly  acute  for  people 
living  below  the  poverty  threshold.  These 
challenges  would  require  building  on  the 
measures  that  have  been  implemented  under 
the RRP and ERDF, such as the procurement of 
mobile  caravan  and  boat  pharmacies,  setting 
up  helicopter  emergency  medical  care  and 
healthcare 
specialised 
professionals  in  primary  care  and  emergency 
medicine. Further action would also be needed 
to  expand  the  healthcare  labour  force  and 
increase  Croatia's  capacity  to  deliver  quality 
healthcare, in particular in underserved areas.  

training 

for 

Croatia is continuing a strong drive for e-
health,  but  gaps  remain.  Croatia  has  taken 
steps under the RRP and ERDF  to harness the 
potential  of  e-health  solutions,  bringing  in 
measures  such  as 
telemedical  services, 
emergency 
Telecordis, 
including 
services,  and  a  pharmacy  chronic  patient 
monitoring  system.  It  has  begun  developing 
electronic  clinical  guidelines  (eGuidelines)  and 
strengthening 
internal  referral  system 
(eReferral).  Despite  these  steps,  e-health 
development  lags  behind  other  EU  countries, 

remote 

its 

with  significant  regional  and  socio-economic 
disparities in  access to  digital  health  services. 
The  proportion  of  individuals  using  online 
health  services  was  one  of  the  lowest  in  the 
EU  in  2024.  Further  measures  are  needed  to 
improve 
services, 
to 
particularly  for  people  with  lower  levels  of 
education  and  people  in  hard-to-reach  areas. 
Further  action  is  also  needed  to  achieve  a 
more effective use of the health workforce by 
using digital technologies. 

e-health 

access 

26 

 
 
 
KEY FINDINGS 

In  areas  covered  by  existing  country-
specific  recommendations,  Croatia  would 
benefit from:  

• 

improving  the  effectiveness  of  the 
research  and  innovation  system  and 
innovation  and 
increasing  business 
reducing 
uptake 
technology 
research 
of 
fragmentation 
institutions,  strengthening  coordination  of 
public R&I policies and funding instruments 
and by promoting digitalisation and private-
sector investment in R&D; 

by 
public 

•  extending  access  to  growth  financing 
for  innovative  firms,  particularly  SMEs 
capital 
and 
markets  and 
role  of 
the 
institutional and retail investors; 

start-ups,  by  deepening 

increasing 

•  reducing the administrative burden for 
businesses,  by  streamlining  permitting 
improving 
and 
licensing 
public 
interoperability 
digital 
administration 
systems  and  boosting 
administrative capacity and cooperation; 

procedures, 
of 

• 

improving  the  efficiency  of  the  local 
public  administration  by  encouraging 
mergers  of  municipalities  and  tackling 
capacity 
service 
constraints  affecting 
investment  management, 
delivery  and 
especially in less developed areas; 

•  addressing  the  bottlenecks 

in  grid 
capacity  and  permitting  to  reduce 
wholesale electricity prices by investing 
in 
increasing  system 
flexibility  and  improving  grid  connections 
and permitting for renewable energy; 

the  power  grid, 

• 

improving  energy  efficiency  and  the 
by 
of 
decarbonisation 
increasing the  use  of  financial  instruments 

buildings 

27 

for  renovation  and  targeting  grants  to  the 
most vulnerable households; 

•  enhancing  sustainable  mobility,  by 
accelerating  the  shift  to  electric  road 
transport,  phasing  out  fossil  fuel  subsidies 
and  expanding 
rail  and  urban  public 
transport systems; 

•  promoting  human  capital  development 
by boosting the capacity and quality of 
the  education  system,  by  expanding 
early  childhood  education  and  care  (ECEC), 
including 
regions, 
remedying  teacher  shortages,  particularly 
in  ECEC  and  STEM,  and  continuing 
improving 
education  reforms  aimed  at 
basic  skills  and  increasing  the  tertiary 
attainment rate; 

less  developed 

in 

•  strengthening 

labour-market 
the 
relevance  of  education  and  training 
and  expanding  lifelong  learning,  by 
improving  skills 
intelligence,  expanding 
work-based learning, stepping up employer 
engagement and increasing participation in 
adult  learning  and  reskilling  opportunities, 
particularly  for  low-skilled  workers,  older 
people and residents of rural areas; 

• 

the 

particularly 

increasing 
labour  market 
participation rate of underrepresented 
groups, 
with 
disabilities and other vulnerable groups, by 
better 
targeting  and  effectiveness  of 
activation  policies  and  strengthening  links 
between  activation  measures  and  related 
upskilling pathways; 

persons 

•  further reducing poverty by raising the 
adequacy  of  the  minimum 
income 
scheme  and  better  targeting  social 
benefits,  in  particular  to  older  people, 
rural 
people 
communities and  low-income  households, 
to  affordable 
while 

improving  access 

disabilities, 

with 

 
 
•  supporting 

the 

development 

of 
industry to help diversify the economy, 
by  designing  and  implementing  a  strategy 
to  increase  the  productivity  and  the  added 
sector, 
value  of 
including clean technology manufacturing; 

the  manufacturing 

•  advancing 

on 

industrial 

de-
carbonisation  by  removing  barriers  to 
investments 
and 
promoting 
low-carbon 
industrial products;  

decarbonisation 

demand 

for 

in 

•  making  infrastructure  more  climate-
priority 
by 
accelerating 
resilient 
increasing 
investments  and 
adaptation 
insurance coverage to reduce the economic 
costs and fiscal risks of disasters; 

• 

economy 

improving  resource  efficiency  and 
circular 
performance, 
including  by  improving  infrastructure  and 
providing  incentives  to  use  secondary  raw 
materials; 

•  modernising  water  infrastructure  and 
reducing  water  losses,  while  improving 
compliance  with  EU  wastewater  treatment 
requirements; 

•  tackling 

regional 

disparities 

in 
productivity 
innovation 
and 
capabilities  by  accelerating  the  industrial 
transition  with  a  focus  on  regional  (smart 
specialisation)  priority  niches  to  diversify 
the economy. 

community-based long-term care, including 
services, tackling  workforce 
homecare 
shortages 
working 
and 
conditions; 

improving 

• 

improving  access  to  healthcare  and 
outcomes  by  increasing  the  geographical 
distribution of health workers and facilities, 
in 
to  boost 
in  particular 
underserved  areas,  advancing  on  e-health, 
stepping  up  prevention  and 
improving 
treatment  of  chronic  conditions,  including 
by promoting healthy lifestyles. 

capacity 

In other areas, Croatia would benefit from:  

• 

• 

• 

improving the quality and efficiency of 
public  spending  by  extending  the  scope 
and  transparency  of  spending  reviews  and 
into 
systematically 
integrating 
budgetary  processes,  including  at 
local 
level; 

them 

the  effectiveness  and 
improving 
progressivity  of  the  tax  system  by 
scaling back ineffective tax expenditure and 
improving the design of property taxes; 

improving  housing  affordability  by 
tackling  structural  supply  constraints  and 
their  regional  dimension,  and  putting  in 
place  a  national  monitoring  framework  for 
social housing;  

in 

•  tackling  the  persistent  issue  of  late 
business-to-business 
payments 
transactions  by  monitoring  business-to-
business  payment  performance,  fostering 
mediation and developing standard clauses 
that can be used in contracts;  

• 

improving the efficiency of the justice 
system,  in  particular  the  duration  of  civil 
proceedings, 
and 
including 
case 
through 
management reforms; 

commercial 

possible 

court 

•  closing  the  remaining  gaps  in  digital 
and connectivity infrastructure, notably 
in  rural  areas  and  islands,  in  very-high-
capacity  networks  and  mid-band  5G 
deployment  to  support  digitalisation  and 
business development across regions; 

28 

 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

A1.  CSR implementation 

Fiscal 

A2.  Fiscal developments and debt sustainability 

A3.  Taxation 

Productivity 

A4. 

Innovation to business 

A5.  Single market and industry 

A6.  Savings, investment and access to finance 

A7.  Effective institutional framework 

Sustainability 

A8. 

Industry decarbonisation, circularity and climate mitigation 

A9.  Affordable energy transition 

A10.  Climate adaptation, preparedness and environment 

Fairness 

A11.  Labour market 

A12.  Social policies 

A13.  Education and skills 

A14.  Social scoreboard 

A15.  Health and health systems 

A16.  Housing 

Horizontal 

A17.  Sustainable development goals 

A18.  Competitive regions 

A19.  Transport 

LIST OF TABLES 

A1.1. 
A2.1. 
A2.2. 
A2.3. 
A3.1. 
A4.1. 

2025 CSR Implementation and Commission Assessment 
Fiscal governance database indicators and public accounting maturity 
Projected change in age-related expenditure in 2025-2040 and 2025-2070 
Supplementary pension schemes - Scope for expansion 
Taxation Indicators 
Key innovation indicators 

31 

34 

42 

42 

47 

51 

51 

57 

67 

75 

80 

80 

89 

96 

105 

105 

110 

114 

119 

120 

124 

130 

130 

133 

139 

34 
45 
45 
46 
48 
56 

 
 
 
Single Market and Industry 
Savings and Investments Union summary diagnostic 
Financial sector indicators 
Croatia. Selected indicators on better regulation practices for primary legislation 
Digital Decade key performance indicators: availability of digital public services 
Key clean industry and climate mitigation indicators: Croatia 

A5.1. 
A6.1. 
A6.2. 
A7.1. 
A7.2. 
A8.1. 
A10.1.  Key Adaptation Indicators 
A14.1.  Social Scoreboard for Croatia 
A15.1.  Key health indicators 
A18.1.  Main development trends, challenges and the concentration of resources 
A18.2.  Key regional indicators (at NUTS 2 level) for Croatia 
A19.1.  ERTMS deployment in Croatia. 

LIST OF GRAPHS 

A2.1. 
A2.2. 
A3.1. 
A3.2. 
A4.1. 
A4.2. 

Public investment evolution and structure (% of GDP) 
Primary spending evolution (% of GDP) and compositional change 
Tax revenue by economic function in 2024, HR (outer ring) and EU-27 (inner ring) 
Tax wedge for single and second earners as a % of total labour costs, 2025 
Share of publications in the top 10% most-cited publications worldwide, 2012 and 2022. 
Patent applications filed under the Patent Cooperation Treaty per billion of GDP (in purchasing power standards / PPS EUR) 
in 2022 

Composition of non-financial corporations’ funding 
Capital markets and financial intermediaries 
Composition of households’ financial assets 
Trust in the justice system, regional / local authorities and in government 

Greenhouse gas emissions in the effort sharing sectors, 2005, 2023, and 2024 
Electricity and gas prices for household and non-household consumers, first half of 2025 
Low-carbon electricity generation vs. electricity wholesale prices, 2025 
Croatia’s installed renewable capacity vs electricity generation mix 

A5.1.  Manufacturing industry production: total and selected sector, index (2021=100), 2015-2024 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2.  Most time-consuming aspects of service delivery 
A8.1. 
A9.1. 
A9.2. 
A9.3. 
A11.1.  Key rates: activity, employment, unemployment, long-term unemployment, youth unemployment, NEET 
A11.2.  Employment by type (permanent, temporary, self-employed), year-on-year changes 
A12.1.  Population at risk of poverty or social exclusion (AROPE) 
A13.1.  Teachers planning to leave the profession within five years (not retiring ones) in HR vs EU 
A15.1.  Treatable mortality 
A15.2.  Healthcare infrastructure investment by year 
A16.1.  House prices, rents and price-to-income evolution in HR and EU27 since 2005 
A16.2.  House supply indicators in HR since 2005 
A16.3.  Housing affordability selected indicators 
A17.1.  Progress towards the SDGs in Croatia 
A18.1.  Labour productivity growth (2024) and labour productivity (2024), Croatia (NUTS 2 regions) 
A19.1.  Croatia's road fatalities per million, 2024 

A1.  CSR implementation 

Fiscal 

A2.  Fiscal developments and debt sustainability 

A3.  Taxation 

32 

65 
67 
74 
76 
77 
87 
104 
119 
122 
134 
137 
139 

42 
43 
47 
49 
51 

53 
64 
68 
68 
69 
75 
76 
82 
90 
90 
93 
105 
108 
112 
115 
120 
121 
124 
125 
128 
130 
133 
141 

34 

42 

42 

47 

 
 
 
51 

51 

57 

67 

75 

80 

80 

89 

96 

105 

105 

110 

114 

119 

120 

124 

130 

130 

133 

139 

Productivity 

A4. 

Innovation to business 

A5.  Single market and industry 

A6.  Savings, investment and access to finance 

A7.  Effective institutional framework 

Sustainability 

A8. 

Industry decarbonisation, circularity and climate mitigation 

A9.  Affordable energy transition 

A10.  Climate adaptation, preparedness and environment 

Fairness 

A11.  Labour market 

A12.  Social policies 

A13.  Education and skills 

A14.  Social scoreboard 

A15.  Health and health systems 

A16.  Housing 

Horizontal 

A17.  Sustainable development goals 

A18.  Competitive regions 

A19.  Transport 

33 

 
 
 
 
ANNEX 1: CSR IMPLEMENTATION  

Table A1.1:  2025 CSR Implementation and Commission Assessment 

(Continued on the next page) 

34 

Croatia faces challenges in a wide range of policy areas, as identified in the 2025 country-specific recommendations (CSRs). Croatia was recommended, among other things, to address the fragmentation of public research institutes and universities, boost access to finance for business and promote capital markets, simplify regulatory procedures, reinforce the efficiency of public administration, address high energy prices, reduce reliance on fossil fuels and address labour and skills shortages. The Commission has assessed the degree of implementation of the 2025 CSRs considering the policy action taken by Croatia to date*. To do so, the Commission has taken into account the information provided by Croatia in its Annual Progress Report as well as other information sources. This annex provides summary information on the policy actions taken or planned by Croatia for each CSR. More detailed information on these actions is included in the relevant chapters and other annexes of the report. *CSR 2 is not assessed in CeSaR. 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, 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. Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  1.1 Reinforce overall defence and security spending and readiness while ensuring debt sustainability in line with the European Council conclusions of 6 March 2025. Total general government defence expenditure in 2026 is projected at 1.6% of GDP, corresponding to an increase of 0.2 ppt. compared to 2024.  Croatia national defence investment plan financed by SAFE loans was endorsed by the European Commission on 15 January 2025, securing 1.7 billion EUR loan financing for the next years. Total general government defence expenditure in 2027 is projected at 1.7% of GDP, corresponding to an increase of 0.3 ppt. compared to 2024. Substantial Progress 1.2 Adhere to the maximum growth rates of net expenditure recommended by the Council on 21 January 2025, while making use of the allowance under the national escape clause for higher defence expenditure.  Cumulated deviation in 2025 amounted to 1.4% of GDP and is only partially explained by the NEC flexibility (0.5 pps. of GDP).  Cumulated deviation in 2026 projected at 1.6% of GDP and is only partially explained by the NEC flexibility (0.6 pps. of GDP)   No Progress 3.1 Address the fragmentation of public research institutes and universities by setting goals in performance agreements that promote consolidation, collaboration, and, where relevant, mergers, backed by financial incentives to boost scientific output and public return on R&D investment. Foster investments in research and innovation. Updated the R&D tax incentive framework, signed programme agreements with 65% of universities and research institutes, and awarded 3,354 STEM/ICT grants to boost graduate employability and mobility. Mapped and reported participation in international research infrastructures (May 2025) and launched a Collaborative Scientific Research call (June 2025). Through RRF, in 2025, MSEY has launched 7 Calls for proposals for various infrastructures, including key projets such as MARBLE and GEOLAB, using various sources of funding including the DIGIT programme under the World bank. Through RRF, funding for institutional research projects was implemented through programme Study launched on mergers of institutes/polytechnics and RRP-driven consolidations are underway, mainly targeting administrative efficiency. The study provides a comprehensive, evidence-based analysis of structural inefficiencies within the system of public scientific institutes and polytechnics, identifying fragmentation, overlaps in activities, and opportunities for consolidation. However, the study does not cover universities and faculties.     New ESIF RDI calls are planned, as well as further projects to support synergies under the World Bank DIGIT programme.    Limited Progress  
 
 
 
      
 
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35 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  agreements with research organisations. In total, EUR 127.38 million was allocated to support 1,421 institutional research projects across public research institutes, polytechnics, and universities. This funding enabled the strengthening of internal research capacities and supported direct scientific and research activities through competitively awarded institutional calls.   3.2 Boost access to diverse sources of financing for businesses and promote capital markets by further facilitating the participation of retail investors, including in the bond market, addressing barriers to listing, and strengthening corporate governance to improve the attractiveness of the stock market. Croatia adopted the Capital Market Strategic Framework and Action Plan under the RRP. Capital market activity picked up in 2025 with three IPOs raising EUR 214 million. Regional market integration and expansion advanced through a cooperation agreement (MoU) between Bulgaria, Hungary, Poland, Romania, Slovakia, Slovenia, North Macedonia, and Croatia, following on the MoU among stock exchanges signed earlier, and a 2026 TSI project to deepen CSEE market connectivity. Notable measures based on the Strategy include easing regulatory burden for investment funds, regulatory amendments targeted at upgrading the market classification, enhancing the standards of corporate governance for state-owned enterprises, and development of a platform for securities lending. Hanfa and the Ministry of Finance launched “PutNaTržište” (Oct 2025), a sandbox to simulate capital-market financing. The first Action Plan foreseesmeasures to boost capital market activity such as an IPO fund, VC support, digitalisation, market-integration platforms, promotion of bonds/ETFs, and stronger financial literacy and investor participation. Measures announced in the short-term include a cooperation agreement between financial market regulators on integration of capital markets of Southeast European countries, a cooperation agreement between Croatian and Slovenian depositories, introduction of savings and investment accounts, amendments to the Capital Market Act to upgrade the capital market classification and establishment of an IPO fund that will invest in companies in the pre-IPO phase and activities to support the SME growth market managed by the Zagreb Stock Exchange. Some Progress  3.3 Further simplify regulation, improve regulatory tools and reduce administrative burden through digitalisation to facilitate business creation and expansion. Croatia advanced digitalisation by upgrading the START system, digitalising key administrative processes, and introducing e-invoicing and online VAT accounting. Single Register of Entrepreneurial Infrastructure (e-JRPI), a publicly accessible database of entrepreneurial zones and entrepreneurial support institutions, has been established. In 2025, reforms reduced administrative burdens, simplified over 50 regulatory requirements for professional services (exceeding 300 measures in the Announced:  Draft 2026–2035 Strategy for managing state-owned assets prepared, alongside updated high-value datasets and continued open-data rollout (2,900+ datasets). Monitoring Operations Center established and national deployment of the European Digital Identity Wallet initiated. The implementation of the Single Digital Gateway Regulation to ensure full online availability of public services for national and cross-border users is in progress, as authorities are progressively Some Progress  
 
 
      
 
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36 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  multi-year reform effort), delivered in excess of EUR 200 million in administrative relief for enterprises based on the implementation of 43 measures from the 5th Action Plan for administrative burden reduction and promoted private investment. Additional tourism IT tools were deployed to further ease business administration. Strategy for Assessing the Economic Impact of Regulations on the small and medium-sized enterprise (SME) sector by the Croatian Government and the accompanying Action Plan adopted and SME Impact Assessment Test digitalised (SME Test), improving implementation of regulatory impact assessment. A simplified regulatory impact assessment procedure has been introduced through the new Law on Better Regulation Policy Instruments. The e-Consultations portal has been extended to the local level. being connected to the Once-Only Technical System (OOTS). Further reduction in administrative burden cost through the implementation of the remaining measures in the 5th Action Plan for administrative burden reduction, to reach overall EUR 345 million in savings. Projects launched to analyse life-event public services and digitalise citizens’ personal status and state registers. In 2025 Croatia announced the adoption of the National Industrial Development Plan (2027–2035) as a basis for a coherent set of reforms and investments to boost industrial competitiveness and decarbonisation.    3.4 Reinforce the capacity and efficiency of the public administration at the local level by merging functions and/or municipalities. Under the RRP (T175, 8th PR), Croatia created a support system to facilitate mergers of local government units (LGUs), combining financial incentives with an upgraded IT tool. The system analyses merger potential across sectors (e.g. water, education, administration) and recommends suitable partners, providing guidance for informed decisions. Furthermore, there has been progress on addressing the fragmentation of local government units in terms of merging functions with over 260 such mergers reported, but no progress on actual mergers.    Some Progress 4.1 Address high electricity prices for businesses by accelerating deployment and grid connection of renewable energy projects.  2025 amendments to the Renewable Energy Sources and High Efficiency Cogeneration Act (Official Gazette No 78/25) to support the RRP reform and ease grid-connection limits for small PV installations; grid-connection requests at distribution level digitalised. Under the RRP, a new renewable self-consumption system was introduced (M406) and an Full transposition of Renewable Energy Directive III (Directive (EU) 2023/2413) is planned for 2026, aiming to clarify system development, RES integration and market development.  Some Progress   
 
 
      
 
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37 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  additional 1,500 MW of RES capacity was connected to the grid (T42). On 27 April 2026, the Croatian energy regulatory authority adopted updated grid connection fees, which could help unblock 3.5 GW of RES projects that were blocked for 3 years.  4.2 Further upgrade electricity transmission and distribution grids, invest in electricity storage and advance the roll-out of smart meters.  2025 amendments to the Renewable Energy Sources and High Efficiency Cogeneration Act (Official Gazette No 78/25) eased investment in electricity storage, notably for hybrid RES-plus-storage projects, and requires planning of designated network-storage areas; a Modernisation Fund grant supports a 60 MW/120 MWh battery project. Under the RRP, 300 km of high-voltage lines were upgraded (T41) and 40,000 smart meters installed (T43). A revised 10 Year Network Development Plan (2026–2035), approved in 2026, sets the long- term vision for grid upgrades. Under the RRP, measures include installing 100 MWh of battery storage, deploying 60,000 additional smart meters, and upgrading 250 km of high-voltage lines. Some Progress 4.3 Streamline permitting, including for energy communities, and simplify the procedures for installing solar photovoltaic facilities in multi-apartment buildings. 2025 amendments to the Renewable Energy Sources and High Efficiency Cogeneration Act (Official Gazette No 78/25) clarify the framework for energy communities, aiming to reduce administrative burden, subject to implementation. Spatial planning rules were amended to simplify installation of certain energy equipment, including floating solar. As of January 1st, 2026, the new Building Act and the new Spatial Planning Act (Official Gazette No 155/25) came into force, which, together form a package of regulations governing issuance of all the permits. The new Spatial Planning Act improves the existing Spatial Planning Information System, which is publicly available to project designers, investors and citizens themselves. Through the upgrading of this system and the development of new application solutions integrated into it, the spatial planning process is largely digitalised which should accelerate and simplify permitting processes. The new Building Act has Transposition of Renewable Energy Directive III (Directive (EU) 2023/2413)) and full transposition of Directive (EU) 2024/1711 should speed up permitting and deployment via acceleration zones and a digital one-stop shop. Croatia plans to support energy communities through its Social Climate Plan, including 10 pilot projects and an improved regulatory framework. Some Progress  
 
 
      
 
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Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  simplified the procedure for issuing construction permits for apartment buildings. Solar photovoltaic panels can still be installed on buildings without obtaining any permits. 4.4 Accelerate the implementation of energy efficiency measures, especially in residential buildings and reduce the dependence on fossil fuels in the heating sector, including by accelerating the use of efficient and green solutions, such as heat pumps.  From 1 January 2026, Croatia enacted a new Construction Act focused on sustainability and energy efficiency, alongside an Energy Efficiency Act with stricter reduction targets and a mandatory “energy efficiency first” principle.  The Energy Efficiency in Buildings Act sets the goal for all buildings to become zero-emission by 2050. RRP and REPowerEU support large-scale energy renovation of public, cultural, and multi-apartment buildings, alongside installation of renewable energy systems. Measures also include adopting at least 60 green urban renewal strategies and completing 20 pilot projects to implement them. In addition, announced project of the New National Children’s Hospital in Zagreb (Blato) which is going to be first Carbon Zero Neutral hospital in Europe. Under the RRF Croatia has allocated €51 million for the development of geothermal potential for future heating systems, with an additional €30 million provided through the European Regional Development Fund (ERDF). Four locations in Croatia will be prepared to switch their district heating systems to new, renewable geothermal sources. The Support Program Decarbonization and Modernization of District Heating Systems has been developed and approved. The Call for Proposals MF-2025-4-1 Decarbonization and Modernization of District Heating Systems EUR 80 million is planned to be published. Some Progress 4.5 Reduce reliance on fossil fuels and energy demand in the transport sector by promoting sustainable urban transport, rail and the electrification of road transport, including by reviewing targeted taxation incentives. Under the RRP, Croatia upgraded key rail infrastructure, introduced greener airport operations, produced battery-train prototypes, delivered 30 new trams, and completed a study for implementing the Hydrogen Strategy to 2050. Additional steps include funding for zero-emission rail (EUR 56 million), procurement of 10 more trams for Osijek (July 2025 grant), and 20 more trams for Zagreb (December 2025 grant) finalising ongoing tram infrastructure investments, and legislation to deploy alternative fuel Under the RRP, Croatia is deploying cleaner transport through 173 alternative-fuel buses and co-financing 2,000 electric/hydrogen vehicles. Two €90 million Modernisation Fund programmes will further support high-mileage commercial fleets (one call will co-finance the procurement of taxis and delivery services and car sharing, and the second call will be a financial instrument through HBOR and leasing companies) to decarbonise. Major rail upgrade (Križevci–Koprivnica–Botovo, 42.6 km) is under construction with €241 Some Progress  
 
 
      
 
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Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  infrastructure such as EV and hydrogen refuelling stations. As part of the EIB loan in 2025, contracts were signed for the purchase of 4 battery trains (for the Split and Istria areas), 4 battery-powered trains (to connect Krapina and Bjelovar with Zagreb) and 2 charging stations (Lupoglav and Velika).   million CEF support, due for completion in H1 2026. As part of the Modernization Fund, a procedure is underway related to the purchase of 6 battery-powered trains and one charging station for charging battery trains and a photovoltaic power plant with energy storage at the Kotoriba station. 4.6 Take concrete steps to phase out fossil fuel subsidies in particular in the transport sector. Regulated price caps for gasoline and diesel were abolished in July 2025 but were reimposed in March 2026 (from 23 March only at service stations off motorways) in view of the increased energy prices due in the Middle East conflict.  Gas price support has been scaled back in 2025, but further phase-out was postponed until at least October 2026.  No Progress 4.7 Address the recent decline in the share of renewables in transport by revising the rules on biofuels. Decision effectively abolishing penalties for not mixing biofuels into fuels sold on the market has expired in December 2025 and has not been extended. Amendments to the National Renewable Energy Action Plan and relevant secondary legislation has been addressed in 2025 to update sustainability criteria, increase the allowable share of advanced and second-generation biofuels, and ensure compliance with EU RED II targets. Croatia will continue supporting clean vehicle uptake and alternative fuel infrastructure beyond the RRP. RRP measures boosting renewables in transport include battery-train prototypes, 30 new trams, 173 clean buses, 2,000 co-financed zero-/low-emission vehicles, and a hydrogen-powered unit for electric locomotives (HERMES). Full Implementation  5.1 Reduce labour and skills shortages by removing obstacles to labour force participation, Amendments to the Aliens Act extended work permits to three years and strengthened worker protections, alongside integration measures like language vouchers and targeted employment support. Amendments to the Pension Insurance Act enabled pensioners to be employed full time while receiving 50% of pension. Croatia continues to implement the measures to encourage the return of the Croatian emigrant workers. Under the RRP, the voucher scheme and reforms to Employment Service processes continued, focusing on vulnerable groups and helping address labour shortages and participation gaps.  Some Progress 5.2 ensuring stronger educational Continued support to vocational Under the RRP a total of 1318 Limited  
 
 
      
 
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40 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  foundations at every level, in particular for basic and science, technology, engineering and mathematics (STEM) skills, education, including new-curricula training (Feb 2025) and outreach visits to all 300 vocational schools by July 2025. Kindergarten infrastructure expanded through 43 grants worth €18.5 million for construction and upgrades. Continued support for scholarships for STEM programmes financed from national budget. classrooms are planned to be finalised until the end of August 2026 to enable the transition to single-shift in primary schools. Additional 52 classrooms should be constructed in general programme secondary schools. Progress  5.3 strengthening upskilling and reskilling, Croatia continues providing Croatian-language vouchers for non-EU workers. Under the RRP, an adult education programme on renovation skills was developed and the general voucher scheme continues. RRP targets include at least 500 participants completing adult training in post-earthquake and energy renovation (M360). A new master’s programme on renovation and energy efficiency is to be launched by the end of the RRP (M401). Some Progress 5.4 better targeting active labour market policies to vulnerable groups, The Job+ Programme continues to support labour-market integration of vulnerable groups. RRP measures aim to assist at least 5,000 beneficiaries through new active labour market policies and improved support services, backed by upgraded Employment Service tools for profiling, job matching, and monitoring.  Some Progress 5.5 and strengthening efforts to attract, develop and retain talent. See subpart 1 and 3  In addition, a Memorandum of Cooperation on labour markets with the Philippines entered into force in February 2025, aimed at attracting qualified workers.    Some Progress 5.6 Strengthen labour market policies and their coordination with social services.  See subpart 1, 3 and 4 By the end of 2025, a total of 679 cooperation agreements between the Centres for Career Information and Counselling (CISOK) and various partners  had been signed, of which 212 new agreements were signed between 1 January 2024 and 31 December 2025.  Some Progress 5.7 Reduce poverty and income inequality by increasing the adequacy of social benefits, including pensions, while maintaining fiscal sustainability. Under the RRP, Croatia integrated social benefits through a new normative framework, a national web application, and strengthened capacity for community-based services. Separately, February 2025 amendments to the Maternity and Parental Benefits Act increased parental support, doubled the newborn allowance, and extended paternity leave. Pension reform under the RRP (#M300), entered into force in July Two action plans are currently being drafted for Government adoption in 2026: one on poverty and social exclusion and one on equalisation of opportunities for persons with disabilities. Some Progress  
 
 
      
 
Table (continued) 

Source: Croatia’s reporting and Commission assessment  

41 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  2025, with several measures increasing pension adequacy, but also encouraging longer work. 5.8 Improve access to formal home- and community-based long-term care. In February 2025, Croatia and the World Bank concluded a 2023–2025 technical assistance project to transition 38 social welfare institutions to community-based care. The reform aims to expand services such as day care, psychosocial support, personal assistance, early development support, mentoring, and employment aid for persons with disabilities and other vulnerable groups by 2027. The Operational Plan for the Development of Integrated Long-Term Care (2025-2030) adopted in May 2025 is currently being implemented, which includes the construction of 18 new centers for the elderly to improve care and reduce labour shortages.  Limited Progress 5.9 Promote balanced geographical distribution of health workers and facilities, investments in e-health, and closer cooperation between all levels of public administration on health policy. On 21 February 2025, the Act on the Implementation of Regulation (EU) 2021/2282 on Health Technology Assessment (HTA) was adopted. Croatia also further strengthened the central healthcare information system (CEZIH).  Under the RRP, several initiatives were implemented including the development of four integrated clinical e-Guidelines, designed to enhance evidence-based decision-making in clinical practice,  a software solution leveraging blockchain technology to monitor, anticipate, and prevent shortages of medicines, a centralised preparation of parenteral preparations in eight hospitals, a pharmacy-based monitoring system for chronic non-hospital patients, delivery of mobile caravan pharmacies to six counties and a boat pharmacy to one county.  Additionally, RRP supported financing of specialist training for doctors at the primary healthcare level, alongside advanced training programmes for nurses and technicians in emergency medicine. Announced measures include the development of additional guidelines and related documentation, as well as the adoption of an  Ordinance on Health Technology Assessment (HTA).  The implementation of RRP measures, including measures like the provision of  a mobile clinic system comprised of 33 primary care outpatient vehicles, are expected to continue until end of  August 2026.   Limited Progress    
 
     
 
FISCAL 
ANNEX 2: FISCAL DEVELOPMENTS AND DEBT SUSTAINABILITY 

strategy 

This annex discusses selected topics in public 
finance  and  developments  on 
fiscal-
structural CSRs  addressed  to  Croatia  in  July 
2025.  These include a  call  to reinforce  defence 
readiness,  while implementing  a 
spending and 
fiscal 
the  Council 
Recommendation  of 21  January  2025  endorsing 
Croatia’s  medium-term  fiscal-structural  plan  (34). 
The plan includes a fiscal adjustment spread over 
four  years.  On  8  July  2025,  the  Council  activated 
the  National  Escape  Clause  (NEC)  for  Croatia,  to 
facilitate the transition to higher levels of defence 
spending (35) (36). 

line  with 

in 

Developments in government deficit, 
debt and public expenditure (37) 

government 

Croatia’s 
deficit  widened 
marginally 
the  3% 
above 
reference 
remained 
threshold,  while  debt-to-GDP 
stable  at  end-2025.  Based  on  Commission 
Spring 2026 forecast, Croatia’s government deficit 
is  projected  to  decrease  to  2.9%  of  GDP  in  2026 
and 2.7% in 2027. The worsening of the deficit in 
2025  was  largely  driven  by  an  increase  in  the 
government  general  expenditure,  which  reached 
50.1%  of  GDP,  around  1.7pp  higher  than  the 
previous  year.  The  main  drivers  of  the  growth  in 
government  expenditure  are  public  investments, 
wages,  pensions  and  social  benefits.  Overall 
government  expenditure  is  expected  to  slightly 
increase  at  50.4%  by  end  of  2027.  General 
government  debt-to-GDP  is  expected  to  decrease 
from 56.3% in 2025 to 55.6% by end of 2027.  

Public investment remains supportive of GDP 
growth.  Contrary  to  previous  shocks  that  led  to 

(34)  OJ  C,  C/2025/638,  ELI:  EUR-Lex  -  32025H00638  –  EN  – 

EUR-Lex. 

(35)  OJ  C,  C/2025/3967,  ELI:  EUR-Lex  -  32025H03967  –  EN  – 

EUR-Lex. 

(36)  Croatia’s compliance with the maximum growth rates of net 
expenditure  recommended  by  the  Council  is  assessed  in 
COM(2026)200. 

(37)  Figures  underpinning  fiscal  surveillance  (net  expenditure 
in  the  Fiscal  Statistical  Tables  
growth)  are  provided 
(SWD(2026)200) providing background data relevant for the 
assessment of the budgetary policies of the Member States. 

significant  cuts,  public  investment  during  the 
pandemic  remained  high  supported  by  EU  funds 
and is expected to reach 6.4% of GDP in 2026, up 
from 4.3% in 2019 (see Graph A2.1). It is expected 
to slightly decrease to 5.8% of GDP in 2027, due 
to  the  phasing  out  support  from  the  RRF  and 
slower  pick  up  in  EU  structural  funds.  Croatia  is 
projected  to  spend  more  on  nationally  financed 
investment (including defence)  than it did prior to 
the COVID-19 pandemic. 

Graph A2.1: Public investment evolution and 
structure (% of GDP) 

Source: Spring forecast 2026 

While  expenditure  with  a  higher  impact  on 
GDP had remained broadly stable over three 
decades, it has slightly increased since 2019. 
This  may  be  related  with  the  impact  of  the  RRF, 
which  also  facilitated  a  more  quality-based  fiscal 
strategy.  Zooming 
in  on  the  composition  of 
spending, social protection accounts for the largest 
share of total expenditure (around 30%), followed 
by health at 19%. Economic affairs, education and 
general  public  services  represent  around  10%  of 
total  spending.  Since  2019,  public  expenditure  on 
health,  which  is  considered  growth-friendly,  has 
increased  strongly  (See  Graph  A2.3).  Spending  on 
defence,  R&D  and  communication  has  risen  more 
modestly,  with  the  rise  in  defence  spending 
reflecting 
recent  security  developments.  By 
contrast, spending on education and transport has 
declined.    This  trend  deserves  attention,  as  these 
categories  are  generally  considered  growth-
friendly spending categories. 

42 

0.01.02.03.04.05.06.07.0201920202021202220232024202520262027Other nationally-financedRRF grantsOther EU fundsDefence 
 
 
 
      
 
 
Graph A2.2: Primary spending evolution (% of GDP) 
and compositional change 

Note: Based on economic literature, the categories considered 
to have the higher growth impact include education, R&D, 
health, transport and communication (See Barbiero and 
Cournede (2013), Gemmel et al. (2016), Lupu et al (2018), 
Cepparulo and Mourre (2020) and OECD (2025)).   
Source: Eurostat 

social 

security 

Croatia’s tax revenues as a share of GDP are 
below  the  EU  average  and  rely  heavily  on 
consumption  taxes.  In  2025,  Croatia’s  total  tax 
revenues  as  a  percentage  of  GDP  (including 
compulsory 
contributions) 
amounted  to  39.4%,  below  the  EU  average  of 
39.9%.  Total  tax  revenues  are  projected  to  have 
increased to 39.8% of GDP in 2025 and to 40% of 
GDP  in  2027  according  to  the  Spring  2026 
Forecast  (38).  The  tax  mix  in  Croatia  relies  heavily 
on consumption taxation, while labour and capital 
taxes contribute a smaller share of total revenues 
than the EU average. The tax system’s progressive 
impact  is  limited,  due  to  the  high  incidence  of 
indirect  taxation  and  a  relatively  high  labour  tax 
burden for low wage-earners compared to the EU 
average (see Annex 3). 

There  is  scope  to  expand  property  taxation, 
to  enhance  tax  progressivity  and  address 
inefficiencies in the housing market. Revenues 
from  immovable  property  taxation  amounted  to 

0.5%  of  GDP  in  2024,  around  half  of  the  EU 
average.  At  the  beginning  of  2025  reforms  on 
immovable  property  taxation  were  implemented, 
but  the  property  tax  applies  only  to  vacant  and 
holiday properties, and is based on location rather 
than  market  value.  Meanwhile  housing  market 
inefficiencies related to unaffordability and a high 
supply  gap  persist,  despite  a  high  share  of 
permanent  residences being  unoccupied  (Annex 
16).  

Cost of ageing 

Total  age-related  spending  in  Croatia  is 
projected to decline by about 0.5 pps. of GDP 
by  2040  and  by  around  1  pp.  by  2070  (see 
Table  A2.2).  The  decline  mainly  stems  from  a 
projected  fall  in  pension  spending,  which  more 
than offsets an expected rise in public healthcare 
expenditure.  

Public pension spending as a share of GDP is 
projected  to  decline  by  about  0.5  by  2040 
and  by  about  1.5  pps.  in  the  long  term.  By 
2070,  public  pension  outlays  would  represent 
around 9% of GDP, compared to an EU average of 
about  12%.  However,  this  coincides  with  a 
projected  decline  in  the  replacement  rate  by  2.4 
pps.  between  2025  and  2040  (Table  A2.2  and 
A2.3)  (39).  In  2025,  Croatia  received  a  CSR  to 
increase the adequacy of social benefits, including 
pensions,  while  maintaining  fiscal  sustainability. 
Relevant recent measures include increases in the 
minimum  and  disability  pension,  a  higher  top-up 
for  children  born,  a  new  annual  bonus  for  all 
pensioners, 
deferred 
retirement,  and  limiting  the  duration  of  penalties. 
Croatia  pension  adequacy  remains  a  challenge 
evidenced  by  a  persistently 
low  aggregate 
replacement  ratio  (ARR)  (0.35  compared  to  the 
EU's  0.6  in  2024)  which  contributes  to  high 
poverty  risks  among  pensioners  (34.2%  vs  EU's 
15.4%).  Although  the  full  impact  of  the  pension 
reform is yet to be observed, EUROMOD simulation 
of  the  effects  of  the  pension  reform  show  an 
expenditure impact of 0.6% of GDP in 2026 and a 
reduction  in  the  rate  of  pensioners  at-risk-of-

bonuses 

higher 

for 

(38)  Data  retrieved  from  the  AMECO  database  (https://economy-

finance.ec.europa.eu/economic-research-and-
databases/economic-databases/ameco-database_en). 

(39)  The  (gross)  replacement  rate  refers,  depending  on  data 
availability,  to  both  public  and  private  pensions.  It  is  based 
on projections from the 2024 Ageing Report. 

43 

1015202540455055200720082009201020112012201320142015201620172018201920202021202220232024a) Evolution (% of GDP)Primary expenditureSpending with higher impact on GDP (rhs)-3.0-2.0-1.00.01.02.03.04.0InterestspendingTransportOther economicEducationSocialprotectionCultureHousingCommunicationPublicorderEnvironmentDefenceR&DGeneralservicesHealthb) Compositional change 2024-2019 (% total spending)  
  
 
 
poverty by 3.3pp compared to the baseline (40). To 
further improve pension adequacy, raising pension 
contributions  could  be  considered.  Currently, 
Croatia has one of the lowest contribution rates in 
the  EU,  with  15%  allocated  to  the  first  pillar  and 
5% to the second pillar. 

Supplementary pension schemes can enhance 
the  resilience  of  the  pension  system  by 
diversifying  retirement  income  sources.  In 
Croatia,  uptake  remains  significant:  by  end-2024, 
private  pension  assets  amounted  to  around  30% 
of  GDP  and  participation  covered  around  92%  of 
the working-age population (41). The high uptake in 
the supplementary pension schemes is due to the 
mandatory  private  scheme.  Further  developing 
occupational  and  personal  pensions  would  help 
improve  pension  adequacy  and  limit  its  projected 
decline. However, the Croatian pension law allows 
individuals  to  choose  whether  to  transfer  their 
pillar II savings into pillar I pension entitlements at 
the  moment  of  retirement.  In  2025,  around  70% 
of  those  eligible  for  pension  rights  opted  to 
transfer  their  savings,  receiving  only  a  pillar  I 
pension.  This  trend  is  largely  driven  by  a  bonus 
applied at the time of the transfer, which partially 
undermines  the  objectives  of  the  pillar  II  reform. 
Recent  legislative  changes  related  to  mandatory 
pension funds, supported by the RRP, have reduced 
the  administrative  fees  and  improved  investment 
flexibility and scope for improving returns.  

Public healthcare expenditure remains below 
the  EU  average.  It  is  projected  to  be  5.8%  of 
GDP in  2025 (6.6%  in the  EU)  and is  expected  to 
increase by 0.4 pps by 2040 and by a further 0.3 
pps by  2070  (42).  Public expenditure  on  long-term 
care  is  projected  at  0.5%  of  GDP  in  2025  (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 

(40)  Estimations  performed  by  the  European  Commission,  Joint 

Research Centre, based on EUROMOD version J2.0 

(41)  Source:  OECD  Pension  Market  in  Focus  2025.  The  highest 
participation rate in at least one supplementary pension plan 
is reported.   

(42)  Key  performance  characteristics,  recent  reforms  to  and 
investment in the Croatian healthcare system are discussed 
in Annex 15 ‘Health and health systems’. 

remains  low  due  to  underdeveloped  long-term 
care services (43). 

National fiscal frameworks 

with 

rules 

fiscal 

The  Fiscal  Policy  Commission  (FPC)  has  a 
narrow  mandate,  focusing  on  the  monitoring  of 
compliance 
and 
endorsing/assessing  the  macroeconomic  forecast 
underlying the budgetary plans of the government 
(without relying on a forecast of its own). Its work 
is  hampered by  the  fact  that  members  work  full-
time  for  their  main  employers,  leaving  them  with 
very  little  time  to  devote  to  their  FPC  tasks.  In 
addition,  although  only  a  fraction  of  its  allocated 
budget  is  actually  used,  the  FPC  still  experienced 
difficulties  recruiting  staff  to  its  Secretariat,  as  it 
can only hire civil servants and, consequently, it is 
not  free  to  set  the  pay  level  of  its  staff.  Partly 
linked  to  these  staffing  constraints,  the  FPC  has 
not  yet  developed  any  significant  outreach 
activities  and  the  role  of  the  President  does  not 
include  any  external  communication  tasks.  Still  a 
young  institution,  the  FPC  has  yet  to  undergo  an 
external  review.  Some  interaction  with  parliament 
has  taken  place,  but  the  policy  dialogue  with  the 
government is not fully developed. 

Spending reviews are in the early stages and 
a  pilot  spending  review  was  done  for 
wastewater  management.  Croatia  benefits 
from  a  2025  TSI  on  the  spending  reviews’ 
methodological  framework,  but  administrative 
capacity  constraints  limit  the  pace  of  institutional 
establishment  of  spending  reviews.  A  spending 
review department was created  at the Ministry of 
Finance  in  2022.  However,  the  scope  of  spending 
reviews  is  relatively  narrow,  and  their  results  are 
not  made  public.  Spending 
could 
contribute to increasing the efficiency of spending 
(European  Observatory  of  Health  Systems  and 
Policies,  2024).  Sectors  like  health  and  education 
are  good  starting  points  for  more  comprehensive 
spending  reviews,  as  spending  is  relatively  high 
(44).  Public 
and  outcomes  are  below  peers 

reviews 

(43)  The  adequacy  and  quality  of  the  Croatian  long-term  care 

system are covered in Annex 12 ‘Social policies’.    

(44)  Jean-Jacques  Hallaert.  "Improving  Investment  in  Human 
Capital in Croatia: Efficiency of Public Spending on Education 
and  Healthcare",  Selected  Issues  Papers  2025,  159  (2025), 
https://doi.org/10.5089/9798229034906.018. 

44 

 
 
 
Table A2.1:  Fiscal governance database indicators and public accounting maturity 

(1) "The Country Fiscal Rule Strength Index (C-FRSI) shows the strength of national fiscal rules aggregated at country level based 
on i) the legal basis, 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. 
The score for public accounting reflects the degree of maturity in relation to the International Public Sector Accounting Standards 
(IPSAS). Countries with an accounting maturity of 70% or more in relation to IPSAS are deemed to apply accrual accounting. For 
more information, see the report on public accounting in the EU (COM(2025)746 and accompanying Staff Working Document 
SWD(2025)396)." 
Source: Fiscal Governance Database, European Commission 

Table A2.2:  Projected change in age-related expenditure in 2025-2040 and 2025-2070 

Source: 2024 Ageing Report (EC/EPC). 

administration  workforce  management  could  be 
also  reviewed,  as  public  employment  increased 
strongly  in  recent  years,  despite  progress  in 
digitalising  public  administration.  Broadening  the 
scope  of  spending  reviews  could  help  identify 
efficiency gains and programme overlaps (45).  

maturity  of  general  government  (see  Table  A2.3) 
Accounting reforms are underway and expected to 
improve  Croatia’s  accrual  accounting  score 
although the country has not yet reached the 70% 
threshold  for  full  accrual  accounting  and  is  not 
expected to reach it in the medium term (47).  

Accrual  accounting  improves  transparency 
over  a  public  body’s  financial  position  and 
performance  and  can  support  sustainability 
and 
(14) 
intergenerational  equity.  Most 
Member  States  have 
implemented  accrual 
accounting  across  the  general  government  sector 
and  five  are  set  to  do  so  by  2030  (46).  Croatia  is 
close  to  the  EU  average  on  public  accounting 

(45)  OECD (2026), OECD Economic Surveys: Croatia 2026, OECD 
Publishing, Paris, https://doi.org/10.1787/b52e3ac0-en. 

(46)  Report on public accounting in the EU (COM(2025)746 and 
accompanying Staff Working Document SWD(2025)396). 
Countries with an accounting maturity of 70% or more in 
relation to International Public Accounting Standards are 
deemed to apply accrual accounting. 

Croatia  has  strengthened  the  efficiency  of 
public  investment  management.  Since  January 
2024, a new standardised methodology for project 
assessments  entered  into  force  for  all  budgetary 
is  monitored 
and  extrabudgetary  users  and 
Finance. 
of 
the  Ministry 
centrally 
Implementation  has  also  been  strengthened  by 
new  reporting  guidelines  for  line  ministries  and  a 
digital  monitoring  system  shared  by  all 
line 
ministries.  

by 

(47)  Annexes 3.1 and 3.4 of SWD(2025)396 

45 

Country Fiscal Rule Strength Index (C-FRSI)13.9314.81Medium-Term Budgetary Framework Index (MTBFI)0.72 0.722025 Public accounting maturity of general government61%65%HR19.8-0.70.40.1-0.3-0.619.2HREU24.30.50.30.4-0.30.925.2EUHR19.8-1.60.70.1-0.4-1.118.7HREU24.30.20.60.8-0.31.325.6EUageing-related expenditure change in 2025-2070 (pps GDP) due to:ageing-related expenditure pensionshealthcarelong-term careeducationtotalageing-related expenditure change in 2025-2040 (pps GDP) due to:ageing-related expenditure pensionshealthcarelong-term careeducationtotal 
 
 
 
   
 
 
        
 
Table A2.3:  Supplementary pension schemes - Scope for expansion 

Source: European Commission. 

46 

Assets in 2024 (% GDP)Participation in 2024 (% working-age population)HR29.6-2.492.4HREU32.4-2.855.9EUGross replacement rate at retirement: (pps change 2025-2040)  
 
      
 
ANNEX 3: TAXATION 

This  annex  provides  an 
indicator-based 
overview  of  Croatia’s  tax  system.  It  includes 
information  on  the  tax  mix,  on  competitiveness 
and fairness aspects of the tax system, and on tax 
collection and compliance. In the area of taxation, 
the  2025  country-specific  recommendations  for 
Croatia  highlighted  challenges  regarding  taxation 
incentives  in  the  transport  sector  in  view  of  its 
fossil fuel reliance and energy demand. 

tax  mix 

Croatia’s 
relies  strongly  on 
consumption  taxes.  In  2024,  tax  revenues  in 
Croatia amounted to 38.4% of GDP, below the EU-
27  average  of  39.4%.  Consumption 
taxes 
accounted for 48.1% of total tax revenues, almost 
double  the  EU  average,  reflecting  the  central  role 
of VAT in revenue generation. 

lowered  municipal 

Labour  and  capital  taxes  contribute  a 
comparatively  smaller  percentage  of  total 
revenues  than  the  EU  average.  By  contrast, 
labour  taxes  accounted  for  36.5%  of  total 
revenues,  well  below  the  EU  average,  and  were 
largely  derived  from  social  security  contributions. 
Personal income tax reforms entering into force in 
2025 
rate  ceilings  and 
increased  allowances,  and  are  consequently 
expected  to  further  reduce  the  already  moderate 
labour tax burden. Capital taxes also contributed a 
smaller  percentage  of  revenue  than  in  most 
Member States (15.4% of total against the 21.6% 
immovable 
EU  average).  Recurrent  taxes  on 
property accounted for only 0.5% of GDP in 2023, 
compared  with  an  EU  average  of  0.9%,  despite 
reforms  entering  into  force  in  2025  aimed  at 
strengthening  revenues  and  improving  fairness. 
This  tax  structure  has  remained  broadly  stable 
over time.  

in  energy  and 
Tax-related  price  signals 
transport  are  not  always  conducive  for 
fostering  the  clean  transition.  Environmental 
taxes in Croatia amounted to around 3.4% of GDP 
in  2024,  above  the  EU  average  of  2.1%.  Despite 
this,  Croatia’s  effective  carbon  rate  (48)  stood  at 
around EUR 62.3 per tonne of CO₂ in 2023, below 
the  EU  average  of  EUR 84.8  per  tonne.  This 
indicates that despite the revenues generated due 

to the high energy intensity of the economy, price 
signals  on  carbon  emissions  are  relatively  weak. 
This is in part due to particularly low energy excise 
duties,  such  as  for  diesel  for  commercial  road 
transport,  while  diesel  for  agricultural  use  is  fully 
exempted  from  excise  duties.  Moreover,  vehicles 
older than 10 years are exempted from circulation 
taxes,  despite  typically  higher  emissions.  By 
contrast,  there  are  currently  no  dedicated  tax 
credits  or  accelerated  depreciation  schemes 
specifically  targeted  at  clean  technologies  or 
industrial decarbonisation (49). There have been no 
specific  tax  reforms  to  address  the  respective 
country-specific 
although 
relevant  investments  are  being  rolled  out  (see 
Annex 8). 

recommendation, 

Graph A3.1: Tax revenue by economic function in 
2024, HR (outer ring) and EU-27 (inner ring) 

Source: Taxation Trends Data, DG TAXUD 

Despite  low  statutory  rates,  some  features 
of  Croatia’s  corporate  tax  system  add 
complexity and limit  competitiveness.  Croatia 
has a relatively low statutory corporate income tax 
rate  of  18%,  with  a  reduced  rate  of  10%  for 
smaller  companies  (less  than  EUR 1 million  in 
annual  revenues),  and  a  tax  expenditure  of  about 
EUR 170 million 
in  2022.  The  forward-looking 
effective  tax  rate  is  below  the  EU  average, 
indicating that the tax burden does not undermine 
investment  incentives.  Several  tax  incentives  are 
available under the Investment Promotion Act, but 
their 
discourage 
companies  from  making  full  use  of  them.  Tax 
incentives for research and development have low 
uptake,  although 
the 
recovery  and  resilience  plan  increased  deductible 

conditions  may 

reforms  under 

complex 

recent 

(48)  The  effective  carbon  rate  is  the  sum  of  fuel  excise  taxes, 
carbon  taxes  and  permit  prices  under  the  EU  emissions 
trading  system.  Electricity  excise  taxes  are  not  included  as 
they  do  not  distinguish  between  energy  sources  and  their 
carbon content. 

(49)  See Commission Recommendation C(2025) 4319 final of 2 
July 2025 on tax incentives to support the Clean Industrial 
Deal and in light of the Clean Industrial Deal State aid 
Framework.  

47 

51.526.821.636.548.115.4Taxes on labourTaxes on consumptionTaxes on capital 
 
 
   
 
 
 
Table A3.1:  Taxation Indicators 

(1) Forward-looking effective tax rate (KPMG).  
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) Forecast value for 2024. EU-27 refers to the median value. For more data on tax revenues as well as the methodology 
applied, see the Data on Taxation Trends webpage. 
Source: European Commission, OECD, ISORA. 

amounts  and  simplified  procedures,  which  may 
improve their effectiveness. 

below  0.4%  of  GDP  targeted  expenditure,  poverty 
can be eliminated (52). 

Croatia’s tax-benefit system reduces income 
inequality  by  less  than  the  EU  average  (see 
also  Annex 12).  In  2024,  the  reduction  in  income 
inequality  through  the  tax-benefit  system,  as 
measured  by  the  Gini  coefficient,  amounted  to 
around 5.8 pps, compared with 7.8 pps on average 
in  the  EU  (50).  On  the  tax  side,  this  reflects  the 
modest  role  of  progressive  labour  taxation  in  the 
overall  tax  mix.  Some  of  the  tax  expenditure  can 
be  ineffective  and  poorly  targeted.  EUROMOD 
simulation shows, among others, that in particular 
the VAT reduced rate for hotel and restaurants has 
a regressive impact. PIT allowances and deduction 
also  have  a  limited  impact  on  redistribution  (51). 
Reducing  ineffective  tax  expenditures  and  using 
the revenues for better targeted social assistance 
would  have  a  better  impact  on  improving  social 
indicators.  EUROMOD  simulations  show  that  with 

(50)  The  Gini  coefficient  measures  the  extent  to  which  the 
distribution  of  income  within  a  country  deviates  from  a 
perfectly  equal  distribution.  A  coefficient  of  0  expresses 
perfect equality where everyone has the same income, while 
a coefficient of 100 expresses full inequality where only one 
person has all the income. 

(51)  Turrini  et  al.,  (2024),  Tax  Expenditures  in  the  EU:  Recent 

Trends and New Policy Challenges. 

impact 

is 
The  tax  system’s  progressive 
limited,  which  results  in  particular  from  a 
high  tax  burden  for  low  wage-earners  (see 
Graph  A3.2).  In  2025,  the  labour  tax  wedge (53) 
was noticeably higher than the EU average for low 
wage-earners at 50% (34.5% vs 31.6%) and 67% 
(38.5% vs 35.8%) of the average wage, while only 
being  slightly  higher  than  the  EU  average  at  the 
average  wage 
(41.2%  compared  to  40.0%). 
Conversely,  the  tax  wedge  for  high  wage-earners 

(52)  Almeida,  V.,  De  Poli,  S.  and  Hernandez  Martin,  A.,  The 
effectiveness  of  Minimum  Income  schemes  in  the  EU, 
European Commission, 2022, JRC130676. 

(53)  The  tax  wedge  is  an  indicator  of  the  tax  burden  on  labour 
that  can  be  assessed  at  various  levels  of  earnings.  It  is 
defined as the sum of personal income taxes, employee and 
employer  social-security  contributions  and  other  mandatory 
contributions,  expressed  as  a  percentage  of  total  labour 
costs  (composed  of  the  net  wage,  personal  income  tax, 
social 
contributions,  and  other  mandatory 
contributions).  Tax  wedge  data  in  the  2026  country  reports 
are calculated by the Joint Research Centre of the European 
Commission and based on the EUROMOD model, while in the 
past  country  reports  they  were  based  on  the  OECD  tax  and 
benefit  model.  While  the  underlying  methodology  is  very 
similar, differences in the assumptions can lead to different 
results between both models. 

security 

48 

2019202220232024202520192022202320242025Tax structureTotal taxes (including compulsory actual social contributions) (% of GDP)38.437.336.738.439.939.739.039.4Taxes on labour (% of GDP)13.412.712.814.020.620.119.920.3of which, social security contributions (SSC, % of GDP)11.110.610.411.313.012.712.713.0Taxes on consumption (% of GDP)19.418.418.218.511.210.910.510.6of which, value added taxes (VAT, % of GDP)13.313.213.213.37.17.47.17.1Taxes on capital (% of GDP)5.66.15.75.98.18.78.58.5Personal income taxes (PIT, % of GDP)3.53.23.53.99.69.49.39.6Corporate income taxes (CIT, % of GDP)2.33.22.93.12.63.23.23.1Total property taxes (% of GDP)1.10.90.90.82.22.11.91.8Recurrent taxes on immovable property (% of GDP)0.70.60.50.51.21.00.90.9Environmental taxes (% of GDP)4.23.43.33.42.62.12.12.1Effective carbon rate in EUR per tonne of CO2 equivalentsnana62.3nanana84.8naTax wedge at 50% of average wage (single person) (*)31.533.835.433.934.532.431.631.531.531.6Tax wedge at 100% of average wage (single person) (*)41.040.541.441.341.240.139.739.939.940.0Corporate income tax - effective average tax rates (1) (*)14.814.814.814.820.019.219.019.3Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)7.36.26.35.87.88.07.97.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)15.59.48.7na31.832.630.7naVAT gap (% of VAT total tax liability, VTTL) (**)4.011.47.79.010.57.38.2naProgressivity & fairnessTax administration & complianceBy tax baseSome tax typesEU-27Croatia 
 
 
 
   
 
at  167%  of  the  average  wage  was  slightly  lower 
than  the  EU  average  (43.4%  vs  44.1%).  The  tax 
wedge for second earners at 67% of the average 
wage whose spouses earn the average wage was 
substantially  higher  than  the  EU  average.  In 
addition,  the  tax  wedge  for  second  earners  was 
noticeably  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 decreases work incentives for second earners, 
who  are  often  women.  The  general  tax  allowance 
for dependent family members contributes to this 
effect. 

Graph A3.2: Tax wedge for single and second 
earners as a % of total labour costs, 2025 

Note: The second earner tax wedge shows a household’s tax 
wedge resulting from the wage that a second earner taking 
up a job at 67% of the average wage receives. It does not 
show the total tax wedge of the household. The household is 
assumed to have a first earner at 100% of the average wage 
and no children. For the methodology of the tax wedge for 
second earners, see OECD (2024), Taxing Wages 2024. 
Source: European Commission 

and 

publishes 

tax 
Croatia  monitors 
expenditures  on  an  annual  basis.  The 
monitoring  identifies  tax  expenditures  in  VAT, 
corporate  income  tax  (CIT),  personal  income  tax 
(PIT) and social security contributions. It sets out a 
quantification, the purposes, and additional details 
for each tax expenditure. Croatia also provides this 
information  for  tax  deductions  and  exemptions  it 
does not consider as tax expenditures, such as the 
basic allowance in personal income taxation (54). 

Reduced  VAT  rates  account  for  almost  two 
thirds  of  Croatia’s 
expenditures. 
EUR 2.2 billion  of  EUR 3.5 billion  of  Croatia’s  tax 
expenditures  are  in  VAT,  while  social  security 
contributions  account  for  EUR 630 million,  PIT  for 

tax 

(54)  Croatian  Ministry  of  Finance,  2025,  Catalogue  of  tax 

expenditures for 2023. 

49 

EUR 290 million,  and  CIT  for  EUR 360 million.  In 
2023,  Croatia’s  VAT  policy  gap (55)  amounted  to 
ideal  revenue (56), 
around  36.6%  of  notional 
equivalent  to  about  EUR 7 billion (57).  Within  this, 
the  VAT  rate  gap  was  around  15%  of  notional 
ideal  revenue,  above  the  EU  average  of  12%. 
However, the rate gap and the tax expenditures it 
encompasses  also  need  to  be  viewed  in  the 
context of Croatia’s particularly high standard VAT 
rate, which overall leads to high VAT revenues. 

Croatia  does  not  estimate  CIT  or  PIT  tax 
gaps,  but  tax  morale  is  low  and  the  shadow 
economy  is  estimated  to  be  large (58).  The 
shadow economy was estimated at 29.7% of GDP 
in  2022,  the  second  highest  percentage  in  the 
EU (59).  Only  45%  of  citizens  in  Croatia  feel  that 
people pay taxes in proportion to their income and 
wealth,  at  least  to  some  extent,  which  is  the 
lowest figure in the EU (60). 57% of individuals also 
feel  that  taxes  are  too  high  and  would  decrease 
them  even  if  it  means  fewer  or  lower  quality 
public services, which is the second highest in the 
EU (61).  However,  EU  estimates  based  on  a  top-
down  methodology  using  national  accounts  data 
suggest  that  Croatia’s  CIT  compliance  gap  was 
around  7%  of  collected  CIT  revenues  in  2019, 
below  the  unweighted  EU  average  of  10.9%  (62). 

(55)  The  VAT  policy  gap  refers  to  the  revenue  lost  due  to  the 
application  of  VAT  exemptions  and  reduced,  super-reduced, 
and zero VAT rates on selected products. 

(56)  The  notional  ideal  revenue  is  the  benchmark  VAT  revenue 
that  assumes  perfect  taxpayer  compliance  in  a  situation 
where  the  current  standard  VAT  rate  is  applied  to  all  final 
consumption  and  household,  government,  and  NPISH 
investment. 

(57)  See European Commission, Syntesia, Poniatowski, G., Bonch-
Osmolovsky,  M.,  Śmietanka,  A.  et  al.,  VAT  gap  in  Europe  – 
Report  2025,  Publications  Office  of  the  European  Union, 
Luxembourg, 2025. 

(58)  European  Commission,  Directorate-General  for  Taxation  and 

Customs Union, Mind the gap - 2025 report. 

(59)  European  Parliament  (2022),  Taxation  of  the  informal 

Economy in the EU. 

(60)  European  Commission,  Directorate-General  for  Taxation  and 
Customs  Union  and  Directorate-General  for  Communication, 
Citizens'  attitudes  towards  taxation  –  Eurobarometer  report, 
2025. 

(61)  Citizens' attitudes towards taxation – Eurobarometer report. 

(62)  European  Commission:  Directorate-General  for  Taxation  and 
Customs  Union  (2025),  The  Corporate  Income  Tax  Gap,  A 
European  approach  to  measuring  losses  in  corporate  tax 
revenues, Publications Office of the European Union. The JRC 
has recently developed a novel approach to estimate the CIT 
gap  based  on  national  accounts  and  existing  data  on  the 

34.538.541.243.442.62025303540455050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - HRSingle earner - EU averageSecond earner -  HRSecond earner -  EU average 
   
 
 
 
audit-based 

Bottom-up, 
could 
potentially  provide  a  more  granular  and  more 
accurate picture of the CIT compliance gap. 

estimates 

supports 

(supported  by 

Digitalisation  and  simplification  measures 
helped  improve  collection  and  compliance. 
The VAT compliance gap in Croatia was estimated 
at around EUR 900 million, corresponding to 7.7% 
of the VAT total tax liability in 2023, below the EU 
median  of  8.2%.  This  represented  a  marked 
improvement  compared  with  a  level  of  around 
11%  in  2022,  reflecting  strong  VAT  revenue 
growth.  Near-universal  electronic  filing  for  VAT 
also 
combined  with 
compliance, 
advanced  digital  tools  and  the  rollout  of  the 
‘Fiscalisation  2.0  system’ 
the 
introducing 
Recovery  and  Resilience  Facility) 
mandatory  e-invoicing  and  real-time  transaction 
reporting. 
under 
Fiscalisation 2.0 started to apply to VAT-registered 
businesses  from  January  2026,  and  to  non-VAT 
taxpayers  and  will  apply  to  public  entities  from 
January  2027.  Moreover, 
e-invoicing 
framework  for  business-to-business  transactions 
includes  various  measures  that  reduced  the 
administrative  burden  of  taxpayers,  related  to 
reporting  and  record-keeping  obligations.  Croatia 
does  not  maintain  a  dedicated  e-commerce 
taxpayer  register,  but  relies  on  integrated  data 
systems,  platform 
reporting  and  advanced 
analytics  for 
its  oversight  of  online  sellers, 
relevant at a time when platform and cross-border 
transactions are expanding (63). 

e-invoicing 

Mandatory 

the 

undeclared  economy,  providing  approximations  of  the  CIT 
gap  for  a  majority  of  EU  Member  States.  JRC’s  estimations 
are based on the exhaustiveness adjustments made to gross 
operating surplus, gross value added and GDP, that national 
statistical  offices  perform  to  account  for  non-observed 
economy.  The  JRC  approach  does  not  capture  CIT  gaps 
associated  with  tax  avoidance  and  (international)  profit 
shifting, which would require other estimation methods. 

(63)  Ninth  Report  from  the  Commission  on  VAT  registration, 
collection  and  control  procedures  following  Article 12  of 
Council Regulation (EEC, EURATOM) No 1553/89. 

50 

 
 
PRODUCTIVITY 
ANNEX 4: INNOVATION TO BUSINESS  

Croatia  is  a  moderate  innovator  and  is 
making  steady  progress,  but  fragmentation 
of  the  public  research 
landscape  still 
constrains  overall  performance.  According  to 
the  European  Innovation  Scoreboard  2025 (64), 
Croatia has achieved 71.6% of the EU average and 
has  been  progressing  faster  than  the  EU  since 
2018.  Croatia’s  R&D  intensity  increased  from 
0.84% of GDP in 2017 to 1.35% in 2024, though 
the indicator has stagnated in the past three years 
and  in  2024  remained  below  the  EU  average  of 
2.24%.  The  country’s  research  and  innovation 
(R&I)  system  has  strengthened  over  the  past 
decade, 
public 
by 
investments  and  reforms,  including  those  under 
the  recovery  and  resilience  plan 
(RRP)  and 
cohesion policy. As already highlighted in the 2025 
country-specific 
(CSRs), 
sustaining momentum will require: (i) stronger and 
more 
R&D 
investments;  (ii)  efforts  to  reduce  institutional 
fragmentation;  (iii)  improved  R&I  governance;  and 
(iv)  a  diversity  of  financing  sources  for  firms  to 
support the development and commercialisation of 
innovation. 

recommendations 

significant 

supported 

effective 

private 

public 

and 

Excellent science 

remains 

fragmented, 

Croatia’s public R&D intensity has stagnated 
in  recent  years,  while  the  public  research 
system 
limiting 
scientific  excellence.  Public  R&D  expenditure 
rose  from  0.49%  of  GDP  in  2018  to  0.65%  in 
2022,  but  stalled  at  0.61%  in  2023  and  2024, 
slightly  below  the  EU  average  of  0.72%.  The 
increase  in  public  R&D  investment  as  a  share  of 
GDP  has  been  driven  by  the  Recovery  and 
Resilience  Facility 
(RRF)  and  cohesion  policy 
funding.  This  underlines  the  need  to  further 
prioritise  public  R&D  funding  in  the  national 
budget  to  ensure  sustainability  and  predictability 

(64)  European 

Commission, 

2025, 

European 
profile: 

Innovation 
Croatia 

country 

Scoreboard, 
https://ec.europa.eu/assets/rtd/eis/2025/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  with  the  EU  average). 
Moderate 
innovators  are  countries  with  performance 
between 70 and 100% of the EU average. 

dilutes 

resources, 

beyond  2026,  in  line  with  the  2025  CSR  on 
fostering  investments  in  research  and  innovation. 
At  the  same  time,  Croatia’s  public  research 
landscape  remains  highly  fragmented,  limiting 
scientific  excellence  and  the  efficient  use  of 
resources.  The  system  comprises  120  scientific 
organisations, 
including  more  than  25  public 
research  institutes,  12  universities  (with  over  80 
autonomous  faculties),  and  12  polytechnics.  This 
fragmentation 
prevents 
institutions from reaching the critical mass needed 
for  excellence,  and  hampers  collaborations  both 
within and across institutions (65). These structural 
constraints 
scientific 
excellence, with only 4.5% of Croatian publications 
among 
top  10%  most-cited 
publications  in  2022,  compared  with  the  EU 
average of 9.4% (see Graph  A4.1).  Fragmentation 
also  limits  Croatia’s  capacity  to  build  strong 
international  scientific  networks.  This  is  reflected 
in  the  relatively  low  international  co-publication 
rates compared with peers in Central and Eastern 
Europe (66). 

the  world’s 

to  modest 

contribute 

Graph A4.1: Share of publications in the top 10% 
most-cited publications worldwide, 2012 and 
2022. 

Source: Science-Metrix data using the Scopus database. 

Some  steps  have  been  taken  to  address 
fragmentation and improve scientific impact, 
but  more  efforts  will  be  required.  The 
introduction  of  a  performance-based  funding 
model in 2023, supported by the RRF, has focused 
on strategic planning and result-based allocations 

(65)  See  also  World  Bank,  2019,  Analysis  of  the  quality  and 

coherence of the policy mix. 

(66)  Croatia’s  international  co-publication  rate  (45.3%)  remains 
below that of most peer countries, notably Slovenia (57.2%), 
Slovakia (52.7%) and Hungary (52.2%), and is slightly above 
Poland (43.2%). 

51 

024681012%2022 (citation window: 2022-2024)2012 (citation window: 2012-2014) 
 
 
 
  
 
 
 
reduce 

helping 

However, 

knowledge 

incentivised 

to  strengthen,  for  instance,  scientific  excellence 
the 
transfer. 
and 
funding  model  has  not 
performance-based 
effectively 
the  consolidation  of 
research  capacities.  In  addition,  the  continued 
funding of centres of excellence through cohesion 
policy,  completed  by  national  resources,  provides 
support  to  public  research  consortia  in  strategic 
research areas. These centres create incentives for 
institutions  to  pool  resources  and  strengthen 
cooperation, 
fragmentation. 
Additional measures are on the way. New decrees 
adopted  in  December  2025  and  early  2026  will 
enable  the  merger  of  four  polytechnics  with 
universities,  with 
institutions 
planned  for  merger  in  early  2026.  This  marks  a 
step  towards  reducing  fragmentation,  although 
these institutions have low enrolment and smaller 
research  capacities.  In  line  with  the  2025  CSR  on 
the fragmentation of public research institutes and 
universities,  improved  institutional  efficiency  will 
depend  on  further  consolidation  through  targeted 
mergers  and  stronger  coordination  mechanisms. 
This will require robust analysis and evaluation to 
include 
inform  decision-making  and  should 
assessing how far the performance-based funding 
model is effective. 

two  additional 

The  governance  of  the  R&I  system  remains 
complex  and  fragmented.  The  R&I  policy 
agenda  is  shared  across  several  ministries  and 
agencies (67),  creating  challenges  for  consistent 
planning  and  implementation (68).  The  National 
Innovation  Council  was  re-established  in  2025  as 
the  top-level  governance  and  coordination  body, 
bringing  together  representatives  from  relevant 
ministries,  implementing  agencies  and  thematic 
innovation councils (69). Making sure the Council is 
fully  operational  will  be  key 
improving 
coordination  of  R&I  policy.  This  also  requires 
continuous  exchanges  at  working  level  through 
bodies such as the Interministerial Working Group. 
In  parallel,  the  ongoing  establishment  of  the 
Innovation,  Advanced 
European  Centre 

for 

to 

(67)  Ministry of Science, Education and Youth; Ministry of Regional 
Development  and  EU  Funds;  Ministry  of  Economy;  HAMAG-
BICRO; Croatian Science Foundation. 

(68)  See for instance European Commission, 2023, Policy Support 
Facility  (PSF)  to  support  early  stages  of  innovation  and 
science-business linkages in Croatia. 

(69)  Ministry  of  Science,  Education  and  Youth,  11 April 2025, 
‘Održana  prva  sjednica  Nacionalnog  inovacijskog  vijeća’ 
(Press  release  for  the  first  constitutive  meeting  of  the 
National Innovation Council). 

Technologies  and  Skills  Development,  supported 
under  cohesion  policy,  is  expected  to  strengthen 
coordination  and  serve  as  a  one-stop  shop  for 
innovation  policy  implementation  and  stakeholder 
support (70).  The  centre  will  provide  a  dialogue 
platform  for  each  smart  specialisation  strategy 
(S3)  priority  area  and  monitor  S3  implementation 
by  linking  indicators  to  strategic  objectives  and 
impacts. 

Business innovation 

Business  R&D  intensity  remains  low  and 
continues  to  weigh  on  Croatia’s  innovation 
performance.  Business  R&D  stands  at  0.74%  of 
GDP in 2024, well below the EU average of 1.49%. 
After a significant increase from 0.39% in 2016 to 
0.77%  in  2022,  progress  has  stalled.  Significant 
regional  disparities  in  business  R&D  persist  (see 
Annex 18). This also reflects structural constraints. 
The  economic  structure  remains  oriented  towards 
technology  manufacturing  and 
medium-low 
services (71),  which  limits  the  development  of 
complex  technologies  and  high-impact  innovation. 
The  private 
is 
structurally  weak,  with  only  1.4  researchers  per 
thousand  active  population,  compared  with  5.9  in 
the EU. These factors explain the weak innovation 
outputs  observed.  International  patenting  activity 
remains  modest,  with  0.73  Patent  Cooperation 
Treaty patent applications per billion GDP in 2022, 
well  below  the  EU  average  of  2.81.  Despite  this 
low  performance,  Croatia’s  overall 
innovation 
output  performance  has  improved  over  the  last 
decade,  as  reflected  in  the  Innovation  Output 
Indicator (72) and the Innovation Input pillar of the 
Global Innovation Index (73). This suggests that the 
policy  and  business  environment  is  gradually 
improving. 

research 

capacity 

sector’s 

(70)  The  centre’s  creation  was  mentioned 

in  the  Croatian 

government’s 2020 national reform programme. 

(71)  European  Innovation  Scoreboard  2024  and  2025,  Country 

Profile: Croatia. 

(72)  The  Innovation  Output  Indicator  2024  is  a  composite 
indicator  measuring  countries’  capacity  to  derive  economic 
benefits  from  innovation  by  tracking  the  extent  to  which 
innovative  ideas  reach  the  market,  create  knowledge-
increase  a  country’s  technological 
intensive 
capability. 

jobs  and 

(73)  World 

Intellectual  Property  Organization,  2025,  Global 

Innovation Index 2025. 

52 

 
 
 
improve 

following 

Public  support  for  business  R&D  is  limited 
and  insufficient  to  address  the  structural 
weaknesses  of  the  innovation  ecosystem. 
Total public support for business R&D amounts to 
0.06% of GDP, significantly below the EU average 
(0.2%).  Direct  support  instruments  tend  to  be 
fragmented,  are  sometimes  implemented  in  short 
cycles,  and  do  not  always  provide  the  stability 
companies  need  to  plan  innovation  projects  over 
the  longer  term (74).  Public  support  for  business 
R&D  may 
recent  RRP 
investments and reforms reorienting the RDI policy 
mix  towards  businesses,  alongside  additional 
private  funding  mobilised  through  the  Digital 
Innovation  and  Green  Technology  (DIGIT)  project. 
As part of its RRP, Croatia recently revised its R&D 
tax incentive scheme adopted at the end of 2024, 
with  a  first  ordinance  entering  into  force  in  May 
2025. The revision doubles the tax base reduction 
for  R&D  project  costs,  with  the  objective  of 
increasing R&D expenditure and innovation activity 
in 
the 
administrative  burden  by  adjusting  the  reporting 
timeline. 
In  addition,  a  new  digital  platform 
launched  to  further 
(eInvestments)  has  been 
simplify  procedures  and  reduce  administrative 
costs for firms under several investment and R&D 
State  aid  schemes.  The  platform  digitalises  the 
submission  of  project  applications  as  well  as 
(75).  These 
project  monitoring  and 
changes  could  help  stimulate  private  R&D 
investment,  but  the  revised  R&D  tax  incentive 
scheme  will  need  to  be  evaluated  once  sufficient 
implementation data become available. 

the  private  sector. 

reporting 

It  also 

reduces 

Graph A4.2: Patent applications filed under the 
Patent Cooperation Treaty per billion of GDP (in 
purchasing power standards / PPS EUR) in 2022 

Source: European Patent Office database, PATSTAT 

(74)  OECD, Economic Surveys: Croatia 2023, OECD Publishing. 

(75)  Ministry  of  Economy,  20.2.2026,  Press  Release:  ‘Ministry  of 
Economy  launches  fully  digital  system  for  state  aid  and 
strategic investment support, Invest Croatia’. 

53 

for 

progress. 

consolidate 

research  and 

linkages  are 

researchers 
the 

Business-science 
improving, 
underpinned  by  multiple  funding  schemes, 
but require continued and consistent support 
to 
Public-private 
co-publications reached 8.4% of all publications in 
2024,  now  above  the  EU  average.  However, 
technology  transfer  activities  are  still  hindered by 
to  pursue 
weak 
incentives 
inconsistent 
by 
commercialisation, 
performance of technology transfer offices and by 
under-utilisation  of 
technology 
infrastructures (76).  Recent  initiatives  such  as  the 
publication  of  national  guidelines  for  technology 
transfer,  coupled  with  around  EUR  200  million  in 
new  funding (77)  supported  through  the  RRP  and 
cohesion  policy,  have  created positive momentum 
to  strengthen  the  technology  transfer  ecosystem, 
for  spin-off 
including 
creation.  These  efforts  aim 
to  strengthen 
collaboration  between  academia  and  business  by 
improving  the  governance  and  management  of 
technology  transfer  offices,  upgrading  research 
infrastructures  and  better  aligning  them  with  the 
needs of industry (78). Implementation is still under 
way,  and  significant  and  durable  results  will  be 
reliant  on  sustained  efforts  in  this  area.  It  would 
to  assess 
also  be  highly  beneficial 
the 
initiatives,  while 
effectiveness  of  these  new 
ensuring continuity and stability over time (79). 

targeted  programmes 

Digital  uptake  among  firms  is  progressing 
but  remains  uneven,  with  persistent  gaps  in 
SME  digital  maturity  and  the  diffusion  of 
advanced technologies. In 2025, 57.1% of SMEs 
in  Croatia  had  at  least  a  basic  level  of  digital 
the  EU  average 
intensity, 

remaining  below 

(76)  World  Bank,  2023,  Project  Appraisal  Document:  Digital, 

Innovation, and Green Technology Project. 

(77)  OECD  STIP  Compass:  International  Database  on  Science, 

Technology and Innovation Policy. 

(78)  In this respect, the centre of excellence for maritime robotics 
and  sustainable  blue  economy  innovation  (MARBLE)  brings 
together  universities,  research  institutes  and  companies  to 
support  applied  research,  technology  transfer  and  the 
developing  of  advanced  maritime  robotics  and  autonomous 
systems.  Additional  efforts  to  strengthen  industry-science 
collaboration  have  been  undertaken,  including  the  Targeted 
Scientific  Research  program  from  the  RRF,  Collaborative 
Scientific  Research  from  cohesion  policy,  as  well  as  the 
Challenge,  Professionalization  of  Research  Centres,  and 
Technology Scouting programs from DIGIT. 

(79)  The importance of continuity has been highlighted in various 
relevant  reports,  for  instance:  European  Commission,  2023, 
Policy  Support  Facility  (PSF)  to  support  early  stages  of 
innovation and science-business linkages in Croatia. 

01234567SEFIDEDKNLATFREU-27BESIITHULVESLUMTPTIECZCYHREEPLELSKBGLTRO 
  
 
 
(71.4%).  This  is  indicative  of  persistent  gaps  in 
SME digital maturity, despite gradual progress (see 
Annex 7). Uptake of advanced digital technologies 
remains  uneven.  Data  analytics,  despite  a  strong 
decline  from  51.7% 
in  2023  to  41.9%  of 
enterprises,  remains  a  relative  strength  compared 
with  the  EU  average  (39.8%).  Cloud  adoption 
increased  to  43.3%  of  enterprises  (EU:  46.7%), 
while  AI  adoption  reached  15.2%  (EU:  19.9%), 
indicating continued barriers (80) to wider diffusion 
of  advanced  technologies,  particularly  among 
SMEs.  To  support  further  adoption,  Croatia  is 
the  RRF, 
implementing 
for 
including  EUR 27.3  million 
digitalisation  and  EUR 9.95  million 
the 
digitalisation  voucher  programme,  aimed  at 
stimulating SME uptake of cloud and AI solutions. 
This support is reinforced by four European Digital 
Innovation  Hubs,  co-financed  by  cohesion  policy. 
These  provide  digital  maturity  assessments,  pre-
investment  testing  environments,  training  and 
advisory  services 
loan 
instruments  for  SMEs 
(EUR 168 million  under 
cohesion  policy)  are  also  aimed  at  supporting 
digital transition. 

for  grants 
for 

to  SMEs.  Meanwhile, 

investments  under 

Entrepreneurial dynamism 

scale-up 

potential 

Croatia’s  start-up  ecosystem  is  expanding, 
with Zagreb emerging as a regional hub, but 
Croatia’s 
remains 
constrained by limited access to risk capital. 
Zagreb  is  the  main  centre  of  start-up  activity  in 
Croatia (81)  and  is  home  to  two  unicorns  (82), 
Infobip  and  Rimac  Automobili,  which  contribute 
significantly  to  the  visibility  and  development  of 
the national start-up ecosystem. At the same time, 
in  deep-tech 
there 
development,  as  indicated  by  the  emergence  of 
initiatives such as the BIRD Incubator, focusing on 
AI,  machine  learning  and  data  analytics,  the 
competence  centre  for  semiconductors  (CROCCS), 

is  a  growing 

interest 

underdeveloped, 

and  the  deep-tech  venture  builder  Nuqleus  (83). 
However,  access  to  risk  capital  remains  a  major 
obstacle to developing a more vibrant start-up and 
scale-up  ecosystem.  The  Croatian 
financing 
landscape  still  relies  heavily  on  bank  loans  and 
internal  funds (84),  with  only  a  small  market  for 
risk  capital.  This  limits  the  availability  of  funding 
for  start-ups  and  scale-ups.  The  equity  market 
remains 
institutional 
investors  such  as  investment  funds,  insurance 
companies  and  pension  funds  play  only  a  minor 
role  in  providing  equity  finance.  As  a  result,  the 
venture capital market represents only 0.015% of 
GDP,  well  below  the  EU  average  of  0.06%.  This 
suggests a need to strengthen risk-capital markets 
and  diversify  funding  sources  for  start-ups  and 
scale-ups,  in  line  with  the  2025  CSR  on  boosting 
access 
for 
businesses (see Annex 6). 

to  diverse  sources  of  financing 

and 

procedures 

administrative 

remains  an  obstacle 

long,  complicated  and 

and 
Heavy 
regulatory  complexity  continue  to  hinder 
business creation and growth, despite recent 
improvement  in  the  business  environment. 
to 
Heavy  bureaucracy 
business  creation,  with  regulatory  procedures 
perceived  as 
lacking 
stability  and  predictability  for  companies (85)  (see 
Annex  5).  This  weighs  particularly  on  innovative 
and  young  firms,  which  are  more  sensitive  to 
administrative  delays  and  uncertainty.  The 
adoption of the euro in 2023 has lowered barriers 
for  Croatian  start-ups  to  expand 
into  other 
European  markets  by  reducing  transaction  costs 
and currency risks. However, there is still a need to 
further  streamline  regulatory  frameworks  and 
administrative  procedures  to  support  and  develop 
a more dynamic start-up and scale-up ecosystem. 

recent 

ICT,  despite 

Skills shortages persist, particularly in STEM 
and 
to 
strengthen  entrepreneurial  skills.  Croatia 
faces  labour  and  skills  shortages.  The  number  of 
graduates  in  science,  engineering  and  computing 
has risen and is now close to the EU  average (86), 

initiatives 

to 

(80)  The Digital Decade 2025 country report for Croatia points to 
the  wider  diffusion  of  advanced  digital 
barriers 
technologies.  These  include  shortages  of  digital  skills  and 
labour  market  mismatches,  fragmentation  of  support 
instruments,  and  the  absence  of  a  dedicated  national 
strategy to stimulate widespread adoption across sectors. 

(81)  Startup Blink, 2025, Startup Ecosystem Report. 

(82)  New  companies  with  a  market  capitalisation  of  over  one 

billion dollars. 

(83)  Nuqleus  has  been  supported  by  the  Ministry  of  Science, 
Education  and  Youth,  through  the  DIGIT  project  to  develop 
the startup ecosystem. 

(84)  OECD,  2023, 

Improving  the  business  environment  to 

accelerate convergence in Croatia. 

(85)  Startup Europe Network 2025. 

(86)  The  number  of  new  graduates  per  thousand  population 
active  population  in  science  and engineering  and  in  ICT  has 

54 

 
 
 
 
opportunities 

understand the societal and environmental impact 
of  their  actions.  Entrepreneurial  experiences  are 
further encouraged as extracurricular activities (88). 
Nevertheless,  some  gaps  remain.  There  is  no 
comprehensive teacher competence framework for 
entrepreneurship, although there are references to 
in 
training 
entrepreneurship 
education  for  teachers. 
In  higher  education, 
entrepreneurial initiatives tend to be implemented 
on  an  ad  hoc  basis,  with  limited  institutional 
support  or  recognition.  There  are  several  factors 
including  underdeveloped  human 
behind  this, 
in  higher  education 
resources  management 
institutions, strong autonomy  at faculty level,  and 
sporadic 
and 
for 
entrepreneurship. 
In  most  Croatian  higher 
education  institutions,  centres  of  expertise  are 
located in faculties of economics and business (89), 
which  may  limit  the  diffusion  of  entrepreneurial 
skills across other disciplines. 

innovation 

funding 

to 

skills 

yet firms still report a lack of skilled staff as one 
of  the  main  barriers  to  investment (87).  There  is 
also a need to further develop the entrepreneurial 
skills  of  researchers,  which  are  important  for 
knowledge  and 
transfer.  Further 
technology 
improvements are expected from the reforms and 
investments  implemented  under  the  RRP  and 
cohesion policy, in particular through measures to 
upskill  SME  staff  in  areas  linked  to  S3  and 
Strategic Technologies for Europe (STEP)  priorities 
and 
for 
support  entrepreneurial 
researchers.  Ensuring  these  measures’  long-term 
impact  will  depend  on  building  on  them  and 
ensuring  their  continuity.  This 
is  particularly 
relevant  for  measures  aimed  at  improving  the 
quality of R&D careers in STEM and ICT, supporting 
the  career  development  of  young  researchers, 
promoting  international  mobility  and  encouraging 
experience in the private sector. While Croatia has 
a  pool  of  skilled  tech  talent,  some  younger 
entrepreneurs  choose  to  register  their  companies 
abroad,  which  may  reflect  a  perceived  advantage 
in the business environment elsewhere. To attract 
international  talents,  Croatia  has  introduced  a 
digital nomad visa, but its impact remains unclear, 
as  digital  nomads  typically  do  not  stay  in  one 
location for extended periods. 

is  a  cross-
Entrepreneurship  education 
curricular  subject  in  primary  and  secondary 
education,  but  remains  more  fragmented  in 
higher  education.  Entrepreneurial  skills  are 
mentioned  in  several  strategic  and  regulatory 
documents,  but  there  is  currently  no  strategy  for 
entrepreneurship  education.  Croatia  is  among  the 
countries  that  apply  a  cross-curricular  approach, 
with  entrepreneurship  identified  as  one  of  the 
seven  cross-cutting 
the  national 
curriculum for primary and secondary education. In 
the 
2024,  Croatia  developed  guidelines  for 
implementation  of  all  seven  cross-curricular 
themes.  The  guidelines  are  helping  integrate  the 
identify 
themes 
into 
improve 
implementation 
collaboration  between 
this 
framework,  pupils  are  encouraged  to  recognise 
resource scarcity in their immediate surroundings, 
develop  attitudes  towards  valuing  resources  and 

subject 
opportunities 

curricula, 
and 

teachers.  Within 

themes 

in 

increased over the last decade, from 12.0 in 2013 to 17.0 in 
2023 for science and engineering, and from 2.50 in 2013 to 
4.05 in 2023 for ICT. 

(88)  European 

2025, 
Entrepreneurship  education  at  school  in  Europe  –  2025. 
Eurydice Report. 

Commission/EACEA/Eurydice, 

(87)  European  Investment  Bank,  2025,  EIB  Investment  Survey 

(89)  Kitagawa,  F,  2019,  Supporting  Entrepreneurship  and 

2025: Croatia overview. 

Innovation in Higher Education in Croatia, OECD. 

55 

 
 
 
Table A4.1:  Key innovation indicators 

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

56 

R&D intensity (gross domestic expenditure on R&D as % of GDP)0.730.821.241.421.371.35:2.243.44Public expenditure on R&D as % of GDP0.410.40.650.650.610.61:0.720.64Scientific publications of the country within the top 10% most-cited publications worldwide as % of total publications of the country 3.444.194.584.53:::9.4412.31Researchers (FTEs) employed by public sector (Gov+HEI) per thousand active population3.12.94.23.94.23.9:4.3:International co-publications as % of total number of publications28.6438.2342.6742.7341.2345.34:57.24:Business enterprise expenditure on R&D (BERD) as % of GDP0.320.420.590.770.750.74:1.492.69Business enterprise expenditure on R&D (BERD) performed by SMEs as % of GDP0.140.130.230.300.24::0.470.30Researchers employed by business per thousand active population0.70.61.31.81.51.4:5.9:Patent applications filed under the Patent Cooperation Treaty per billion GDP (in PPS €)1.070.680.740.73:::2.812.20Employment share of high-growth enterprises measured in employment (%):::1.371.43::0.87:SMEs with at least a basic level of digital intensity% SMEs (EU Digital Decade target by 2030: 90%)::::55.97:57.0971.39:Data analytics adoption% enterprises (EU Digital Decade target by 2030: 75%)::::51.68:41.9039.85:Cloud adoption% enterprises (EU Digital Decade target by 2030: 75%)::::40.7338.5543.3046.69:Artificial intelligence adoption % enterprises (EU Digital Decade target by 2030: 75%)::::7.8911.7615.1919.95:Public-private scientific co-publications as % of total number of publications7.877.158.468.208.808.35:7.62:Public expenditure on R&D financed by business enterprises (national) as % of GDP0.030.040.030.02:::0.060.02Total public-sector support for BERD as % of GDP0.0410.0000.0530.0730.061::0.21:R&D tax incentives: foregone revenues as % of GDP0.0310.0000.0130.0030.001::0.100.16BERD financed by the public sector (national and abroad) as % of GDP 0.0100.040.0700.060::0.11:Venture capital (market statistics) as % of GDP (calculated as a 3-year moving average)0.0030.0060.0100.0350.0270.015:0.06:Seed stage funding share (% of GDP)0.0000.0000.0020.0070.0060.006:0.01:Start-up stage funding share (% of GDP)0.0000.0060.0070.0120.0070.003:0.03:Later stage funding share (as % of GDP)0.0030.0000.0010.0160.0140.006:0.03:New graduates in science & engineering per thousand population aged 25-34:13.118.017.117.0::16.8:Graduates in the field of computing per thousand population aged 25-34:2.73.53.84.0::3.8:Science and innovative ecosystemsCROATIA2010201520202022202320242025EU average (1)USHeadline indicatorInnovative talentR&D investment & researchers employed in businessesInnovation outputsDigitalisation of businessesAcademia-business collaboration Public support for business innovationFinancing innovation 
 
 
 
 
 
 
 
 
 
 
  
 
 
ANNEX 5: SINGLE MARKET AND INDUSTRY 

The 

2025 

Country 

beyond 

improve 

tourism, 

including 

is  taking  steps  to 

Croatia 
its 
business environment, but further reductions 
in  administrative  burdens  remain  essential 
for  businesses.  At  the  same  time,  stronger 
support is needed to develop new engines of 
growth 
a 
competitive  and  innovative  manufacturing 
sector. 
Specific 
Recommendation  (CSR)  3  (90)  called  for  measures 
to  further  simplify  regulation,  improve  regulatory 
tools  and  reduce  administrative  burden  through 
digitalisation,  to  facilitate  business  creation  and 
expansion.  Under  its  Recovery  and  Resilience  Plan 
(RRP)  (91), Croatia is implementing the fifth action 
plan  for  reducing  the  administrative  burden  and 
has  completed  the  third  Action  Plan  for  the 
liberalisation  of  services  markets,  but  further 
simplification  of  regulation  and  reduction  of  the 
administrative  burden  remain  key  for  businesses. 
At  the  same  time,  while  summer  coastal  tourism 
may  be  approaching  its  capacity  limits,  Croatia 
needs to diversify its engines of growth, including 
by  developing  a  strong  manufacturing  sector. 
However,  productivity  in  Croatian  manufacturing 
remains  well  below  the  EU  average,  reflecting 
limited  innovation  and  low  economies  of  scale. 
Business  expenditure  on  research  and  innovation 
also lags significantly behind EU levels.  

Business dynamics 

Business creation has been dynamic. Between 
2021 and the end of 2025, business registrations 
increased by 29.5%, an increase much larger than 
in  the  EU 
(+12.5%).  Business  creation  was 
particularly  dynamic  in  the  sectors  of  education, 
human  health  and  social  services,  as  well  as  in 
transportation  and  storage (92).  Also  on  a  positive 
note,  between  2021  and  the  end  of  2025 
bankruptcies  decreased  by  21%,  while  they 
increased by 96% in the EU.   

(90)  Council 

recommendation  on 

social, 
employment,  structural  and  budgetary  policies  of  Croatia, 
1/7/2025. 

the  economic, 

(91)  European  Commission  (EC),  Annex  to  the  Commission 
IMPLEMENTING  DECISION, 

for  a  COUNCIL 

Proposal 
22/10/2025, measure C1.1.1. R1. 

SMEs  are  growing  faster  than  in  the  rest  of 
the EU. SMEs are a major component of Croatia’s 
economy: they represent 62.4% of the firms’ value 
added (93), which is larger than in the EU (53.6%). 
In 2024, their inflation-adjusted value added grew 
by  1.1%,  a  performance  better  than  in  the  EU  (-
0.2%).  All  size  classes  experienced  growth,  with 
the highest growth seen in micro-enterprises, with 
2.0%  (1.9%  in  the  EU).  Construction,  one  of  the 
biggest  industrial  ecosystems  in  Croatia,  saw 
significant  growth:  its  inflation-adjusted  value 
added  grew  by  9.6%.  Another  key  ecosystem  for 
the  national  economy,  tourism,  thrived  as  well, 
with  growth  rates  exceeding  2.3%.  In  2025,  SME 
real value added is expected to grow by 3.4% (vs 
1.6% in the EU).  

Business  and  public  investment  are  higher 
than  in  the  EU  on  average,  but  business 
investment  in  research  and  development 
remains  low.  Business  investment  has  regularly 
increased  over  the  last  years  and  reached  14.3% 
of  GDP  in  2024  (against  12.6%  for  the  EU27 
average)  (see  Table  A5.1).  However,  business 
expenditure in research and development remains 
low at 0.74% of the GDP in 2024, with significant 
regional disparities (see Annex 4 and Annex 18). To 
promote  investment,  Croatia  designed  a  strategic 
framework under its Recovery and Resilience Plan 
(RRP) (94). According to Croatia, the implementation 
of  the  Action  Plan  under  this  strategic  framework 
is progressing as scheduled. Public investment has 
also increased since 2021, although less regularly. 
In 2024, it reached 5.2% of Croatia’s GDP (against 
3.7%  for  the  EU27  average),  boosted  by  the 
implementation  of  the  RRP  and  cohesion  policy 
programmes.  In  this  respect,  the  IMF  warns  that 
one  of  the  highest  risks  for  Croatia  stems  from 
possible  delays  in  the  implementation  of  public 
the 
reforms, 
investments  and 
administrative capacity constraints, combined with 
supply disruptions and labour shortages (95). 

considering 

Productivity  gains  have  been  uneven  across 
sectors.  Croatia’s  labour  productivity  is  still  only 
at  68.7%  of  the  EU’s  (see  table  A5.1).  Several 
factors  hamper  Croatia’s  productivity  level  and 

(93)  EC, 2025 SME country fact sheet- Croatia.  

(94)  EC,  Annex  to  the  proposal  for  a  Council  Implementing 

decision, 22/10/2025, measure C1.1.1. R3. 

(92)  Eurostat, dataset: sts_rb_q  NACE sectors B-S-X-O-S94, index 

(95)  IMF,  Staff  report  for  the  2025  article  IV  consultation, 

2021=100, time value =2025-Q4. 

20/11/2025.  

57 

 
 
 
 
 
 
long-established 

growth,  including  the  lack  of  business  innovation, 
low 
the  presence  of  many 
productivity  firms  and  small  businesses  with 
limited investment capacities. In terms of sectors, 
productivity gains have been uneven, with stronger 
(boosted  by  EU 
performance 
transfers)  and  tourism,  while  productivity  growth 
has  been  slower  in  digital  services  and  in  the 
manufacturing sector. In the manufacturing sector, 
labour  productivity  is  at  around  40%  of  EU 
average with only limited convergence, partly due 
to limited innovation and scale (96).  

in  construction 

Business environment 

The  lack  of  skilled  staff  remains  the  main 
obstacle  to  business  investment.  According  to 
the  2025  EIB  investment  survey  (97),  Croatian 
businesses  find  that  the  main  obstacles  to 
investment  are  the  availability  of  skilled  staff 
(90% find it to be an obstacle vs. 79% in the EU), 
the  uncertainty  about  the  future  (84%  vs.  83%) 
and  the  energy  costs  (77%  vs.  75%).  The  results 
are similar to last year. Businesses complain about 
both  the  lack  of  skills  and  the  shortage  of 
workforce.  The  biggest  labour  shortfalls  are  in 
construction,  manufacturing,  hospitality,  sales, 
transport and ICT (see Annex 11).  

(98), 

Regulations  are  less  of  an  obstacle  than  in 
the  past.  According  to  the  2025  EIB  investment 
survey 
labour  regulations  and  business 
regulations  constitute  an  obstacle  to  investment 
for  respectively  66%  and  64%  of  Croatian  firms 
(against 65% and 69% in the EU). The year before, 
68%  of  firms  in  Croatia  found  that  business 
regulations  were  an  obstacle  to 
investment 
is 
(against  66% 
confirmed  by  the  answers  to  another  question  of 
the same survey: 27% of firms in Croatia find that 
business regulations are a major obstacle for long 
term  investment,  against  27.7%  the  year  before 
(see  the  table  A5.1).  It  is  well  below  the  EU  27 
average (34%), although still slightly above the EU 
median (26%).  

in  the  EU).  This  progress 

(96)  Reply of Croatia to Commission’s questionnaire, 12/2025.  

(97)  European Investment Survey (EIBIS) 2025, 10/2025, p.30. 

(98)  European Investment Survey (EIBIS) 2025, 10/2025, p.30. 

58 

burden 

reduction 

This progress reflects the measures taken by 
Croatia  to  reduce  administrative  burdens. 
Under its RRP, Croatia adopted a 5th action plan for 
administrative 
in  March 
2024 (99). It contains 103 measures, with planned 
financial relief of EUR 364 million, focusing on key 
economic  areas  such  as  tax  policy,  tourism,  the 
pension  system,  agriculture and 
transport. By 
February  2026,  63  measures  were  implemented. 
According  to  Croatia (100),  this  should  result  in  a 
financial relief of EUR 346 million. Implementation 
is  ongoing.  Croatia  plans  to  have  most  of  the 
remaining measures completed  by the end of the 
first  quarter  of  2026,  with  total  financial  relief 
exceeding EUR 350 million.  

lengthy 

further 

reductions 

in 
However, 
administrative  burdens  remain  key  for 
businesses. Despite this improvement, the cost of 
the  administrative  burden  for  businesses  is  still 
high:  25%  of  firms  employ  staff  dedicated  to 
regulatory  compliance  (vs.  14%  in  the  EU),  and 
16%  of  firms  need  more  than  10%  of  their 
workforce  for  compliance  tasks  (vs.  11%  in  the 
EU) (101).  Particular  areas  of  concern  are (102): 
(i) fragmented  permitting  procedures  across 
different  authorities  and 
licensing 
processes  for  business  establishment  (103),  (ii) 
complex  reporting  obligations  and  (iii)  limited 
interoperability  of  digital  registries  and  platforms 
(see Annex 7). Regarding permitting and licensing, 
business organisations (104) find that the processes 
are slow, fragmented and sometimes overlapping, 
especially  where 
level  authorities  are 
involved.  They  ask  for  faster  procedures,  the 
application of the principle “silence is compliance,” 
a 
required  from 
the  documents 
businesses  and  the  removal  of  unnecessary 
additional  checks.  The  World  Bank  also  identified 
several  shortcomings  regarding  regulations  and 
administrative  burden  (105).  The  time  needed  to 

review  of 

local 

(99)  Annex 

to 

the  Commission  Proposal  for  a  COUNCIL 

IMPLEMENTING DECISION , 22/10/2025, C1.1.1 R1-I2. 

(100) Information provided by Croatia on 19/2/2026. 

(101) European Investment Survey (EIBIS) 2025, 10/2025. 

(102) Reply by Croatia to Commission questionnaire, 12/2025.  

(103) Complicated business establishment and operations are one 
of the ten Single Market barriers that should be addressed in 
priority (EC, The Single Market: our European home market in 
an uncertain world, 21.05.2025). 

(104) Meeting with business organisations, 12/2025. 

(105) World  Bank,  Business  Ready  –  2025  economy  profile: 

Croatia. 

 
 
 
independent  and 

obtain a construction-related permit (90 days) and 
an environmental permit (120 days) is particularly 
long.  Digital  public  services  are 
lacking  for 
environmental permits. Regarding the resolution of 
commercial  disputes,  many  consider  that  courts 
impartial  and  that 
are  not 
alternative dispute resolutions, such as arbitration 
and mediation, are not reliable. The time to resolve 
a  liquidation  proceeding  is  particularly  long  (35 
months).  With  regards  to  simplification  measures 
for  maritime  transport,  Croatia  has  not  yet 
implemented 
the  European  Maritime  Single 
Window environment (EMSWe)  (106), a key tool for 
efficiency  in  the  shipping  sector,  applicable  since 
15 August 2025.  

Access  to  loans  is  good  comparatively  to 
other  Member  States,  while  access  to  equity 
financing remains slightly more difficult than 
in  the  rest  of  the  EU  despite  significant 
progress.  44%  of  Croatian  firms  report  that 
access  to  finance  is  an  obstacle  to  investment, 
which is in line with the EU average  (107). Firms in 
Croatia rely more than the EU average on funding 
from  banks  and  less  on  funding  from  capital 
markets  (see  Annex  6).  Indeed,  access  to  bank 
loans is comparatively good as reflected by the EIF 
index on access to loan (see table A5.1). Access to 
equity  has  significantly  improved  compared  to 
other Member States but is still slightly below the 
average  (see  the  EIF  index  on  access  to  equity  in 
table  A5.1).  In  particular,  access  to  risk  capital 
remains  limited,  with  insufficient  availability  of 
funding for start-ups and scale-ups representing a 
key  bottleneck  to  the  development  of  a  more 
dynamic start-up ecosystem (see Annex 4). 

Businesses  are  increasingly  suffering  from 
late  payments  (108)  from  other  businesses. 
According to the EU payment observatory (109), the 
average  business-to-business  (B-to-B)  payment 
period reached 64 days in 2024, the longest in the 
EU.  The  payment  period  reflects  the  sum  of 
contractual payment terms and payment delays. In 

(106) EC,  European  Maritime  Single  Window  environment 
report, 

analysis 

survey 

implementation  monitoring 
31/10/2025. 

transactions, 

B-to-B 
the  average  contractual 
payment term reached 46 days, also the longest in 
the  EU.  In  addition,  the  average  payment  delay 
amounted to 17.8 days, broadly in line with the EU 
average  but  representing  a  significant  increase 
compared  to  2021  (from  11.6  days  in  2021  to 
17.8  days  in  2025).  Among  sectors,  construction 
recorded the worst payment performance in 2024, 
despite recent improvements. 

Despite  strong  recent  progress,  risks  to  the 
deployment  of  fibre-to-the-premises  (FTTP) 
and  very  high-capacity  networks  (VHCN),  as 
well as persistent gaps in mid-band 5G, could 
slow  Croatia’s  progress  towards  building  its 
connectivity  infrastructure.  36%  of  Croatian 
infrastructure  is  an 
firms  report  that  digital 
obstacle  to  investment  (EU  average:  44%)  (110). 
VHCN  coverage increased from 67.8% in 2023 to 
78.9%  in  2024,  but  remained  below  the  EU 
average  (82.5%),  while  rural  VHCN  coverage 
reached  49.1%,  still  well  below  the  EU  average 
(61.9%). FTTP coverage rose from 62.1% in 2023 
to  75.4%  in  2024,  exceeding  the  EU  average 
(69.2%),  although  rural  FTTP  coverage  (44.4%) 
continued  to  lag  behind  the  EU  average  (58.8%). 
Overall,  in  2024,  5G  coverage  reached  94.2%, 
broadly  in  line  with  the  EU  average  (94.3%),  with 
rural  coverage  (86.3%)  above  the  EU  average 
(79.6%),  while  coverage  in  the  3.4–3.8  GHz  band 
remained limited at 45.2% nationally and 8.5% in 
rural  areas,  compared  to  EU  averages  of  67.7% 
and  26.2%, 
In  2024,  no  new 
measures  for  VHCN  and  FTTP  roll-out  were 
introduced.    Reduction  in  the  scope  of  the  RRF-
for 
funded  National  Framework  Programme 
Broadband 
increased 
Infrastructure 
implementation  risks,  particularly  for  FTTP  and 
VHCN  deployment  in  suburban  and  rural  areas.  
Major  risks  for  the  development  of  overall 
broadband 
infrastructure,  particularly  affecting 
suburban and rural areas, as well as islands, arose 
from  a  recent  removal  of  a  project  on  Next 
Generation  Network  (NGN)  broadband  backhaul 
infrastructure  from  a  cohesion  policy  programme, 
which  was  covering  approximately  50.2%  of  all 
rural and suburban settlements in Croatia. 

respectively. 

has 

(107) European Investment  Bank  Investment  Survey  (EIBIS) 2025, 

10/2025, p.30. 

(108) Part of the barriers highlighted in the Single market strategy 
(“Terrible  10”)  and  the  2026  Annual  Single  Market  and 
Competitiveness Report. 

(110) European Investment  Bank  Investment  Survey  (EIBIS) 2025, 

(109) EC, EU payment observatory, annual report 2025, 12/2025. 

10/2025, p.30. 

59 

 
 
 
Single Market 

The  integration  of  Croatian  firms  into  the 
Single  Market  lags  slightly  behind  the  EU 
average.  Croatia’s  trade  integration  into  the 
Single  Market  was  measured  at  38.1%  of  GDP  in 
2025 vs. 40.7% in the EU (see Table A5.1).  

efficient 

its  national  standardisation  body, 

An 
standardisation 
national 
system (111)  plays  a  critical  role  in  providing 
Croatia’s  industry  with  easy  market  access 
and  improve  their  competitiveness.  As  such, 
Croatia  should  further  support  Hrvatski  zavod  za 
norme, 
in 
transitioning  towards  a  digitalised  process.  This  is 
a  key  requirement  to  ensure  a  faster  and  more 
inclusive 
process. 
Moreover, while Hrvatski zavod za norme reported 
in  its  last  annual  report  that  over  1650  Croatian 
experts  take  part  in  the  standardisation  process, 
the  rise  of  new  technologies,  such  as  Artificial 
Intelligence  and  quantum,  call  for  additional 
resources  to  support  the  upskilling  of  Croatia’s 
experts in these critical sectors. 

standardisation 

national 

Although  the  public  procurement  framework 
is  competition-friendly,  the  share  of  single 
bids  is  increasing.  According  to  OECD,  Croatia 
has  one  of  the  most  competition-friendly  public 
frameworks (112).  Direct  awards 
procurement 
represented  5%  of  the  awards  in  2025,  slightly 
less  than  the  EU  median  of  6%  (see  Table  A5.1). 
However,  the  share  of  single  bids  has  increased 
and  is  slightly  above  the  EU  median  with  31% 
against  27%  (see  Table  A5.1).  According  to  the 
World  Bank  (113),  many  firms  find  it  difficult  to 
meet 
to 
participate  in  tenders.  To  improve  the  situation, 
Croatia  adopted  several  measures,  including  the 
publication  of  SME-specific  guidelines  on  the 
Public  Procurement  Portal,  the  organisation  of 
targeted workshops (114)  and the upgrading of the 

administrative 

requirements 

the 

(111) Rigid  and  outdated  standardisation  system  has  been 
identified  as  one  of  the  ‘Terrible  Ten’  barriers  to  the  Single 
Market  that  have  been  highlighted  in  the  Single  market 
strategy, 2025.  

(112) OECD, 2024, Product Market Regulation Indicators. 

(113) World  Bank,  Business  Ready  –  2025  economy  profile: 

Croatia. 

national  platform  for  public  tenders,  including 
simplified  interactive  forms  for  bidders  and  free 
notifications to SMEs about procedures of interest 
(115).  

of 

stronger 

systems, 

participation 

interoperable 
and 

However,  Croatia’s  eProcurement  landscape 
and  limited  lifecycle  data  highlight  the  need 
common 
for 
data 
standards, 
governance. Croatia’s  centralised  eProcurement 
service allows economic operators to use a single 
system  to  access  all  national  public  procurement 
procedures.  In  addition,  Croatia  has  implemented 
features  within  their  eProcurement  platform  that 
facilitates 
foreign 
the 
suppliers.   However,  some 
issues remain  that 
create  complexity  and  barriers  to participation  for 
firms  of  other  Member  States.  Firms  from  other 
Member  States  must  use  the  Croatian  system 
to participate in  public  procurement  procedures. 
This  barrier  could  be  removed  by  introducing 
interoperability  and  common  standards.  Although 
Croatia has  implemented  the  once-only  principle 
within 
its  national  eProcurement systems and 
plans  to  further  strengthen  this  principle through 
law  amendments, buyers  across  the  EU still lack 
access to  relevant  evidence. Regarding  reporting 
and  monitoring  of  the  public  procurement  data, 
Croatia  has  dedicated  services  within  the  Ministry 
of  Economy,  but  the  reporting  and  monitoring  do 
not  fully  cover  the  public  procurement  lifecycle. 
Further  reinforcement  of  data  collection  and 
analysis would  support  data  driven management 
of the public procurement lifecycle. 

Businesses  rate  corruption  risks  in  public 
procurement above the EU average. In Croatia, 
78%  of  companies  (EU  average:  51%)  consider 
collusive bidding in public procurement procedures 
to  be  very  or  fairly  widespread,  and  75%  (EU 
average: 58%)  consider tailor-made specifications 
for  particular  companies  to  be  'very'  or  'fairly 
widespread' practice. Among companies that have 
in  a  public 
experience 
procurement procedure, 27% think that corruption 
has prevented them from winning a public tender 
or  a  public  procurement  contract  in  practice  (EU 
average:  25%)  (116).  27%  of  businesses  perceive 
the 
the  public 
procurement  review  body  (the  State  Commission 

in  and  participated 

independence  of 

level  of 

(115) Croatia’s reply to Commission’s questionnaire, 12/2025. 

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

monitoring reporting. 

(116) EC, Flash Eurobarometer 557, p.133. 

60 

 
 
 
for Supervision of Public Procurement Procedures-
DKOM)  as  ‘very’  or  ‘fairly  good’  when  it  is 
reviewing  public  procurement  cases  (117).  The 
Electronic  Public  Procurement  Notice  (EOJN)  RH 
platform has been upgraded to simplify processes 
and  make  information  more  accessible  to  the 
public and oversight authorities to enhance a level 
playing field for businesses (118).  

the  Single  Market 

Croatia is now among the best performers in 
implementing 
rules. 
Compared to last year, Croatia drastically reduced 
its  average  delay  in  transposing  Single  Market 
directives  into  national  law:  it  is  now  well  below 
the EU average (5.5 months vs. 9.7 months in the 
EU). The percentage of directives not transposed in 
2025  (0.9%)  remains  stable  compared  to  2024 
and is at a level below both the EU average (1.1%) 
and the 1% target set by the EU Council (see table 
A5.1).  In  addition,  the  percentage  of  directives 
incorrectly transposed continues decreasing and is 
now  significantly  below  the  EU  average  (0.8%  vs. 
1.1%) (see Table A5.1). Regarding the handling of 
infringement  cases,  Croatia  is  also  performing 
pending  Single  Market 
well,  with 
infringements since 2023. In 2025, Croatia had 18 
pending  infringement  cases,  against  25  in  the 
Member States on average. In 2025, the resolution 
rate  of  SOLVIT  cases  (93.9%)  was  even  higher 
than in 2024 and was well above the EU average 
(84.6%) (see Table A5.1).  

fewer 

surveillance 

investigations 

Compliance  of  products circulating  in  the 
Single Market (119) is key to ensuring a level-
playing  field  for  law-abiding  companies  and 
the safety of consumers. In Croatia, the number 
of  market 
has 
increased  compared  with  2019.  In  2025,  national 
authorities  reported  in  the  EU  system  for  market 
surveillance  (ICSMS)  a  total  of 98.9 investigations 
per one million inhabitants, which is lower than the 
The 
EU median 
of 
number 
notifications remains limited 
in  absolute  terms, 
which  may  also  be  the  result  of  insufficient  IT 
national interoperability to the ICSMS system. 

136.2. 

of 

(117) EC, 

Justice  Scoreboard 
Eurobarometer 555, 1/2025, p. 39. 

(2025),  p.  53;  EC,  Flash 

(118) EC, Rule of Law Report- Country Chapter Croatia (2025), pp. 

11-12. 

(119) Part  of  the  barriers  highlighted 

in  the Single  market 
strategy (‘Terrible Ten’)  and  the 2026  Annual  Single  Market 
and Competitiveness Report. 

61 

Regulatory  restrictions  on  professions  (120) 
are  being  reduced.  226  professions  are 
regulated  in  Croatia  (121),  which  is  more  than  the 
EU median (200). In 2023, according to the OECD 
(122),  restrictions  on  regulated  professions 
in 
Croatia  were  below  both  the  EU  and  OECD 
average,  except  for  notaries  and  real  estate 
agents. Notaries in Croatia were facing the highest 
restrictions  in  the  EU.  Under  its  RRP,  Croatia  has 
committed  to  simplifying or  removing  at least  50 
regulatory  requirements  for  professional  services, 
based  on  the  implementation  of  the  second  and 
third  Action  Plans  on  liberalisation  of  services 
markets  (123).  The Commission  found  that Croatia 
had  successfully  reached  this  target(124)  ,  by 
having  implemented  62  measures  simplifying  or 
removing regulatory requirements for professional 
services,  including  the  professions  of  lawyers, 
notaries, 
tax  advisors,  auditors,  pharmacists, 
physiotherapists,  architects,  engineers  and  tourist 
guides,  between  February  2020  and  September 
2025. 
or 
partially addressed 
the  World 
(125), including  several 
Bank’s recommendations 
recommendations  linked  to  the  registration  and 
membership  costs  of  professional  chambers,  the 
fragmented 
individual 
professions,  the  provision  of  the  post-graduate 
the  ownership  and 
professional  exam  and 
management restrictions on tax advisors. However, 
there is margin for further progress. In its answer 
the  European 
to  a  survey  carried  out  by 
Commission  between  December  2025  and 
February  2026,  Croatia  reported  that  it  had  fully 
implemented  only  3  of 
the  13 Commission 
recommendations from 2021(126).   

Those  measures 
several 

have 
of 

exclusive 

rights 

fully 

in 

(120) Restrictive  and  diverging  national  services  regulations  are 
one  of  the  ten  Single  Market  barriers  that  should  be 
addressed  in  priority.  EC,  The  Single  Market:  our  European 
home market in an uncertain world, 21.05.2025. 

(121) EC, Regulated Profession Database. 

(122) OECD, Product Market Regulation Indicators, 2024. 

(123) On  6  May  2025,  the  government  adopted  the  Third  Action 
Plan  for  the  Liberalisation  of  Services  Markets.  The  plan 
includes 21 measures to be implemented in 2025. 

(124) Commission’s positive assessment of Croatia’s 7th request 

payment, target 12, p.34, 1/12/2025. 

(125) World Bank, License to Compete - Reforming the Regulation 

of Professions in Croatia, 2020. 

(126) European  Commission,  2021, Communication  on  taking 
stock  of  and  updating  the  reform  recommendations  for 
regulation 
(2021)385. 
9/7/2021, Eur-lex.europa.eu. 

in  professional 

services, COM 

 
 
 
 
introduced 

to  be  exceptionally 

Croatia  has  set  price  caps on food,  but food 
prices  continued  to  increase  faster  than  in 
the  EU  and  euro  area  until  August  2025.  In 
response,  Croatia  has  set  price  caps  on  certain 
essential  products  (mainly  food).  The  number  of 
capped  products  increased  from  9  items  at  the 
end  of  2022  to  30  in  September  2023,  70  in 
February  2025  and  100  in  December  2025.  In 
addition,  Croatia  adopted  the  Act  on  Exceptional 
Price Control Measures. This Act has been in force 
It  enables  price  control 
since  March  2025. 
measures 
to 
prevent  the  negative  consequences  of  price 
changes,  mitigate  inflation,  prevent  monopolistic 
pricing 
extraordinary 
circumstances.  In  addition,  two  decisions  were 
adopted:  (i)  the  Decision  determining  the  highest 
prices of certain products (127) and (ii) the Decision 
on  publishing  price  lists  (128).  Price  caps  are 
susceptible to undermine free access by traders to 
the  market  in  conditions  of  effective  competition 
and  disturb  the  entire  supply  chain  (129).  Despite 
the  price  caps,  food  prices  have  continued  to 
increase  faster  in  Croatia  than  in  the  EU  and  the 
euro area (130). First analyses also indicate that the 
publication of price lists does not seem to have led 
to  a  significant  change  in  price  levels  and  price 
dispersion for food price products, possibly due to 
limited awareness raising about the available data 
and comparison possibilities (131). 

address 

other 

and 

So  far,  Croatia  has  not  addressed  or 
identified  the  reasons  why  food  prices  have 
increased more there than in the rest of the 
EU and euro area. The consumer price index has 
been  increasing  faster  than  the  producer  price 
indexes for food products over the past years (132), 
which  may  suggest  a  lack  of  competition  in  the 
retail  trade, anti-competitive practices in the food 
supply  chain  and/or  territorial  supply  constraints 

(127) Croatia, Official Gazette 142/2025. 

(128) Croatia, Official Gazette 75/2025. 

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

(130) EC, Food price monitoring tool; data available until 12/2025 

when this text was written. 

(131) EIZ,  Why  didn't  the  public  announcement  of  the  price  list 

the 

supply 

vertical 

(133). In the retail trade (covering the distribution of 
food  and  other  usual  consumption  products), 
according  to  the  OECD  (134),  Croatia  has  imposed 
high  regulatory  barriers  to  entry  and  competition. 
These  restrictions  can 
lead  to  higher  prices. 
Regarding  the  food  supply  chain,  the  Croatian 
competition  authority  expanded 
its  annual 
groceries  retail  market  inquiry  for  2024(135),  to 
include  potential  supply  restrictions.  In  addition,  it 
conducted  a sector  enquiry  into  the  relations  and 
terms of business between retailers and suppliers 
in 
for 
food, beverages and  household  hygiene  products. 
The enquiry did not identify structural competition 
concerns 
in  terms  of  prohibited  agreements 
between  market  participants,  although  certain 
practices, such as potential tying, will be subject to 
further  examination.  According  to  the  competition 
in  retail  prices  was 
authority,  the 
primarily  driven  by 
input  and 
the 
procurement  costs,  particularly  for  distributors 
who, based on the data, more frequently adjusted 
their price lists. This points to the need to examine 
all  drivers  of  the  inflation  of  food  products, 
including – but not limited to - the evolution of the 
costs  and  productivity  of  Croatia’s  agro-industry 
and wholesale and retail trade sectors.  

increase 

chain 

rise 

in 

Croatia  remains  outside  the  Unitary  Patent 
system.  Unlike  25  other  Member  States,  it  does 
not  participate  in  the  enhanced  cooperation  on 
unitary  patent  protection.  Joining  it  would  be  the 
first  step  towards  possible  integration  into  the 
unitary patent system. This has two consequences: 
firstly,  Croatian  and  non-Croatian  companies 
remain burdened by  the significant administrative 
costs of national validation and maintenance fees 
for  obtaining  patent  protection 
in  Croatia. 
Secondly, in Croatia European patents can only be 
enforced  in  national  courts  and  so  do  not  benefit 
from the advantages offered by the Unified Patent 
Court  in  terms  of  centralised  litigation.  For  all 
these  reasons,  by  refraining  from  joining  the 
less 
unitary  patent  system,  Croatia  may  be 
attractive, in terms of innovation support, than the 
Member  States  already  participating 
in  that 
system.  Finally,  the  fact  that  several  Member 

(133) Territorial supply constraints are one of the ten Single Market 
barriers (EC, The Single Market: our European home market in 
an uncertain world), 21.05.2025. 

equalize the prices in stores? 10/12/2025. 

(134) OECD, Product Market Regulation Country note Croatia, 2024. 

(132) Eurostat, Harmonised Index of consumer prices and domestic 

(135) Croatia’s  competition  authority,  Groceries  Retail  Market 

market- producer price index. 

Inquiry for 2024. 

62 

 
 
 
States  do  not  participate  in  the  unitary  patent 
system weakens the single market, making the EU 
less  attractive  for 
innovative 
entities.   

inventors  and 

Industry and economic security  

path 

higher 

towards 

Manufacturing  faces  several  challenges.  The 
industry represented only 15% of Croatia’s added 
value, against 19% in the EU on average, in 2024 
(136). Croatian industry  faces several  challenges in 
its 
productivity, 
competitiveness  and  decarbonisation,  such  as 
outdated  production  technology  in  some  sectors, 
the  lack  of  innovation  and  university-business 
linkages  (despite  some  good  examples  –  see 
Annex  4  and  Annex  18),  the  lack  of  capital  and 
labour,  relatively  high  social  welfare  contributions 
compared  to  its  neighbours,  among  the  highest 
electricity  prices  for  non-household  consumers  in 
the  EU,  and  complex  and  long  administrative 
procedures  in  some  areas,  for  instance  for  the 
approval of plant expansion. Those challenges add 
to the challenges faced by the EU industry overall, 
including rising Chinese imports, high gas price and 
volatile  prices  of  the  input  materials.  However, 
there  are  dynamic  industrial  companies  with  high 
added  value  production,  which  have  found  their 
niches, in particular in the energy sector, electrical 
equipment,  the  beverage  industry,  non-metallic 
minerals and construction materials. 

Croatia  has  set  the objective of  increasing 
in  GDP, 
the  share  of  manufacturing 
especially  in  high  value-added  sectors.  The 
ministry of economy is developing a National Plan 
for the development of industry for 2027-2034, to 
increase  production,  investment,  innovation  and 
skills.  Croatia  wants  to  connect  industry  with 
research  and  innovation  capacities,  reduce  the 
innovation  gap  of  critical  technologies  such  as 
artificial 
technology, 
biotechnology, encourage cooperation between the 
private  and  public 
the 
development  of  the  circular economy,  strengthen 
the  resilience  of  supply  chains,  improve  economic 
security  and  decrease  administrative  burdens,  to 
facilitate investment.  

sectors,  promote 

intelligence, 

quantum 

Clean  technology  manufacturing  capacities 
are limited, but there is potential for further 
growth.  These  capacities  include  makers  of  heat 
pumps,  solar  panels,  wind  energy  technologies, 
storage and batteries, grid components and hydro 
power  equipment  (137).  Croatia’s  exports  in  clean 
tech (138) represented less than 0.2% of its GDP in 
2022,  much  less  than  in  Bulgaria,  Poland  and 
Romania.  Most  of  those  exports  related  to  wind 
technologies.  Simulations  conducted  by  the  World 
Bank (139) 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. 

Croatia is increasing its support to clean tech 
and  is  making  progress  in  implementing  the 
Net  Zero  Industry  Act.  Croatia  is  promoting 
clean  tech  mainly  through:  (i)  financial  support  in 
the  form  of  tax  credits  and  subsidies  for  the 
implementation  of  clean  technology  projects,  and 
(ii)  support  for 
in  research  and 
investment 
development for producing energy from renewable 
sources  and  storing  energy.  In  the  framework  of 
the  implementation  of  the  Net  Zero  Industry  Act, 
Croatia  has  established  a  single  point  of  contact 
for net zero industry and published information on 
the  Ministry  of  Economy’s  website.  It  has  applied 
for  a  net-zero  strategic  project,  but  none  is 
confirmed yet. Croatia has not yet established net-
zero acceleration valleys but is working on it (140).  

industries  decreased 

Energy-intensive 
industries  are  suffering 
from  high  energy  prices.  Croatia’s  production 
from  energy-intensive 
in 
2024, down to slightly above the 2021 level  (141). 
Compared  to  the  EU  average,  Croatia’s  energy-
intensive  industries  are  faring  slightly  better, 
despite  suffering  from  the  increase  in  gas  prices, 
from 
2022, 
notably 
the sixth highest wholesale electricity  price  in  the 
EU,  above  the  EU  average  (see  Table  A5.1  and 

and 

in 

(137) 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. 

(138) Electrolysers,  electric  vehicles  batteries,  heat  pumps, 

solar, wind. 

(139) World  Bank,  Clean  tech  value  chains,  zooming  in  Croatia, 

12/2024. 

(140) Croatia’s reply to the EC questionnaire, 12/2025. 

(136) Source: Eurostat. Gross value added and income by detailed 
industry (NACE Rev.2) [nama_10_a64__custom_20588311]. 

(141) Eurostat,  Production  in  industry  –  annual  data,  sts_inpr_a, 
production of NACE codes C16, C17, C20, C22, C23; C24.  

63 

 
 
 
could  better 

To  reduce 
its  dependency  on  material 
recycle 
imports,  Croatia 
materials.  Circular  material  use  is  significantly 
below  the  EU  average  (5.9%  vs  12.2%)  and  has 
decreased  from  6.8%  in  2022  to  5.9%  in  2024 
(see  Table  A5.1).  Businesses  find  that  incentives 
for  businesses  to  engage  in  recycling  are  lacking. 
On  a  more  positive  note, the  recycling  rate  for  e-
waste,  a  key  source  of  critical  raw  materials,  is 
above the EU average, at 90% in 2021. Croatia is 
taking  measures 
its  circular 
economy (see Annex 8).  

to  strengthen 

Annex  9).  Croatia  has  taken  measures  to  support 
its  energy-intensive 
the  decarbonisation  of 
industry 
regulatory 
framework suffers from bottlenecks (see Annex 9). 

(see  Annex  8),  but 

the 

Graph A5.1: Manufacturing industry production: 
total and selected sector, index (2021=100), 
2015-2024 

Source: Eurostat 

Industry  depends  heavily  on 
imports  of 
materials,  including  critical  raw  materials. 
Croatia’s  material  import  dependency  is  higher 
than  the  EU  average  (37.6%  vs.  22.4%)  and  has 
been increasing over the last years from 35.5% in 
2021  to  37.6%  in  2024  (see  table  A5.1).  Its 
dependency  reaches  100%  for  metal  ores  and 
19.7% for non-metallic minerals (142). In 2023, the 
most important non-food,  non-fuel  raw materials’ 
imports  by  value  included  construction  materials, 
wood 
(mainly  from  Bosnia-Herzegovina)  and 
fertilisers  (mainly  from  Turkey  and  Russia).  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) (143). Croatia has 
no  strategic  project  approved  under  the  Critical 
Raw Material Act (144).  

(primarily 

coking 

coal 

(142) Eurostat, dataset: env_ac_mid.  

(143) EC, Raw material Information System, country profile Croatia. 

(144) EC, strategic projects under the CRMA. 

64 

7075808590951001052015201620172018201920202021202220232024ManufacturingManufacture of wood and of products of wood and cork, except furniture; manufacture ofarticles of straw and plaiting materialsManufacture of paper and paper productsManufacture of chemicals and chemical productsManufacture of rubber and plastic productsManufacture of other non-metallic mineral productsManufacture of basic metals 
      
 
Table A5.1:  Single Market and Industry 

(Continued on the next page) 

65 

POLICY AREA20212022202320242025EU-27 average65.166.570.968.368.0100.011.412.914.014.3-12.64.84.15.75.2-3.9Business environment and simplification38.727.829.227.727.034.00.430.680.780.91-0.430.080.090.110.18-0.1911.613.412.914.317.817.410.015.217.49.17.913.6from private entities in the previous or current quarter---50.944.547.1from public entities in the previous or current quarter---18.313.515.938.745.240.339.038.140.7-----0.0502123222731276554561.41.10.60.90.911.41.21.10.90.81.110092.99388.993.584.62220221918250.15670.28850.35570.30200.29150.1462CroatiaINDICATOR NAMEBusiness environment and investmentProductivity and investmentLabour productivity (GDP per hour worked in PPP terms), % of EU271Business investment (share of GDP)1Public investment (share of GDP)1Impact of regulation on long-term investment, % of firms reporting business regulation as a major obstacle2SME liquidityEIF Access to Finance for SMEs index - loans3EIF Access to Finance for SMEs index - equity3Late paymentsPayment gap - corporates B2B, difference in days between offered and actual payment4Payment gap - public sector, difference in days between offered and actual payment4Share of SMEs experiencing late payments, %5Industry and economic securitySingle Market IntegrationEU trade integration, average(intra-EU imports + intra EU exports)/GDP, %1EEA Services Trade Restrictiveness index6Public procurementSingle bids, % of total contractors7*Direct awards, % of negotiated procedures7*ComplianceTransposition deficit, % of all directives not transposed8Conformity deficit, % of all directives transposed incorrectly8SOLVIT, resolution rate per country, %8Number of pending infringement proceedings8Energy-intensive industriesElectricity prices for non-household consumers1 
 
 
     
 
Table (continued) 

Source: (1) Eurostat, (2) EIB Investment Survey, (3) EIF SME Access to Finance Index, (4) Intrum Payment Report, (5) SAFE survey, 
(6) OECD, (7) data up to 2024: Single Market and Competitiveness Scoreboard, 2025: Commission calculation based on TED data, 
accessible at the Public Procurement Data Space (PPDS) (*) the value represented here under EU average is the median, (8) Single 
Market and Competitiveness Scoreboard, (9) European Commission calculations.  

66 

27.326.126.6--32.731.328.128.126.7-25.235.536.836.637.6-22.46.16.86.15.9-12.2Energy-intensive industriesElectrification (electricity as a share of total energy consumption in industry)1Share of energy from renewable sources (renewable energy generation as a share of overall energy consumption)1Critical raw materialsMaterial import dependency, %1Circular material use rate1Operational cleantech manufacturing capacity in 20259 - Solar PV (c: cell, w: wafer, M:module), GW#N/A - Electrolyzer, GW#N/A - Heat pump assembly #N/A - Battery, GW#N/A 
 
   
 
ANNEX 6: SAVINGS, INVESTMENT AND ACCESS TO FINANCE 

Table A6.1:  Savings and Investments Union summary diagnostic 

Source: OECD (pensions), Eurostat (households' financial wealth), FISMA CMU dashboard (VC and PE), national sources (capital 
taxation). End-2024. 

financing 

households 

recommendation 
in  Croatia 

Croatia  is  performing  satisfactorily  in  its 
work to meet the policy goals of the Savings 
and  Investment  Union  (see  Table  A6.1).  The 
(CSR) 
2025  country-specific 
highlighted  the  challenges 
(i) 
in: 
for 
accessing  diverse  sources  of 
businesses  and  retail  investors;  and  (ii)  capital 
market development (145). Croatian companies rely 
mostly  on  internal  funding  or  traditional  bank 
funding.  The  domestic  capital  market  has  limited 
depth  and 
liquidity  but  has  recently  shown 
renewed  issuer  confidence  and  investor  appetite, 
while debt markets mostly channel savings to the 
government.  Croatian 
a 
conservative approach to managing their financial 
wealth,  and  still  have  ample  space  to  increase 
their  level  of  direct  and  indirect  participation  in 
capital  markets.  The  Croatian  banking  sector 
remains  robust.  Bank  lending  to  households  has 
grown  more  rapidly  than  lending  to  companies. 
Non-bank  financial  intermediaries,  which  have 
both  the  funds  and  the  capacity  to  drive  the 
development  of  Croatia’s  capital  markets,  prefer 
very  conservative  asset  allocations  that  favour 
debt  securities.  The  insurance  sector  is  small  and 
solvent  with  a  conservative  investment  portfolio 
tilted  towards  bond  holdings.  Croatian  pension 
funds have an investment focus on debt securities, 
but  continue  to  grow.  High  levels  of  household 
pension  fund  assets  are  primarily  due  to  the 
mandatory three-pillar pension system established 
in  2002,  which  requires  contributions  to  fully 

have 

(145) European 

2025, 

Country 

Commission, 

specific 
recommendation.  CSR.3.3:  ‘Boost  access  to  diverse  sources 
of financing for businesses and promote capital markets by 
investors, 
further  facilitating  the  participation  of  retail 
including  in  the  bond  market,  addressing  barriers  to  listing, 
and  strengthening  corporate  governance  to  improve  the 
attractiveness of the stock market.’. 

capital 

significant 

funded  mandatory  pension  funds  (pillar  2),  thus 
accumulation. 
fostering 
Croatia’s fund management sector has nearly half 
of  its  assets  in  debt  securities.  The  country’s 
venture  capital  ecosystem  remains  small,  and 
plans by the Croatian Bank for Reconstruction and 
Development  (HBOR)  to  provide  a  framework  for 
IPO  funds  could provide  an  alternative  exit  option 
for start-ups and scale-ups. 

Business landscape and company 
funding 

Croatian  companies  rely  mainly  on  internal 
financing or traditional bank funding. The size 
structure of local non-financial corporations (NFCs) 
in  Croatia  is  more  tilted  towards  micro  firms  and 
SMEs (see also Annex 5). This has implications for 
the funding composition of the country’s corporate 
sector.  According  to  the  2024  EIB  Investment 
Survey, internal financing is the dominant form of 
investment  in  the  country,  with  70%  of  Croatian 
firms  financing 
their  capital  spending  from 
retained earnings (EU average: 67%) (146). Owners’ 
equity  accounted  for  40.7%  of  the  funding  of 
Croatian  NFCs,  followed  by  bank  loans  at  30.2% 
(EU  average:  26.9%)  at  end-2024.  Market  based 
instruments  (e.g.  listed  shares  and/or  corporate 
bonds)  accounted  for  a  modest  16.3% 
(EU 
average:  23.5%)  at  end-2024,  underscoring  the 
fact  that  Croatia’s  capital  market  is  relatively 
undeveloped.  The  overall  level  of  NFC  funding  in 
Croatia was equivalent to 130.6% of GDP, which is 

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

67 

Main featuresRelative EU positioningAssets at 29.6% of GDP (32.3% in the EU)10-year real return of 1.7 (1.4% in the EU)The high level of pension assets yield a relatively high real return.EUR 27 138 per capita (EUR 85 090 in the EU)o/w 8.4% in listed shares and bonds (7.6% in the EU)o/w 3.3% in investment funds (11.0% in the EU)o/w 2.2% in life insurance (13.4% in the EU)o/w 23.9% in  pension claims (13.6% in the EU)A modest share of households' financial assets is invested in equity and in capital markets. The high level of pension fund assets is primarily due to Croatia's mandatory three-pillar pension system.  A savings and investment account (SIA) is not available but is being considered.VC at 0.015% of GDP (0.064% in the EU)PE at 0.251% of GDP (0.487% in the EU)Low venture capital and modest private equity investments.For individuals, capital gains and dividends taxed at 12%. For companies, capital gains taxed at 18%, dividends tax exempt.Relatively low taxes on capital instruments1-34-1011-1718-2425-27Colours indicate the country's relative ranking based on five groups, ranging from the three best to the three worst performers. The relative ranking as regards an SIU diagnostic topic derives from a consistent cross-country comparison, the starting point of which is the average of the underlying main features.TopicAsset-backed pension schemesHouseholds' financial assetsVenture capital (VC)Private equity (PE)Capital taxation 
 
 
 
 
 
 
 
   
 
substantially 
226.2% of GDP at end-2024 (see Graph A6.1). 

lower  than  the  EU  average  of 

Graph A6.1: Composition of non-financial 
corporations’ funding 

Source: Eurostat. End-2024. 

Size and structure of the financial 
sector 

Although  the  Croatian  stock  exchange  has 
limited  depth  and  liquidity,  it  is  currently 
showing  renewed 
issuer  confidence  and 
investor  appetite.  The  Zagreb  Stock  Exchange 
(ZSE) is the primary platform for equity trading in 
Croatia.  The  market  capitalisation  of  listed  equity 
was  equivalent  to  34.8%  of  GDP  in  Q3-2025  (EU 
average:  69.9%). 
In  November  2025,  stocks 
accounted for 56.2% of that market capitalisation, 
bonds  43.6%,  and  exchange-traded  funds  (ETFs) 
0.2% (148).  NFCs  accounted  for  65%  of  that 
capitalisation at the end of 2024. In 2025, the ZSE 
had  three  successful  initial  public  offerings (IPOs) 
(ING-GRAD,  Žito  Group,  and  Tokić),  which  in  total 
raised 
around 
EUR 85 million  from  retail  investors.  The  ZSE’s 
Progress  Market  (a  multilateral  trading  platform 
for  SMEs  launched  in  2019)  also  saw  growth  in 
volume  and  activity  in  2025  (149).  Overall,  the 
Croatian capital market is mainly characterised by 
the  listing  of  large  traditional-sector  companies 
rather  than  tech/start-up  exits,  although  retail 
investor demand is growing. 

EUR 214  million, 

including 

sector 

financial 

remains 
Croatia’s 
predominantly  bank-driven,  and  there 
is 
scope for the future development of all non-
bank intermediaries. The banking sector’s assets 
were equivalent to 101.0% of GDP in Q3-2025, far 
below  the  EU  average  of 246.1%,  but  well  above 
the  assets  of  any  other  part  of  the  domestic 
financial  system.  The  Croatian  banking  sector  is 
highly  concentrated,  with  the  top  five  lenders 
owning 82.4% of total assets (EU average: 50.9%), 
while  87.7%  of  the  sector  was  foreign  owned  in 
2024.  Pension  fund  assets  were  equivalent  to 
about  30.3%  of  GDP  in  Q3-2025  (EU  average: 
23.0%), which makes the pension fund sector the 
second  largest  segment  of  Croatia’s  financial 
(147).  The 
system  after 
insurance  sector  was  equivalent  to  only  6.9%  of 
GDP 
(EU  average:  53.9%).  The 
investment  fund  sector  was  equivalent  to  5%  of 
GDP in Q3-2025 (see Graph A6.2). 

the  banking  sector 

in  Q3-2025 

(147) The figure for pension fund assets (as a percentage of GDP) 
provided  in  Graph  A6.2  is  based  on  ECB  data  on  pension 
funds.  It  is  therefore  different  from  the  figure  provided  in 
Table A6.1  on the assets of asset-backed pension schemes, 
which  is  based  on  OECD  data  and  includes  all  pension 
providers (not only pension funds) and public pension reserve 
funds. 

Graph A6.2: Capital markets and financial 
intermediaries 

Source: ECB, EIOPA, AMECO. End-2024. 

Measures  have  been  taken  to  further  foster 
the  development  of  the  Croatian  capital 
markets.  On  the  2025  CSR  on  promoting  capital 
markets 
the 
attractiveness  of  the  stock  market),  the  Croatian 
government  adopted  a  strategic  framework  for 
capital  market  (CM)  development  (2025-2030), 
and  a  corresponding  action  plan  (2025-2026),  as 

improvement  of 

(including 

the 

(148) ZSE, 2025. Market capitalisation. 

(149) Progress Market, 2025, Market capitalisation. 

68 

050100150200250HREU% of GDPLoansTrade credit and advancesBondsListed sharesUnlisted sharesOther equityNon-financial corporationsFinancial corporationsNon-financial corporationsMFIsInsurance  and pension fundsOther financialsGovernmentMFIsPension fundsInsurance corporationsInvestment funds020406080100120   Listed equity               Bonds                        Assets by sector% of GDP 
     
 
     
 
the 

the 

recovery  and 

part  of 
resilience  plan. 
importance  of  cross-border 
Recognising 
trading, the ZSE fully acquired the Ljubljana Stock 
Exchange,  and  partially  acquired 
the  North 
Macedonian Stock Exchange. To stimulate regional 
markets, eight central and eastern European stock 
exchanges 
(Bratislava,  Bucharest,  Budapest, 
Ljubljana,  Skopje,  Sofia,  Warsaw,  and  Zagreb), 
signed  a  memorandum  of  understanding 
in 
November 2024 along with the EBRD to foster the 
joint  development  of  national  capital  markets 
through  closer  cooperation,  regulatory  alignment, 
and  increased  market  integration.  This  initiative 
was  endorsed  by  the  respective  Ministers  of 
Finance  with  a  memorandum  of  understanding 
signed 
in  August  2025.  In  April  2026,  the 
respective  regulators  also  signed  a  memorandum 
of  understanding, 
thereby  bringing  all  key 
institutions  to  this  project.  Croatia  is  trying  to 
position 
financial  centre. 
Strengthening  corporate  governance  for  private 
companies  and  state-owned  enterprises  (SOEs)  is 
also  a  priority  in  the  action  plan  (action  plan, 
Section  3),  as  identified  in  the  2025  CSR.  This  is 
because listed companies require strong corporate 
governance 
ensure 
transparency, and hold themselves accountable to 
investors. In particular, Croatia adopted a new law 
in 2025 to improve corporate governance and risk 
management in SOEs, and is now exploring options 
to promote the issuance of corporate bonds.  

to  attract 

investment, 

itself  as 

regional 

debt 

through 

securities 

is 
Financing 
dominated  by  the  sovereign.  The  outstanding 
volume of debt securities in Croatia stood at 45% 
of GDP at end-2024. The domestic bond market in 
Croatia  is  dominated  by  government  securities, 
which  accounted  for  91.5%  of  the  total  bonds  in 
issuance  as  of  end-2024  (combining  Eurobond 
issues  abroad  and  large  retail  national  bonds/T-
bills  domestically).  Financial  institutions,  whether 
banks  or  not,  accounted  for  5.8%  of  total  debt 
security  issuance,  while  NFCs  accounted  for  the 
remaining  2.7%.  Overall,  ESG/sustainability-linked 
bonds  are  a  new  trend,  and  there  are  occasional 
issuances of municipal bonds. 

Households’ participation in capital 
markets 

implies  that  there 
is  scope  to  further 
increase their level of direct or indirect retail 
investment.  In  aggregate,  Croatian  households 
have financial assets equivalent to 121.9% of GDP 
(EU  average:  212.2%).  Croatian  households  have 
higher-than-average  holdings  of 
cash  and 
deposits, which represented nearly half (43.7%) of 
household  assets  at  end-2024 
(EU  average: 
31.6%), indicating significant liquidity held in bank 
accounts.  Around  38.1%  of  households’  financial 
assets were held in pension and investment funds 
or held directly in financial investment instruments 
(EU  average:  46.5%)  at  end-2024.  More 
specifically,  Croatian  households  have  about 
26.5%  of  their  financial  wealth 
in 
insurance and pension funds (EU average: 27.8%), 
3.3%  in  investment  funds  (EU  average:  11.0%), 
4.7%  in  bonds  (EU  average:  2.8%),  and  3.7%  in 
listed shares (EU average: 4.9%) (see Graph A6.3).  

invested 

Graph A6.3: Composition of households’ financial 
assets 

Source: Eurostat. End-2024. 

Although  financial  literacy  in  Croatia  is 
greater  than  the  EU  average,  more  can  be 
done  to  deepen  the  practical  knowledge  of 
retail  investors.  The  July  2023  Eurobarometer 
survey  showed that  only 20%  of  Croatians  had  a 
high level of financial literacy, 65% a medium, and 
the remaining 16% a low level, compared with the 
EU average of 18% for high financial literacy, 64% 
for medium, and 18% for low (150). In Croatia, the 
overall  financial  literacy  indicator  (the  average  of 
the  financial  knowledge  and  financial  behaviour 
indicators)  was  47.7% vs an  EU  average  score  of 

Croatian  households  have  a  high  share  of 
their  assets  in  cash  and  deposits,  which 

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

69 

050100150200250020406080100HREUHREUper capita (000 EUR) (lhs)% of GDP (rhs)Currency and depositsInsurance and pension fundsInvestment fundsBondsListed sharesUnlisted sharesOther equityHH Debt (liability) 
     
 
45.5%  (151).  A  national  strategic  framework  for 
consumer  financial  literacy  was  implemented  for 
the period 2015-2020, and updated for the period 
2021-2026 (152). Financial education has also been 
included in the curricula of primary and secondary 
schools.  Croatia  has  adopted  three  guidelines 
related  to  financial  literacy  (one  in  2024  and two 
in  2025),  covering  the  financial  sector:  credit 
institutions  (153),  insurance  companies  (154),  and 
pension  funds  (155).  These  three  sectors  are 
required  to  allocate  a  portion  of  their  revenue  to 
activities aimed at improving the citizens’ financial 
literacy (156). Improving financial literacy across all 
age groups is one of the key ongoing actions in the 
strategic  framework  for  the  development  of  the 
capital market in Croatia 2025-2030 (action plan, 
Section 4.2). 

Further  initiatives  are  aimed  at  ‘facilitating 
the participation of retail investors, including 
in  the  bond  market’  (a  goal  set  in  the  2025 
CSR). Firstly, since 2023, the Croatian government 
has  enabled  citizens  to  directly  participate  in  18 
issuances  of  government  securities  (treasury  bills 
and bonds), in an effort  to familiarise households 
with  direct  investment  in  financial  instruments. 
This has resulted in Croatian households investing 
more than EUR 12.2 billion. The interest earned on 
these bonds can be tax-exempt, particularly if the 
bonds  are  held  for  more  than  two  years,  making 
them  an  attractive  alternative  to  bank  deposits. 
However,  this  has  also  created  a  preferential 
treatment  for  these  instruments  compared  with 
listed  shares  and  other  bonds.  Today,  retail 
investors hold more than 8.5% of total public debt 
(approximately  EUR  4.5  billion). 
in  Croatia 
Secondly,  the  e-Treasury  digital  platform  and  the 
both 
m-Treasury  mobile  application  were 

(151) European  Commission,  2025,  Overview  of  CMU  Indicators, 

Indicator 27. 

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

(153) Croatian  Ministry  of  Finance,  2025.  Guidelines  on  the 
fulfilment  of  the  obligation  of  a  credit  institution  regarding 
the  allocation  of  revenues  for  the  financing  of  activities  to 
strengthen the financial literacy of citizens of Croatia. 

(154) HANFA,  2025.  Guidelines  for  insurance  companies  and 
reinsurance  companies  for  strengthening  the  financial 
literacy of citizens of the Republic of Croatia. 

(155) HANFA, 2024. Guidelines for pension companies and pension 
insurance  companies  to  strengthen  financial  literacy  of 
citizens of the Republic of Croatia. 

(156) Commission Communication on a Financial Literacy Strategy 

developed to enable Croatians to make simple and 
safe  investments  via  the  internet  or  on  their 
smartphone,  making  investing  more  accessible  to 
the  public.  Thirdly,  the  Croatian  government  is 
exploring  the  possibility  of  introducing  a  savings 
and  investment  account  (157),  which  could  be  a 
useful  tool  to  help  both  foster  a  stronger 
investment culture among the public and increase 
capital  market  liquidity  (strategic  framework  for 
CM development, action plan, Section 4.1). 

The banking sector: resilience and 
financing of the economy 

The  Croatian  banking  sector  is  resilient  and 
well  capitalised,  and  is  thus  not  constrained 
in its role of funding the economy. Key capital 
ratios for the Croatian banking sector are solid and 
above the EU  average, underlining the robustness 
of the country’s banks (see Table A6.2). As of Q2-
2025, the aggregate MREL (minimum requirement 
for  own  funds  and  eligible  liabilities)  stood  at 
36.2%,  which  was  above  the  required  level  (158). 
Profitability,  asset  quality  and  liquidity  indicators 
are  also  above  EU  average.  However,  the  banks’ 
asset  quality  outlook  is  subject  to  increased 
uncertainty  due  to  the  current  conflict  in  the 
Middle  East  and  its  impact  on  energy  prices  and 
economic  growth.  Return-on-equity  stood  at 
15.6%  in  Q3-2025  (EU  average:  9.6%),  and  the 
aggregate  non-performing  loans  ratio  stood  at 
2.2% 
(see  Table  A6.2). 
Croatian banks  also maintain  very  strong  liquidity 
positions  thanks  to  an  ample  liquidity  buffer.  The 
net stable funds ratio was 173.4% (159), while the 
liquidity coverage ratio stood at 222% at the end 
of March 2025.  

(EU  average:  1.9%) 

Bank lending in Croatia is driven by loans to 
households,  which  account  for  around  61% 
of all bank loans.  As of  September  2025, loans 
to  households  in  Croatia  reached  EUR  26.8  billion 
(nearly  half  for  residential  mortgage 
loans) 
equivalent  to  29.1%  of  GDP.  As  of  September 
2025,  the  aggregate  outstanding  volume  of  bank 

(157) Commission  Recommendation  of  30.9.2025  on  Increasing 
the  Availability  of  SIAs  with  Simplified  and  Advantageous 
Tax Treatment and EC SWD 2025, p.17. 

(158) EBA, 2025. MREL Dashboard – Q2 2025, p.13. 

for the EU, COM(2025) 681 final. 

(159) HNB, 2025. Financial Stability Report (June 2025), p.70. 

70 

 
 
 
loans  to  NFCs  had  reached  EUR  17.2  billion 
(around 18.7% of GDP). The annual growth rate in 
loans to households reached 11.6% in April 2025, 
while  the  annual  growth  rate  in  consumer  loans 
reached  15.3%  in  April  2025  (160).  The  continued 
fall in interest rates (below the euro-area average) 
on  new  housing  and  consumer  loans  at  the 
beginning  of  2025  contributed  to  an  increase  in 
demand  for  loans  (161).  Croatia’s  central  bank,  the 
July  2025  new 
HNB,  has 
macroprudential  measures  to 
limit  consumer 
lending.  The  annual  growth  rate  for  corporate 
loans  reached  6.4%  in  2024,  while  in  the  first 
quarter of 2025, this growth accelerated to 12.2% 
year-on-year (162). The growth in corporate lending 
can  be  attributed  to  construction  and  real  estate 
corporations,  as  well  as  to  manufacturing  and 
trade. 

introduced 

in 

Role of non-bank financial 
intermediaries 

Institutional  investors  have  the  funds  and 
capacity to further drive the development of 
Croatia’s  capital  markets.  A  2024  paper  by 
CEPS  showed  that  pension  funds  in  Croatia, 
Slovakia,  and  Slovenia  accounted  for  only  6%  of 
private  equity  and  venture  capital  funds  raised 
annually  between  2007-2023,  a  figure  that  falls 
substantially short of the 19% for the Baltic states 
or the 20% shares for Nordic Member States (163). 

insurance  sector 

is  growing, 
Croatia’s 
solvent,  and  focused  on  non-life  insurance, 
while  climate  change  remains  an  issue  of 
concern. Total premiums collected in the first nine 
months  of  2025  amounted  to  EUR  1.5  billion  (a 
year-on-year  increase  of  8.1%),  of  which  84.2% 
was related to non-life insurance (164) premiums (a 
10.2%  year-on-year  increase),  and  15.8%  was 
related to life insurance premiums (a year-on-year 

decline  of  1.9%)  (165).  Efforts  are  being  made  to 
increase financial literacy in this area to encourage 
the take-up of life insurance products. The sectoral 
solvency  ratio  was  233.9%  in  Q2-2025  (EU 
average:  246.6%).  Moreover,  according  to  EIOPA’s 
2024  dashboard,  Croatia  is  the  European  country 
with  the  fourth-highest  aggregated  insurance-
protection  gap  for  natural  catastrophes 
(in 
particular,  for  floods,  earthquakes,  and  wildfires) 
(166). Insurance premiums for coverage against fire 
and natural damage increased by 13.3% in 2024, 
partly due to inflation, but also due to an increase 
in the number of insurance policies (4.8%) because 
of  climate  change  risks  and  increased  awareness 
of these risks (167).  

Given the high share of non-life business and 
its  specific  liability  structure,  the  Croatian 
insurance  sector  has  a  conservative  asset 
allocation, with nearly half of its investment 
portfolio  composed  of  bonds.  The  Croatian 
insurance  sector  is  dominated  by  fixed-income 
securities,  with  government  bonds 
(mostly 
domestic) accounting for 44.7% of total assets in 
Q2-2025 (168). This conservative approach ensures 
low  risk  and  predictable  stable  returns.  Equity 
accounted  for  14.8%  of  total  assets,  property  for 
12.3%,  investment  funds  for  10.8%  (of  which 
22.4%  was  in  equity  funds  and  11.9%  in  private 
equity funds), and corporate bonds for 6.6%. Cash 
and 
liquidity 
held  mostly 
management,  are  roughly  6.4%  of  the  allocation. 
Capital  requirements  are  the  main  reason  that 
Croatian  insurers  choose  to  invest  in  safe,  fixed-
income  instruments  instead  of  equity.  In  addition, 
the  country’s  dominant  non-life  sector  relies  less 
on  alternative  asset  classes  due  to  the  long-term 
investment horizon of alternative assets. 

deposits, 

for 

and 

The  Croatian  fund  management  industry  is 
small 
rather 
characterised 
conservative  investment  strategies.  The  net 
assets  of  UCITS  funds  amounted  to  EUR  3.93 
billion  at  the  end  of  September  2025  (169),  while 
alternative  investment  funds  (AIFs)  amounted  to 

by 

(160) HNB, 2025. Financial Stability Report (June 2025), p.35. 

(161) HNB, 2025. Financial Stability Report (June 2025), p.37 

(162) HNB, 2025. Financial Stability Report (June 2025), p.45. 

(163) ECMI, 2024, Closing the gaping hole in the capital market for 

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

(164) Motor vehicle liability (35.3%), road vehicles (19.5%), against 
fire  and  natural  disasters  (9.5%),  and  health  insurance 
(8.7%). 

(165) HANFA, 2025. 2025 September Monthly Report. 

(166) EIOPA, 2025. Dashboard on Insurance Protection for Natural 

Catastrophes in a Nutshell. 

(167) HANFA, 2O25. Financial Stability Report, June 2025, p. 41. 

(168) EIOPA,  2025.  Insurance  Statistics  (under  asset  exposures); 

ECB, 2025. Insurance, Q3-2025. 

(169) HANFA, 2025. 2025 September Monthly Report. 

71 

 
 
 
EUR 1.2 billion  at  the  end  of  June  2025  (170). 
Nearly  half  of  the  assets  of  the  Croatian  fund 
management  industry  were  allocated  to  bonds 
(43%),  followed  by  shares  and  other  equity 
(38.6%),  deposits  (11.3%),  and  investment  funds 
(including  money  market  funds)  (5.6%)  in  Q3-
2025 (171). The greater offering of UCITS funds (as 
a  result  of  a  strong  inflow  into  money  market 
funds)  (172)  and  favourable  market  developments 
have  stimulated the  interest  of  small investors  in 
domestic  investment  funds.  In  2025,  the Croatian 
Financial  Services  Supervisory  Agency  (HANFA) 
regulatory 
conducted  a  consultation  on 
framework  for  AIFs  and  UCITS  funds  (173),  and 
proposed  to  remove 
(additional 
national  requirements  beyond  EU  legislation)  for 
AIFs  (174),  which  is  expected  to  give  an  additional 
boost  to  the  market  (by  reducing  administrative 
burden).  For  instance,  it  is  now  proposed  that  the 
small  AIF  managers  would  need  only  registration 
(and not licencing as before). 

‘gold-plating’ 

the 

Croatia’s  pension  fund  market  continues  to 
grow.  Total  net  assets  of  pension  funds  reached 
EUR 24.7 billion at end-2024 (14.8% growth year-
on-year).  Croatia  has  a  basic  pay-as-you-go 
system  (pillar  1),  fully  funded  mandatory  pension 
funds  (MPFs)  based  on  individualised  capitalised 
savings  (pillar  2),  and  voluntary  pension  funds 
(pillar 3) (175). In September 2025, MPFs accounted 
for  94.2%  of  total  pension  funds  assets  in  the 
country,  while  voluntary  pension  funds  accounted 
in  place  a 
for  only  5.8%.  Croatia  has  put 
centralised  tracking  platform  for  pillar  1  and  2, 
and  the  platform  is  expected  to  cover  pillar  3 
funds later in 2026 (176).  

(170) HANFA, 2025. Financial Stability Report, June 2025, p. 35. 

(171) ECB, 2025, Euro-Area Investment Funds, Q3-2025. 

(172) HANFA, 2025. Macroprudential Risk Scanner, Nov , p.11. 

(173) HANFA,  2025.  Eliminating  Excess  Regulation  (Gold  Plating) 
from the Legislative Framework for AIFs and UCITS Funds in 
Croatia (April 2025); Report on the Consultation (July 2025). 

(174) There are three types of alternative investment funds: a full 
scope AIF manager (large),  and two  under-the-threshold AIF 
managers (small and medium).  

(175) OECD,  2025.  Annual  Survey  on  Investment  Regulation  of 
Pension Providers , pp.76-85, 190-193, 307-317, 441-447. 

(176) Commission  Recommendation  of  20.11.2025  on  Pension 
tracking  systems,  pension  dashboards  and  auto-enrolment 
final;  Commission  Communication  of 
C(2025)  9300 
20.11.2025  on  Enhancing 
the  EU 
the  capacity  of 
supplementary pension sector to improve retirement income 

The  domestic  pension  fund  industry  has  a 
conservative  investment  profile,  placing  a 
greater  focus  on  bonds,  with  only  moderate 
growth  in  equity  investments.  Debt  securities 
accounted  for  58.3%  of  total  assets  held  by 
pension  funds  as  of  Q3-2025.  Equities  were  the 
second  largest  investment  asset  held  by  pension 
funds at 24.1%, while investment funds accounted 
for  10.3%,  and  bank  deposits  for  6.6%  of  their 
total  assets (177).  The  high  exposure  to  bonds 
reflects 
risk 
compared with other investment instruments (178). 

their  perceived 

level  of 

lower 

The  performance  of  private  pensions  has 
been  good.  The  pillar  2  MPF  manages  around 
EUR 23 billion  worth  of  assets  for  future  retirees. 
The  pension  fund  life-cycle  investment  model  set 
up A, B, and C fund categories (varying from riskier 
to safer) to align investments with members’ age 
(179)  and  proximity  to  retirement  (with  declining 
investment  risk  as  retirement  approaches).  As  of 
1 January 2024, a new legislative package entered 
into  force  that  alleviates  many  requirements  for 
pension  funds  and  allows  for  a  more  diversified 
investment  portfolio  (including  a  higher  threshold 
for equities, AIFs, and real estate depending on the 
category) 
increases  choice  for 
members,  allows  greater  flexibility  in  lifecycles, 
and 
costs.  As  of 
31 October 2025,  the  exposure  of  pension  funds 
to  AIFs 
the 
regulatory  caps,  reflecting  a  prudent  and  phased 
approach.  Overall,  the  revisions  made  it  possible 
for  pension  funds  to  invest  in  riskier  and  possibly 
more profitable assets.  

remains  moderate  and  below 

reduces  administrative 

It  also 

(180). 

Interest in voluntary pension funds continues 
to  grow,  but  their  full  potential  has  not  yet 

and supply long-term capital to the EU economy, COM(2025) 
839 final (also SWD(2025) 367 final). 

(177) ECB, 2025, Euro-Area Pension Funds, Q3-2025. 

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

(179) At  end-September  2025,  category  B  funds  had  75.39%,  A 
funds  had  21.03%,  and  C  funds  had  3.58%  of  all  MPF 
members. Annual Mirex returns reached 16.35% for category 
A,  9.94%  for  category  B  and 2.68%  for  category  C.  HANFA, 
2025, Monthly Market Review, Sept 2025. 

(180) HANFA,  2025.  Financial  Stability  Report,  June  2025,  p.  26. 
For instance, now categories A and B have the obligation to 
invest  a  minimum  of  5%  of  net  assets  in  an  alternative 
investment  fund  with  a  state  guarantee  of  return  on  the 
total investment (overall category A can invest up to 20% in 
AIF, while category B up to 15%). Category A can invest up to 
70% in equities, while category B can invest up to 40%. 

72 

 
 
 
 
supported  by  international  initiatives  (e.g.  the 
European Investment Fund, and the Croatian Bank 
for  Reconstruction  and  Development  (HBOR)).  The 
Croatian  recovery  and  resilience  plan  included 
measures  to  support  the  financing  of  start-ups 
(C1.1.1.R5-I1). The strategic framework for capital 
market  development,  mentioned  earlier,  gives 
HBOR a dedicated  role,  along with the Ministry of 
Finance and HANFA, in exploring ways to stimulate 
the  VC/PE  market  in  Croatia  and  set  up  an  IPO 
fund,  which  could  offer  successful  start-ups  an 
attractive exit option (action plan, Section 3.2).  

been reached despite government incentives, 
and  flexible  options  for  both  savings  and 
withdrawing  funds.  Pillar  3  funds  in  Croatia 
manage  around  EUR  1.4  billion  worth  of  assets 
(5.8% of the combined assets of pillar 2 and pillar 
3)  so  it  is  not  yet  very  sizeable.  There  are  two 
types of voluntary pension funds in Croatia: (i) the 
closed  voluntary  pension  funds  set  up  by 
employers  (occupational);  and  (ii)  the  optional 
open  voluntary  pension  funds  (personal),  which 
cover  most pillar  3  assets.  As  of  1 January 2024, 
asset allocation also permitted a more diversified 
investment  portfolio  in  these  voluntary  funds 
(including  AIFs  and  real  estate,  and  unlisted 
covered  bonds).  The  regime  is  now  also  more 
flexible  on  duration  of  participation,  and  on  the 
amount,  frequency  and  timing  of  contribution  to 
the  fund.  Voluntary  pension  funds  also  benefited 
from  some  new  incentives  such  as  a  contribution 
subsidy  by  the  government  with  an  annual 
threshold (the only condition for using the funds is 
that  the  beneficiary  must  first  reach  55  years  of 
age).  Moreover,  the 
legal  amendments  also 
introduced  greater  investment  limits  by  asset 
class. 

Venture capital ecosystem 

(VC) 

investments 

The  Croatian  venture  and  growth  capital 
ecosystem  is  not  developed  enough  to  meet 
the  financing  needs  of  innovative  firms. 
in  Croatia 
Venture  capital 
averaged  0.015%  of  GDP 
in  2022-2024, 
significantly below the EU average of 0.064% (181). 
Private  equity  (PE)  investments  averaged  0.251% 
in  2022-2024,  nearly  half  of  the  EU  average  of 
0.487%  (182)  (See  Annex  4  for  more  details). 
According  to  HBOR,  the  Croatian  VC  market  is 
shallow,  with  small  VC  funds  (average  size 
EUR 50 million)  that  are  primarily  focused  on 
early-stage  investments.  As  start-ups  grow,  they 
typically  turn  to  larger  pan-European  VC  funds. 
The  Croatian  PE  market  is  also  small,  with  small 
sized  funds  (the  average  size  of  a  first-time  PE 
fund  is  EUR  60-70 million  and  second  generation 
is EUR 120 million). The local VC/PE market is also 

(181) European  Commission,  2025,  Overview  of  CMU  Indicators, 

Indicator 16. 

(182) European  Commission,  2025,  Overview  of  CMU  Indicators, 

Indicator 11. 

73 

 
 
Table A6.2:  Financial sector indicators 

(1) Annualised data. EU data for credit growth and pension funds refer to the EA average. 
Source: ECB, Eurostat, European Insurance and Occupational Pensions Authority, DG FISMA CMU dashboard, AMECO. 

74 

20182019202020212022202320242025-Q3EUTotal assets of MFIs, % of GDP113.4109.1126.7118.6116.1102.2101.1101.0246.1Common equity Tier 1 ratio20.221.722.723.822.121.520.319.716.8Total capital adequacy ratio21.122.523.224.422.822.221.721.520.2Overall NPL ratio, % of all loans7.35.25.34.23.02.52.32.21.9NPL ratio, loans to NFCs18.512.011.48.95.84.53.93.43.5NPL ratio, loans to HHs6.55.56.86.24.84.13.63.42.1Return on equity ratio18.89.14.77.79.415.715.015.69.6Loans to NFCs, % of GDP21.019.822.619.620.418.518.018.329.3Loans to HHs, % of GDP31.832.435.832.329.427.528.328.943.6NFC credit growth rate, %2.04.66.61.820.86.36.312.82.5HH credit growth rate, %5.67.72.64.65.79.512.013.82.6Stock market capitalisation, % of GDP--36.432.027.029.233.934.869.9Initial public offerings, % of GDP0.110.000.000.090.000.000.00-0.06Market funding ratio53.153.852.153.047.446.344.8-49.7Private equity, % of GDP0.1030.1240.2130.3310.4890.4100.251-0.487Venture capital, % of GDP0.0050.0050.0110.0300.0360.0300.015-0.064Financial literacy, composite index-----47.5--45.5Bonds, % of HHs' financial assets0.40.40.40.30.53.24.6-2.8Listed shares, % of HHs' financial assets4.74.93.83.83.53.73.7-4.8Investment funds, % of HHs' financial assets2.83.42.62.92.42.73.3-11.0Insurance/pension funds, % of HHs' financial assets25.827.427.227.426.626.826.5-27.8Total assets of insurers, % of GDP10.510.812.110.68.67.77.26.953.9Pension assets, bn EUR---19.019.022.325.4-5813.8Pension assets, % of GDP---32.628.128.129.6-32.310y real return average of pension assets, %-----2.51.7-1.4Pension funds assets, ECB (% of GDP)--33.132.127.527.229.430.323.01-34-1011-1718-2425-27Colours indicate performance ranking among the 27 EU Member States.Banking sectorNon-banking sector 
 
     
 
ANNEX 7: EFFECTIVE INSTITUTIONAL FRAMEWORK 

institutional  framework 

An  effective 
is 
essential  for  competitiveness.  This  means 
integrity,  high-quality 
public 
trust  built  on 
legislation,  simplification  of 
regulation  and 
efficient services for businesses and people. In the 
the  2025  country-specific 
case  of  Croatia, 
recommendations (CSRs) highlighted challenges as 
regards 
and 
effectiveness  of  its  public  administration  at  local 
level  and 
improving  the 
regulatory  tools  to  reduce  the  administrative 
burden, through digitalisation to facilitate business 
creation and expansion (183).  

ii)  simplifying  and 

improving 

capacity 

the 

i) 

Croatia  is  implementing  reforms  to  address 
the  capacity  and  effectiveness  of  its  public 
administration  at  local  level.  For  example, 
under its recovery and resilience plan (RRP), it has 
introduced  legal  frameworks,  and  a  financial-
incentive  system  for  functional  cooperation  (184) 
(See  Annex  18).  There  is  also  and  an  IT  support 
system  aimed  at  encouraging  either  mergers  of 
functions  between  local  government  units  or 
actual mergers, so far with limited results (185). 

Public trust 

Public  trust  in  government  in  Croatia  is 
currently  slightly  above  the  EU  average 
(Croatia 35%; EU 33%). There has been a slight 
rise in trust in the justice system since 2024 but it 
remains well below the EU average (HR 40% vs EU 
56%). Since spring 2024 trust in local and regional 
authorities has fallen from 45% to 40% (186). This 
is  combined  with 
insufficient  administrative 
capacity  at  regional  and  local  level  affecting  the 
access and quality of public services for the public 
and  businesses  alike  (187),  (188).  Businesses  and 

(183) European  Commission,  2025,  2025  European  Semester: 
Commission 

Country 
Recommendations - European Commission. 

Recommendations 

Specific 

/ 

retain 

people 
public 
confidence 
administration’s  ability  to  handle  their  data 
securely and responsibly (189). 

the 

in 

Graph A7.1: Trust in the justice system, regional / 
local authorities and in government 

(1)  EU-27 since 2019; EU-28 before 
Source: European Commission, Standard Eurobarometer 
surveys 

Quality of lawmaking 

Croatia’s  rules  on  lawmaking  demonstrate 
partial  alignment  with 
selected  best 
practices  in  reducing  the  regulatory  burden 
and  ensuring  effective  implementation.  For 
example, the ability to monitor the implementation 
of  legislation  has  been  undermined  by:  i)  the 
absence of a formal requirement for lawmakers to 
draw  up  procedures  for  measuring  progress  in 
achieving  the  objectives  of  a  primary  law,  ii)  the 
difficulty  of 
identifying  potential  enforcement 
mechanisms  and  iii)  a  lack  of  mechanisms  for 
assessing the level of compliance. Additionally, the 
is  also 
oversight  of  better-regulation 
weakened  by  a  lack  of  publicly  available  analysis 
of 
impact 
assessments (RIAs) in guiding regulatory proposals 

i)  the  effectiveness  of  regulatory 

tools 

(184) Slijepcevic, Suncana, Tanja Broz, and Ivana Rasic, 2024, The 
Capacities and Sustainability of Croatian Cities in Performing 
Municipal 
https://www.mdpi.com/2071-
1050/16/17/7277. 

Services, 

(185) Croatia’s 

recovery  and 

resilience  plan 

-  European 

Commission. 

(186) European  Commission,  2026,  Flash  Eurobarometer  surveys 
567 and 568 on satisfaction with administrative services. 

(187) OECD,  2024,  Towards  Balanced  Regional  Development  in 
Croatia:  From  Strategy  Design  to  Implementation,  OECD 

Multi-level 
Governance 
https://doi.org/10.1787/3c0779cf-en.  

Studies, 

(188) OECD,  2025,  OECD  Reviews  of  Labour  Market  and  Social 
Policies: Croatia 2025, https://doi.org/10.1787/90b78cc3-en. 

(189) European  Commission,  2026,  Flash  Eurobarometer  surveys 
567 and 568 on satisfaction with administrative services. 

75 

00.10.20.30.40.50.60.70.80.9AutumnSpringAutumnSpringAutumnSpringWinterSummerWinterSpringWinterSummerAutumnSpringAutumnSpringAutumnSpring202520242023202220212020201920182017Justice,  legal system EU-27Justice,  legal system HRRegional or local public authorities EU-27Regional or local public authorities HRGovernment  EU-27Government  HR 
 
 
 
       
 
 
 
Table A7.1:  Croatia.  Selected indicators on better regulation practices for primary legislation 

Source: OECD (2025), Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the 
European Union 2025   

and  ii)  ex  post  evaluations  in  improving  the 
regulatory stock (190).  

reports  on 

It  publishes  annual 

A  central  body  coordinates  the  better-
regulation  policy  and  checks  the  quality  of 
RIAs. 
the 
performance  of  the  better-regulation  rules.  In 
2025 RIAs and evaluations of laws were expanded, 
and a public-consultation portal was introduced at 
local  and  regional  levels  (191).  Non-regulatory 
options  are  considered,  and  their 
is 
assessed. 

impact 

Croatia  is  using  online  tools  to  engage  with 
stakeholders  in  the  development  of  primary 
and  secondary  laws.  National,  and  since  2025 
also  local  and  regional  authorities  have  used  the 
online  portal  for  consultations.  The  length  of 
consultations  again  improved,  however,  the  share 
of  comments  received  that  remained  unanswered 
increased. 

Public service delivery and 
digitalisation 

Croatia  has  made  uneven  progress  in  the 
digitalisation  and  user-friendliness  of  its 

(190) OECD, 2025, Better Regulation Practices across the European 

Union 2025  https://doi.org/10.1787/6f007516-en. 

(191) EUR-Lex - 52025SC0911 - EN - EUR-Lex. 

76 

public  services.  Overall  satisfaction  with  public 
administration is around the EU average (45% for 
people  and  46%  for  companies).  However,  the 
proportion  of  people  finding  the  administration 
dropped 
slow 
significantly  over  the  past  two  years  by  19 
percentage  points  and  those  finding  it  fast  and 
effective increased by 10 percentage points.  

providing 

services 

has 

in 

Graph A7.2: Most time-consuming aspects of 
service delivery 

Source: European Commission. Flash Eurobarometer 567 / 
568 on satisfaction with administrative services (2026) 

Several challenges in service delivery remain 
(Graph  A7.2).  Waiting  time  and  collecting  and 
preparing  documents  is  a  challenge  both  for  the 
general  public  and  for  businesses.  32%  of 
businesses  have  experienced  delays  (one  of  the 
highest  percentages  in  the  EU).  Understanding 
applicable 
significant 
obstacle for companies. Most  people (76%, above 
the  EU  average  of  63%)  find  that  government 
institutions  repeatedly  ask  for  the  same  personal 
data.  These  responses  indicate  inefficient  internal 

is  another 

legislation 

0%10%20%30%40%50%Time forresponsesDocumentspreparationApplicationformsTime forresponsesDocumentspreparationLegislationandobligationsPeopleBusinessesEUTools for smart legislation: Share of possible impacts assessed for all primary laws when developing legislation 1Regulators are required to identify and quantify the benefits of a new primary law0Regulators are required to identify and assess the impacts of alternative non-regulatory options1Tools for effective implementation: when developing laws, regulators are required to:Assess the level of compliance0Identify and assess potential enforcement mechanisms0Specify the methodology of measuring progress in achieving the law's goals0Oversight of better regulation: There is an external  body responsible for reviewing the quality of RIAs and of ex post evacuations 1There are publicly available assessments of the effectiveness of RIA in modifying regulatory proposals 0There are reports on the level of compliance by government department with the requirements of RIA1There are indicators on the percentage of ex post evaluations that comply with guidelines0The effectiveness of ex post evaluations in improving the regulatory stock has been assessed in the last five years0 
 
     
 
     
 
Table A7.2:  Digital Decade key performance indicators: availability of digital public services 

(1) Digital Decade target by 2030: 100. (2) Publishing year, data was collected in the previous year 
Source: European Commission, State of the Digital Decade report 2025 

processes  and  untapped  potential  to  reuse  data 
and thereby simplify the user’s experience (192).  

Croatia  has  made  progress  in  providing 
digital  public  services  for  the  general  public 
but it is still considerably short of EU targets 
(Table  A7.2).  Digitalising  public  services  for 
businesses (65)  is lagging  behind  the  EU  average 
(86).  Although  70%  of  people  report  that  digital 
services  save  time,  50%  would  like  better  quick 
help and  a more user-friendly  design. Croatia has 
adopted  a  nationally  certified  eID  scheme  for 
accessing  public  services.  According  to  Eurostat, 
38% of Croatian citizens used their eID  to access 
online  public  services  in  2023,  close  to  the  EU 
average  of  36%.  In  terms  of  access  to  electronic 
health records, Croatia’s rate was 87%, a modest 
increase  of  1.2%,  above  the  EU  average  of  83%. 
Croatia is broadly on track to meet its targets.  

The  availability  of  digital  public  services  to 
business  in  Croatia  has  fallen  (Table  A7.2). 
Companies  in  Croatia  has  much  less  interest  in 
online  services  than  those  in  the  rest  of  the  EU 
(Croatia  35%;  EU  70%)  (193).  Cross-border  digital 
public  services  for  businesses  fell  from  36%  to 
32%, contrasting with modest growth in the EU as 
a whole. 

the 

is  addressing 

Croatia 
challenges 
highlighted  in  the  2025  CSRs.  It  has  set  up  a 
one-stop  shop  with  the  support  of  Croatia’s  RRP 
(194). The purpose of this platform is to harmonise 
helpdesk services for people and for businesses. In 
addition,  supported  by  the  RRP  and  supported  by 
the  Technical  Support  Instrument,  Croatia  has 

(192) European  Commission,  2026,  Flash  Eurobarometer  surveys 
567 and 568 on satisfaction with administrative services. 

(193) European  Commission,  2026,  Flash  Eurobarometer  surveys 
567 and 568 on satisfaction with administrative services. 

(194) Croatia’s 

recovery  and 

resilience  plan 

-  European 

Commission. 

77 

regulatory  environment, 

developed a number of digital tools to improve the 
including  a 
business 
digital  platform  to  pay  fees  and  adding  more 
services  to  the  START  platform,  which  is  the 
official  government  platform  for  digital  business 
registration (see Annex 5). 

require  access 

In  recent  years,  Croatia  has  carried  out  a 
digital  transformation  of  building-permit 
process. This has facilitated access to information 
on use of space, reduced the number of steps and 
standardised the process across the country. There 
is  still  room  for  improvement  in  the  efficiency  of 
obtaining building permits and occupancy permits; 
developers 
to  a  centralised, 
comprehensive  list  of  pre-approvals  required  for 
permit  application.  If  such  requirements  were 
publicly  available  online  this  would  make  the 
process  more  transparent  and  predictable.  As  for 
environmental  permits,  throughout  the  country 
regulatory  compliance  benchmarks  are  applied, 
provided  and 
services  are 
digital 
transparency  of  information  is  maintained.  The 
efficiency  of  environmental  clearance  practices  in 
Croatia is characterised by uniformity between the 
five cities examined (195).  

public 

the 

through 

Croatia  has  enabled 
cross-border 
exchange  of  data  and  documents  between 
authorities 
the  EU  once-only 
technical  system  (196).  As  services  (197)  become 
accessible,  people  and  businesses  will  no  longer 
have  to  search  for  their  data  or  download,  and 
upload documents manually  across  e-government 
portals  in  different  Member  States.  Croatia  still 

(195) World  Bank,  2025,  Subnational  Business  Ready  in  the 

European Union 2025: Croatia. 

(196) European Commission, Once-Only Technical System 

Acceleratormeter, Ec.europa.eu. 

(197) Procedure types 

under 
SDGR (2018/1724/EU) and 
2006/123/EC, 2014/24/EU and 2014/25/EU. 

Annex 
directives 

II 

of 

the 
2005/36/EC, 

EU-272023202420252025716775826766658686868783Digital public services for citizens (0 to 100)Digital public services for businesses (0 to 100)Access to electronic health records (0 to 100)Croatia 
 
 
 
   
 
needs to identify the types of documents and data 
they need to exchange through the system and to 
explore  ways  to  shift  from  the  submission  of 
unstructured to structured data formats. Currently, 
Croatia  has  4  procedures  (198)  connected  in the 
areas  of education,  business and  working abroad. 
Croatia  has  authority  registries  connected  in  the 
fields of population, education, and vehicles. 

introduction  of  remote  and  hybrid  work  models, 
with  IT  support;  ii)  the  digitalisation  of  strategic 
planning  processes;  and  iii)  an  IT  platform  to 
support  local  government  units  that  are  merging. 
The  publication  of  posts  will  become  more 
transparent,  as  a  new  online  platform  linked  to 
Croatia’s  e-citizens portal will provide information 
on  current  public-administration  needs,  which  will 
in turn contribute to better talent screening.  

Civil service 

Integrity  

regional 

self-government,  and 

Croatia  continues  to  reinforce 
its  civil 
service.  The  proportion  of  civil  servants  with 
higher education is close to the EU average. Since 
April  2025  Croatia  has  expanded  the  use  of  the 
general competency framework in recruitment and 
selection  procedures  to  national  agencies,  local 
central 
and 
government.  Further  efforts  are  needed 
to 
increase skills and knowledge, as the participation 
rate  of  civil  servants  in  adult  education  remains 
substantially below the EU  average (Croatia 10%; 
EU  19%).  A  new  appraisal  system  is  expected  to 
improve  the  performance  and  productivity  of  civil 
servants. The first results of the implementation of 
the  appraisal  system,  as  regulated  by  the  Decree 
on  the  Evaluation  of  the  Performance  of  Civil 
Servants,  will  be  available  in  the  first  quarter  of 
2026.  With  the  support  the  Technical  Support 
Instrument,  Croatia  has  developed  and  tested  a 
staff  survey  model,  which  reveals  that  employee 
engagement  increases  well-being,  management 
quality 
development 
opportunities (199).  

learning 

and 

and 

Croatia  has  taken  steps  to  increase  the 
attractiveness  of 
its  civil  service  as 
employer.  In  addition  to  the  substantial  increase 
in  salaries 
the  centralised 
employment  system,  established  with  the  support 
of  the  RRP,  has  enabled  new  functionalities  for 
employee  management.  Other  measures  enable 
the  monitoring  and  management  of  wages:  i)  the 

in  2025 

(200), 

The  perception  and  experience  of  corruption 
when doing business in Croatia remains very 
high.  90%  of  companies  see  corruption  as 
widespread (EU: 63%) and 88% consider too close 
links  between business  and  politics  as  a  cause  of 
corruption  (EU:  76%),  pointing  to  perception.  60% 
also see corruption as a practical barrier (201) (EU: 
35%).  Sectors  that  are  particularly  vulnerable  to 
corruption  in  Croatia  (202)  the  health  sector  and 
public procurement (see Annex 5).  

Fewer companies than the EU average report 
being asked for gifts, favours or extra money 
for  permits,  services  or 
in  exchange 
procurement  (Croatia  8%;  EU  10%),  yet 
confidence  in  enforcement  is  well  below  the 
EU average. Only 16% believe that those caught 
bribing a senior official are appropriately punished 
(EU: 33%)(203), which suggests that the perception 
is of limited deterrence at high levels.   

Croatia  is  striving  to  improve  its  corruption 
prevention  and  detection  mechanisms.  A 
lobbying  law  entered  into  force  in  October  2024 
(204),  setting  restrictions  and  rules  for  verification, 
enforcement  and  sanctions.  There  is,  however,  a 
lack  of  specific  criteria  and  practical  guidance  for 
public  officials  on  their  obligations  to  disclose, 
which  leads  to  inconsistent  disclosure.  A  lobbying 
register  is  in  place,  but  there  is  still  limited 
records  of  meetings 
transparency  because 

(198) European Commission, 2026, Once-Only Services going-live! 

SDG procedures in production in Croatia: setting up a 
business, doing an income tax return and applying for 
studies, Ec.europa.eu. 

(199) OECD,  2025,  Workforce  Insights  from  Central  Governments: 
Findings  of  the  2024  OECD/EU  Survey  of  Public  Servants, 
https://doi.org/10.1787/2f9080b1-en. 

(201) European  Commission,  2025,  Flash  Eurobarometer  survey 
557 on Businesses' attitudes towards corruption in the EU. 

(202) European Commission, 2025, Rule of Law Report. 

(203) European  Commission,  2025,  Flash  Eurobarometer  survey 
557 on Businesses' attitudes towards corruption in the EU. 

(200) European Commission, 2025, Croatia Country Report 2025. 

(204) The Croatian Lobbying Act, Official Gazette 36/2024. 

78 

 
 
 
and 

public 

officials 

for  courts 

between 
interest 
representatives  are  not  published.  New  deadlines 
apply 
legal 
proceedings  to  protect  whistleblowers  against 
retaliatory  measures,  which  aim  to  address  the 
issue of lengthy proceedings that risk discouraging 
reporting.  

to  ensure  speedier 

is  a 

There 
large  number  of  high-level 
corruption  crimes,  yet  the  number  of 
investigations  has  also  risen.  The  system’s 
impact  is  undermined  by  persistently  lengthy 
proceedings  and  the  absence  of  any  convictions 
for 
that 
enforcement  in  such  cases  remains  ineffective 
(205). 

foreign  bribery,  which 

suggests 

Justice 

in 

the  highest 

Overall, the justice system continues to face 
efficiency challenges.  At the year-end of 2025, 
the overall backlog decreased by nearly -3%, while 
the  average  length  of  litigious  proceedings  in  the 
first  instance  commercial  courts  increased  to 
1 182  days  (1 147  days  in  2024)  and  both 
the  EU. 
remained  among 
Administrative cases at first instance took shorter 
to  resolve,  decreasing  to  256  days  in  2025  on 
average 
in  2024).  Croatia 
performs  very  well  in  digital  solutions  to  initiate 
and  follow  proceedings  in  civil/commercial  and 
administrative  cases,  and in  online  access  for  the 
general  public  to  published  judgments.  Providing 
better  online  access  to  judicial  decisions  in  a 
machine-readable 
be 
downloaded in bulk, would improve access to case 
law  and  enable  its  reuse  by  private  companies. 
(206). 

(from  278  days 

format,  which 

can 

(205) For  a  more  detailed  analysis  of  the  performance  of  the 
justice system in Croatia, see the upcoming 2026 EU Justice 
Scoreboard and the 2025 Rule of Law Report. 

(206) For  a  more  detailed  analysis  of  the  performance  of  the 
justice system in Croatia, see the upcoming 2026 EU Justice 
Scoreboard and the 2025 Rule of Law Report. 

79 

 
 
SUSTAINABILITY 
ANNEX 8: INDUSTRY DECARBONISATION, CIRCULARITY AND CLIMATE MITIGATION 

country-specific 

Croatia  faces  challenges  in  decarbonising 
industry  and  road  transport  and  complying 
with  effort  sharing  limits,  and  its  transition 
to  a  circular  economy  is  progressing  slowly. 
Croatia supports the decarbonisation of its energy-
intensive  industry  but  has  significant  gaps  and 
bottlenecks  in  the  regulatory  framework.  It  is 
projected  to  overachieve  its  2030  effort  sharing 
target  but  is  still  projected  to  exceed  emissions 
cumulatively  over  the  decade.  For  Croatia,  the 
recommendations 
2025 
highlighted  challenges  concerning:  (i)  its  reliance 
on  and  subsidies  for  fossil  fuels  and  (ii)  energy 
demand in the transport sector. Croatia took some 
measures to address these, but challenges remain, 
as the modal split continues to be heavily tilted in 
favour  of  road  transport.  Croatia  has  received 
significant  EU  funding  for  waste  management, 
both  from  cohesion  policy  funds  and  from  the 
Recovery  and  Resilience  Facility  (RRF),  but  a 
functioning system for the whole country is not yet 
in place. It faces challenges as a result of lengthy 
public  procedures,  appeals,  price  increases  and 
limited  capacity.  This  results  in  a  high  share  of 
landfilling (50,9% of municipal waste in 2024) and 
diverts funds from investment in the higher levels 
of  the  waste  hierarchy  and  more  innovative 
circular  economy  projects 
the 
reusability and recyclability of products. 

increase 

that 

Industry decarbonisation 

Greenhouse gas emissions from industry 

intensity 

Croatia’s 
The 
emission 
is 
manufacturing  sector 
dominated  by  emissions  from 
industrial 
processes(207).  Greenhouse  gas  (GHG)  emissions 

is  high  and 

of 

(207)This  Annex  discusses 

the 

industry,  specifically 

transition  of  Croatia's 
manufacturing 
its  energy-intensive 
industries, to low-carbon and net-zero modes of production, 
which  is  key  to  preserving  competitiveness  on  the  path 
towards  climate  neutrality  as  mandated  by  the  European 
Climate  Law.  A  broader  perspective  on 
the  current 
competitiveness  challenges  facing  Croatia's  manufacturing 
industry  is  provided  in  Annex  5.  For  a  more  detailed 
description  of  greenhouse  gas  emissions  from  industry,  see 
European  Commission  (2025),  2025  Country  Report  - 
Croatia,  Commission  staff  working  document,  SWD  (2025) 
211  final,  Brussels,  4.6.2025,  Annex  A7.  Clean  industry  and 
climate mitigation.  

from  manufacturing  represent  around  13%  of 
Croatia’s  total  emissions  and  have  declined  by 
20%  in  the  five  years  to  2024  (compared  with 
16%  in  the  EU  as  a  whole)  (208).  At  around  500 g 
CO2eq per euro of gross value added, the emission 
intensity of the manufacturing sector is among the 
highest  in  the  EU.  The  biggest  share  comes  from 
emissions  from  industry  process  and  product  use 
rather than energy use. It is driven, in particular, by 
chemical  and  cement  production.  Between  2018 
and  2023,  the  energy-related  GHG  emissions 
intensity  of  manufacturing  production  declined  by 
14 % (EU average: 20%).  

Policies to promote industry decarbonisation 

Croatia  has  a  solid  set  of  measures  to 
advance  industry  decarbonisation  and  relies 
heavily  on  EU  funds  to  do  so.  Since  2022, 
Croatia has a long-term hydrogen strategy in place 
(209),  with  the  aim  of  achieving  70 MW  of  green 
hydrogen production capacity by 2030, backed up 
by  a  plan  for  industry  and  transport.  In  2023, 
together  with  Italy  and  Slovenia,  it  launched  the 
‘North  Adriatic  Hydrogen  Valley’  project  with 
support from the RRF and other funds. The aim of 
the  project  is  to  build  transnational  hydrogen 
ecosystems  by  supporting  17  pilot  projects  for 
hydrogen  production,  distribution  and  use  across 
sectors, 
In 
addition, by end of 2026, Croatia plans to build an 
electrolyser  capacity  of  at  least  10 MW  in  the 
Rijeka  refinery  and  to  invest  in  an  additional 
20 MW  of  renewable  hydrogen  power  production 
capacity  and  is  deploying  ‘hydrogen-ready’  gas 
pipelines with support from the RRF and cohesion 
policy  funds.  Concerning  carbon  capture  and 
storage, Croatia has put in place legislation (210) to 
allow  storage  of  CO2  on  its  territory.  By  end  of 
2026, the authorities plan to finalise the feasibility 
studies  to  identify  potential  storage  sites  and 
capacities,  with  support  from  the  RRF.  The  aim  is 

industry  and 

transport. 

including 

(208) Data on the manufacturing sector exclude the NACE division 
C19 – manufacture of coke and refined petroleum products, 
for  better  match  of  the  sectoral  data  from  Eurostat  (gross 
value  added)  with  those  from  the  UNFCCC  under  the 
Common  Reporting  Format.  Also  see  further  indicators  on 
industry  decarbonisation,  as  well  as  the  annotation  for 
further information, in table A8.1 at the end of this Annex. 

(209) Hrvatska  Strategija  za  vodik  do  2050.  godine,  Official 

Gazette No 40/22. 

(210) Official Gazette No 52/18, 52/19 and 30/21. 

80 

 
 
 
 
 
 
to become a regional leader in carbon capture and 
storage.  In  parallel,  major  players  in  the  cement 
industry,  such  as  Holcim  and  NEXE,  are  using  the 
Just  Transition  Fund  and  the  Innovation  Fund  to 
decarbonise  their  processes  via  carbon  capture 
initiatives  have  received 
and  storage.  These 
strategic  project  status  under  existing  law  (211), 
which  should  speed  up 
implementation.  To 
improve  energy  efficiency  and  support  the  use  of 
renewables in manufacturing industries, Croatia is 
also  relying  on  the  RRF  (212),  on  the  European 
(213)  and 
Regional  and  Development  Fund 
increasingly  on  the  Modernisation  Fund.  Recently, 
the  focus  has  been  shifting  towards  supporting 
batteries  and  on-site  generation,  given  that 
regulatory  uncertainty,  long  permitting  processes 
and  infrastructure  constraints  continue  to  impede 
(214).  A  new 
a  faster  shift 
Environmental  Protection Act  and  amendments  to 
the 
Impact 
Assessment  are  being  drawn  up  to  simplify  and 
speed up the permitting procedures, which should 
also accelerate decarbonisation (215). 

Environmental 

renewables 

Regulation 

on 

to 

to 

the 

reduce 

Despite ongoing efforts, there are significant 
gaps  and  bottlenecks  in  Croatia’s  policy 
toolkit  for  industry  decarbonisation.  In  2023, 
Croatia  set  up  a  state  aid  scheme  worth 
electricity 
EUR 104 million 
consumption  levy  imposed  on  energy-intensive 
companies.  It  is  set  to  run  until  the  end  of  2028 
but  has  so  far  not  been  used.  At  the  moment, 
biomass  and  biogas  potential  to  replace  fossil 
fuels  remains  untapped,  but  in  January  2026  the 
government  presented  the  long-awaited  strategy 
for  the  bioeconomy  until  2035  to  the  Croatian 
Parliament.  Overall, 
limited 
willingness  to  scale  up  low-carbon  production 
technologies in Croatia. This due to a combination 
of:  (i)  high  operating  costs  (i.e.  high  energy  prices 
and  almost  non-existent  use  of  power  purchase 
agreements – see Annex 9); (ii) capital expenditure; 

there  has  been 

(211) Official Gazette No 29/18. 

(212) Croatia  is  supporting  small,  medium-sized  and  mid-cap 
companies  from  energy-intensive  sectors  with  EUR  252 
million  of  grants  to  decarbonise  and  to  boost  energy 
production from renewable sources. 

(213) In  2026,  Croatia  will  start  disbursing  loans  amounting  to  
EUR  275  million  (EUR  150  million  from  the  ERDF)  to 
entrepreneurs to invest in energy-efficiency measures under 
a cohesion policy financial instrument scheme. 

(214) See Annex 9 for details. 

(215) See Annex 9 for details. 

81 

(iii) low and fragmented demand (due to a lack of 
incentives to buy ‘green products’ domestically and 
in the region); (iv) underdeveloped storage options; 
(v) a lack of industrial clusters and decarbonisation 
pathways; and (vi) long and overlapping permitting 
procedures (216). The national industry plan and the 
accompanying  2027-2034  action  plan  to  be 
adopted  in  2026  could  provide  a  real  opportunity 
to  address  the  above  shortcomings  in  a  coherent 
way.  A  close  dialogue  with  the  industry  and  the 
Intersectoral  Coordination  for 
Commission  for 
Policies  and  Measures 
for  Mitigation  and 
Adaptation is  warranted  to  avoid  fragmented  and 
misaligned  policies  and  to  identify  priorities  and 
targeted measures for energy-intensive industries. 

Reduction of effort sharing emissions 

Compliance  with  effort  sharing  limits  with 
domestic measures 

for 

2021-2030 

Croatia is projected to overachieve its effort 
sharing  target  in  2030,  but  its  emission 
allocations 
appear 
insufficient  to  cover 
its  effort  sharing 
emissions  in  the  entire  period (217).  In  2024, 
GHG  emissions  from  Croatia’s  effort  sharing 
sectors  are  expected  to  have  been  4.3%  above 
those  of  2005(218).  By  2030,  with  current  and 
planned  policies  and  measures,  these  emissions 
are expected to decrease by 21.3%, resulting in a 

(216) See Annex 5 for details. 

(217) The  national  GHG  emission  reduction  target  is  set  out  in 
Regulation (EU) 2018/842 (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). The emissions from effort sharing 
sectors for 2024 are based on approximated inventory data. 
The  final  data  will  be  established 
in  2027  after  a 
comprehensive  review.  Projections  about  the  impact  of 
(‘with  existing  measures’,  WEM)  and 
current  policies 
additional  policies (‘with  additional  measures’,  WAM)  as  per 
Croatia’s 2025 reporting under Article 17 of Regulation (EU) 
2018/1999 (the Governance Regulation). Also see European 
Commission  (2025),  Climate  Action  Progress  Report 2025  – 
Technical  Information,  Commission  staff  working  document, 
Brussels,  Chapter  9  (pp. 111ff.),  and  in  particular  Tables  25 
and 26. 

(218) Based  on  final  GHG  inventories  notified  in  2026,  Croatia’s 
effort sharing emissions in 2024 were 9.4% above the levels 
of  2005.  The  assessment  of  progress  under  the  Effort 
Sharing  Regulation  will  be  established  after  the  publication 
of the European Semester country report. 

 
 
 
its  effort  sharing  emission 

surplus  of  4.6  percentage  points  relative  to  the 
2030 target (16.7%). However, Croatia is projected 
to  exceed 
limits 
temporarily  in  the  2021-2030  period.  It  could 
bridge  part  of  the  gap  with  own  unused  annual 
emission  allocations  from  other  years  but  would 
also  need  transfers  of  allocations  from  other 
Member  States  to  comply  with  the  Effort  Sharing 
Regulation.  In  2025,  Croatia  aligned  its  climate 
legislation with the EU framework by including the 
climate  neutrality  and  the  2030  effort  sharing 
targets. 
the  amended 
legislation (219),  to  meet  the  2030  target  the 
government  can  decide  on  sectoral  targets,  while 
the  ministries  are  responsible  for  putting  in  place 
corrective  measures  and  for  securing  financial 
resources. 

Furthermore,  under 

Graph A8.1: Greenhouse gas emissions in the 
effort sharing sectors, 2005, 2023, and 2024 

Source: European Environment Agency. 

Sustainable transport 

in 

increases 

In  2024,  42%  of  Croatia’s  effort  sharing 
emissions  came  from  road  transport,  an 
increase  of  42%  from  2005  levels  –  one  of 
the  EU (220). 
the  biggest 
Continuing  the  trend  in  previous  years,  GHG 
emissions  were  considerably  higher  in  2024  than 
the  year  before.  The  strong  and  continuous 
increase in road transport emissions is driven by a 
heavy  reliance  on  passenger  cars (221),  which  are 
largely  second  hand,  and  on  trucks  and  buses.  In 
2023,  more  than  80%  of  passengers  used 
passenger  cars  and  only  a  minority  used  coaches 

(219) Official Gazette No 67/25. 

strong,  with  public 

(8.2%)  or  rail  (3.9%) (222).  In  2024,  the  share  of 
electric vehicles in newly registered cars continued 
to  be  among  the  lowest  in  the  EU (223).  In  2025, 
the number of newly registered hybrids and plug-
in increased considerably, but there was a drop in 
the  number  of  newly  registered  electric  cars (224). 
The availability of public charging infrastructure is 
comparatively 
charging 
capacity  already  exceeding  indicative  EU  fleet-
based  benchmarks.  There  was  also  a  clear 
increase  in  the  number  of  fast  chargers  in  2025. 
However, faster take-up seems to be hampered by 
the  high  cost  of  charging  in  public  spots.  This  is 
lack  of 
linked 
interoperability  and 
in 
combination  with  the  relatively  scarce  number  of 
considerably  more  affordable  private  charging 
spots.  This  is  especially  the  case  for  residents  in 
multi-apartment  buildings(225).  As  regards  freight, 
the  majority  (65.5%)  of  all  freight  in  2023  was 
transported by road, as opposed to only 20.2% by 
rail,  which,  moreover,  is  on  a  downward  trend. 
Lastly,  in  2024,  the  overall  share  of  renewable 
energy  in  transport  (226)  was  by  far  the  lowest  in 
the EU. 

to  high  operational  costs, 

their  malfunctioning, 

country-specific 

Croatia  is  investing  heavily  in  EU  co-funded 
green  mobility  initiatives  but  would  benefit 
focus  on  promoting 
from  a  greater 
sustainable  travel  alternatives.  For  Croatia, 
the  2025 
recommendations 
highlighted  challenges  concerning  reliance  on 
fossil  fuels  and  energy  demand  in  the  transport 
sector, specifically pointing to the need to promote 
rail  and  sustainable  urban  transport  and  to 
electrify  road  transport.  This  could  be  done  by 
reviewing  tax  incentives  and  revising  rules  on 
biofuels,  addressing  fossil  fuel  subsidies  in  the 
transport  sector.  Croatia  took  some  measures  to 
address  these  challenges,  including  investing  in 
sustainable  urban  transport  and  electrification  of 

(222) Statistical pocketbook 2025. 

(223) In 2024, the share of newly registered electric cars was just 
about  5 %  (battery  electric  vehicles:  2.8%;  plug-in  hybrids: 
2.3%). Source: European Environment Agency. 

(224) In line with EU Regulation (EU) 2023/1804 of  the European 
Parliament and of the Council of 13 September 2023 on the 
deployment of alternative fuels infrastructure, Target tracker 
European Alternative Fuels Observatory. 

(220) See Graph A8.1, and Table A8.1 at the end of this Annex. 

(225) New  buildings  are  not  necessarily  equipped  with  charging 

(221) Since 2021, the motorisation rate (number of passenger cars 
per 1 000 inhabitants) has increased faster than in the EU as 
a whole, Eurostat. 

infrastructure. 

(226) Close to 1% (close to the 2004 level), compared with an EU 

average of around 11% in 2024; see Eurostat. 

82 

02468101214161820200520232024MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
   
 
 
road transport and reversing more lenient rules on 
the mixing of biofuels. More specifically, Croatia is 
rolling out  several  major investments with EU  co-
funding  (227).  These  include:  (i)  a  targeted  support 
scheme  to  cofinance  electric  vehicle  purchases 
worth  EUR  90  million  (228);  (ii)  a  call  to  finance  2 
000 electric and/or hydrogen road vehicles, 1 300 
charging stations of at least 50 kW two hydrogen 
charging  stations  along  TEN-T  corridors;  and  (iii) 
calls for the procurement of  around 200 buses in 
cities  and  towns,  30  new  trams,  several  battery- 
and  hydrogen-powered  trains  and  supporting 
charging  infrastructure;  and  (iv)  a  double-track 
railway  line  from  Kustošija  to  Zagreb  Glavni 
Kolodvor.  New  electro-diesel  trains  are  being 
financed  through  a  European  Investment  Bank 
loan  of  almost  EUR 120  million.  The  green  public 
procurement  decision(229),  in  force  since  2025, 
stipulated  that  by  2028  at  least  50%  of  new 
vehicles  must  either  be  electric  or  satisfy  low-
emission  criteria.  In  2026,  the  emergency  decree 
introduced  as  part  of  crisis  measures  to  reduce 
sanctions  for  not  mixing  biofuels  with  diesel  and 
petrol  ceased  to  apply.  In  the  heavy-duty  sector, 
Croatia  does  not  yet  support  the  uptake  of  zero-
emission  trucks  by  exempting  them  from  the 
infrastructure charge component of road tolls (230), 
which 
incentive 
allowed  under  EU  law until  June  2031.  It  also  did 
not  carry  out the  optional  assessment  referred  to 
in  Article  7(4)  of  Directive  1999/62/EC  on  the 
application  of  CO2-based  toll  rates  on  existing 
the 
concessions,  adopting 
motorway 
minimum requirements (231). Finally, there is a lack 
of  awareness,  promotion and  education  regarding 
the  attractiveness  of  car  alternatives,  with  an 
emphasis  on  active  and  sustainable  modes  of 
travel. 

is  a  demand-side  economic 

only 

(227) The RRF, Cohesion Funds and Modernisation Fund. 

(228) Half of which for taxi, delivery and car-sharing services, and 
other  half  via  financial  instruments  for  electric  vehicle 
legal  persons  as  well  as 
purchases  by  private  and 
entrepreneurs (corporate fleets and such).  

(229) Official Gazette No 137/24. 

(230) Applicable toll rates: https://www.hac.hr/en/toll/toll-rates. 

(231) The Tolling (Eurovignette) Directive provides for price signals 
to  accelerate  the  renewal  of  the  fleet  towards  cleaner 
vehicles. 

Sustainable industry 

Circular economy industry 

Croatia  is  increasing  its  efforts  to  promote 
transition towards a circular economy. To this 
end,  the  government  is  developing  two  new 
strategies.  The  2027-2034  national  plan  for  the 
development of industry is expected to encourage 
growth  and  investment  in  the  transition  to  a 
circular economy, while the envisaged 2026-2032 
national  plan  for  the  development  of  a  circular 
economy  (232)  aims  to  make  changes  along  the 
value chain, from the design stage throughout the 
life  of  a  product,  and  to  promote  behavioural 
change. The national  plan for the development of 
a  circular  economy  is  expected  to  be  adopted  in 
2026.  Croatia  draws  generously  on  RRF  and 
cohesion  policy  funds  to  invest  in  new  waste 
management infrastructure, such as waste sorting 
facilities,  biowaste  treatment  facilities,  waste 
transfer  stations,  etc.  Nonetheless,  performance 
on  key  waste  and  circular  economy  indicators  is 
not yet optimal. In 2024, only 36,7% of municipal 
waste  (EU  average:  48%)  and  28.2%  of  plastic 
packaging  (EU  average:  42%)  were  recycled.  By 
contrast,  the  recycling  rate  for  construction  and 
demolition  waste  is  slightly  better  at  75,5%  in 
2024 (233). The indicators are improving but not at 
a  satisfactory  rate  (for  regional  disparities  see 
Annex 19). One of the reasons is that only 4 of the 
11  planned  waste  management  centres  serving 
the  whole  country  are  currently  operational. 
Despite  cohesion  policy  investment  and  close 
procurement 
monitoring, 
procedures,  multiple  appeals,  price  increases  and 
limited capacity are among the key reasons for the 
delays.  While  Croatia  has  adopted  positive 
measures  in  some  areas,  for  example  to  improve 
the  legal  framework  for  the  use  of  biowaste  by-
products  such  as  fertilisers  and  compost,  more 
efforts  are  needed  to  speed  up  the  circular 
transition.  No  patents  related  to  recycling  and 
secondary  raw  materials  were  recorded  between 
2017 and 2020 and only a negligible number were 

bottlenecks 

in 

(232) Ministry  of  Economy  of  the  Republic  of  Croatia,  Nacionalni 
plan  razvoja  kružnog  gospodarstva  Republike  Hrvatske  za 
razdoblje od 2026. do 2032. 

(233) Ministry of Environmental Protection and Green Transition of 
the Republic of Croatia, Report on construction waste 2024. 

83 

 
 
 
recorded (234). Coupled with the low numbers of EU 
Ecolabel  licences  and  products  awarded  (76)  and 
the  fact  that  only  three  companies  are  registered 
in the Eco-Management and Audit Scheme (EMAS) 
register, this reveals a low level of innovation and 
competitiveness  in  the  circular  economy  sector  in 
Croatia. 

Progress towards a circular economy remains 
slow and per capita material consumption is 
increasing  at  a  slower  rate  than  the  EU 
average.  Despite  a  12%  increase  in  the  number 
of people now employed in the sector (235) and the 
fact  that  the  circular  economy  sector  accounted 
for  3.9%  of  total  employment  in  2023  (EU 
average:  2%),  the  transition  to  circularity  remains 
slow.  While  per  capita  material  consumption  has 
continued  to  increase  over  the  past  five  years  by 
8.8%  (236),  resource  productivity  remained  at  EUR 
1.6  per  kg,  which  is  far  below  the  EU  average  of 
almost  EUR  3  per  kg.  Moreover,  the  gap  is 
increasing  because  the  rate  of  increase  is  slower 
in  Croatia  than  in  the  rest  of  the  EU  (only  27% 
between 2019 and 2024, compared with 37% for 
the EU as a whole). 

increase 

Waste  generation  has  increased  steadily 
last  10  years,  but  secondary 
over  the 
material  use  grew  only  marginally,  from 
4.6%  to  5.9%,  in  the  same  period  (237), 
underscoring a persistent reliance on primary 
in 
resources  and  a  significant 
material  import  dependency  (238).  Reuse  and 
repair centres could help reduce waste generation 
and  pressure  on  resources.  Such  centres  are  still 
rare in Croatia and there is scope for national and 
local  administrations  to  create  the  conditions  for 
their  development.  On  the  positive  side,  green 
public  procurement  has  been  extended 
to 
additional  products  and  has  been  made 
compulsory  for  public  administrations,  and  the 
deposit  refund  system  has  been  extended  to 
beverages. 

(234) Patents  related  to  recycling  and  secondary  raw  materials, 

Eurostat. 

(235) The  circular  economy  sector  covers  the  recycling  sector,  the 
repair  and  reuse  sector  and  the  rental  and  leasing  sector. 
Eurostat definition code [cei_cie011]. 

(236) Eurostat, Material footprints, 2024. 

(237) Eurostat, circular material use rate. 

(238) Decision on the Implementation of Green Public Procurement 

(Official Gazette No 137/2024). 

Croatia’s  fiscal  tools  for  circular  practices 
have  potential  to  reduce  waste  and  provide 
revenues.  Total  environmental  tax  revenue  has 
increased in real terms to EUR 2.29 billion in 2023 
(239)  but  has  fallen  as  a  percentage  of  GDP. 
Environmental  taxes  represented  3.3%  of  GDP  in 
2022 (more than the EU average of 2%) (240). Out 
of these, taxes on pollution and resources form a 
significant  share  of  the  total  (0.7%  of  GDP;  EU 
average: 0.08%) but are decreasing in GDP terms. 

improvements  have  not 

The  legal  framework  for  collecting  revenue 
from  the  waste  sector  in  Croatia  has  been 
improved recently, for example by incorporating 
an  eco-modulation  criterium  into  the  fee  system 
for  different  types  of  packaging  materials  and 
designs and by reforming the waste disposal fees 
as part of a recovery and resilience plan measure. 
These 
immediately 
translated  into  a  rapid  improvement  in  waste 
management  and  recycling,  such  as  could  be 
achieved  by  introducing  mechanisms  to  enforce 
waste  targets  for  producers,  particularly  for 
packaging.  A  mandatory  deposit-return  system 
exists  for  aluminium  drink  cans  and  glass  and 
plastic  drinking  bottles,  but  not  for  plastic  crates 
and  wooden  packaging.  While  separate  collection 
systems, pay-as-you-throw schemes and extended 
producer  responsibility  for  packaging  are in place, 
they seem to not work optimally yet (241). 

To  conclude,  Croatia’s  expenditure  on  waste 
management and the circular economy is not 
yet  sufficient  and  project  implementation  is 
slow.  An  additional  EUR 118 million  per  year  is 
estimated  to  be  needed  to  make  Croatia’s 
economy more circular (242). 

Bioeconomy industry 

The  overall  picture  with  regard  to  Croatia’s 
bioeconomy  is  one  of  a  dynamic  sector  set 

(239) European  Commission:  Directorate-General  for  Environment, 
Camboni, M., Markandya, A., Tyrer, D., Goonesekera, S. et al., 
Greening  the  European  Semester  –  Resource  and  pollution 
taxes. Annex 6, Country factsheets, Publications Office of the 
European Union, 2026. 

(240) 2025  Environmental  Implementation  Review  (SWD(2025) 

303 final), country report – Croatia. 

(241) European Environment  Agency,  Waste  Management  Country 

Profile, Croatia, 2025. 

(242) 2025  Environmental  Implementation  Review  (SWD(2025) 

303 final), country report – Croatia. 

84 

 
 
 
this 

against  a  challenging  broader  employment 
backdrop.  Bioeconomy  value  added  has  grown 
broadly  in  line  with  domestic  GDP  (243),  with  bio-
based  chemicals  and  plastics  emerging  as  a 
standout  performer,  at  21.5%  average  value-
added  growth  between  2018  and  2023,  followed 
by  wood  products  and  furniture  at  7.8% (244). 
Overall  bioeconomy  employment  has 
fallen 
considerably, largely driven by a contraction in the 
primary  production  workforce,  yet  both  bio-based 
chemicals  and  plastics  and  wood  products  and 
furniture  bucked 
trend  with  positive 
employment  growth  of  16.7%  and  1.7% 
respectively (245) (246). This compositional change is 
reflected  in  a  marked  productivity  improvement, 
with  labour  productivity  rising  from  69.9%  of  the 
national  average  in  2018  to  86.8%  in  2023 (247). 
The  principal  area  of  concern  is  R&D,  where 
bioeconomy-relevant subsectors have significantly 
lagged  behind  overall  national  R&D  growth (5.1% 
compared  with  an  average  of  16.1%  between 
(248).  Structurally,  Croatia’s 
2018  and  2023) 
bioeconomy  is  anchored  by  food  and  beverages, 
wood products (leveraging the country’s extensive 
forest  coverage),  and  an  emerging  bio-based 
chemicals  and  plastics  segment  focused  on  food 
waste-derived 
bio-based 
pharmaceuticals.  These  developments  are  guided 
by  Croatia’s  national  bioeconomy  strategy  until 
2035,  which  has  earmarked  EUR  200  million  to 
boost  sustainable  production  and  circularity  (249). 
Croatia has used its recovery and resilience plan to 
for  example  by 
promote 
increasing  the  use  of  advanced  biofuels 
in 
transport. 

the  bioeconomy, 

biopolymers 

and 

Zero-pollution industry 

Over  the  past  decade,  Croatia  has  made 
some progress in reducing key air pollutants 
through  cleaner  energy  production,  more  efficient 
heating  systems  and  tighter  vehicle  emission 
standards.  However,  Croatians  are  still  the  third 
most  exposed  to  fine  particle  pollution  in  urban 
areas in the EU (250). 

The  rate  of  natural  deaths  attributable  to 
long-term exposure to fine particles above 5 
µg/m3  is  estimated  to  have  been  reduced  by 
53.8%  between  2005  and  2023  (251).  In 
particular,  air  pollutant  emissions  (NOx,  NMVOC, 
PM10  and  SOx)  in  kg  per  capita  fell  by  15%  in 
2023 (252). Despite this progress, Croatia continues 
to  grapple  with  significant  air  pollution  costs.  In 
2022, it ranked among Europe’s worst performers, 
with  some  air  quality  zones  exceeding  ozone  and 
targets.  Annual  damage  costs  were 
PM10 
estimated  at  EUR  7.1  million  per  year  for  ozone 
alone  (253).  This  underscores  the  need  for  further 
action,  particularly  for  transport  and  household 
heating. Levies on pollutants, such as NO2 and SO₂, 
in  2004,  but  practically 
were 
suspended 
in 
in  2015.  This  has 
opportunities being missed to protect public health 
and  the  environment  and  to  raise  additional 
revenues to be used for that purpose (254). 

introduced 

resulted 

Industrial  heavy  metal 

Water  pollution  from  industry  remains  a 
challenge. 
releases 
(cadmium, mercury, nickel and lead) to water have 
increased by  53%  since  2010,  while  total  organic 
carbon  emissions  have  decreased  slightly  since 
2022,  as  reported  under  the  Industrial  Emissions 
Directive  (255).  The  status  of  surface  water  bodies 

(250) European Environment Agency, Average exposure indicator. 

(243) Joint  Research  Centre,  Developments  of  Economic  Growth 
and Employment in Bioeconomy Sectors across the EU. 

(251) Air  pollution  quick  country  facts  |  Air  pollution  country  fact 

sheets 2025 | European Environment Agency (EEA). 

(244) Ibid. 

(252) Eurostat, Air emissions accounts. 

(245) Bioeconomy  subsectors:  food  and  beverages;  bio-based 
textiles;  wood  products  and  furniture;  bio-based  chemicals 
and plastics. 

(253) Report:  Update  of  the  costs  of  not  implementing  EU 
environmental  law.  The  damage  cost  is  calculated  in  terms 
of value of a life-year (VOLY). 

(246) Joint Research Centre, Business expenditure in Research and 

Development (R&D) in the EU bioeconomy. 

(247) Ibid. 

(248) Joint Research Centre, Business expenditure in Research and 

Development (R&D) in the EU bioeconomy. 

(249) Joint Research Centre, Business expenditure in Research and 

Development (R&D) in the EU bioeconomy. 

(254) European  Commission:  Directorate-General  for  Environment, 
Camboni, M., Markandya, A., Tyrer, D., Goonesekera, S. et al., 
Greening  the  European  Semester  –  Resource  and  pollution 
taxes. Annex 6, Country factsheets, Publications Office of the 
European Union, 2026. 

(255) European  Environmental  Agency  (EEA),  Water  pollutant 
releases  changes  from  2010  to  2022  for  the  EU  Member 
States. 

85 

 
 
 
 
 
is  rather  good,  as  only  19.40%  of  them  failed  to 
achieve  good  chemical  status,  while  only  8%  of 
groundwater  bodies  have  poor  chemical  status 
(256). 

industrial 
The  total  economic  cost  of 
pollution  in  Croatia  was  EUR  1.7  billion  per 
year  in  2021,  a  significant  decrease  since 
2017.  Costs  include  healthcare  expenses,  lost 
productivity  and  environmental  degradation  (257). 
Yet,  investment  still  falls  short.  To  meet  national 
and  EU  targets  for  pollution  prevention  and 
control, Croatia would need to spend an additional 
EUR 226 million  per  year  (about  0.34%  of  GDP), 
largely in relation to clean air and noise (258). 

(256) Third River Basin Management Plan for Croatia 02/2025. 

(257) The  cost  to  health  and  the  environment  from  industrial  air 
pollution in Europe, 2024 update. EEA. The costs reported are 
calculated in terms of value of a statistical life (VSL). 

(258) 2025  Environmental  Implementation  Review  (SWD(2025) 

303 final), country report – Croatia. 

86 

 
 
 
 
Table A8.1:  Key clean industry and climate mitigation indicators: Croatia 

Sources and notes: Industry decarbonisation: All data are from Eurostat; data following the UNFCCC Common Reporting 
Format (CRF) are from the European Environment Agency (EEA), republished by Eurostat. (1) Sectors covered: all divisions of 
section C - Manufacturing - of the NACE Rev. 2 statistical classification of economic activities, except C19 (manufacture of coke 
and refined petroleum products). (2) GHG emissions as per UNFCCC Common Reporting Framework (CRF) categories 1.A.2 - fuel 
combustion in manufacturing in industries and construction (that broadly correspond to the broadly correspond to the NACE 
sections C - Manufacturing and E - Construction, excluding C-19),  and CRF2 - industrial processes and product use. The figures 
shows the emissions in the 1.A.2 category as a share of the sum of CRF1.A.2. and CRF2 emissions. (3) Sectors covered: CRF 1.A.2 
as described above. Gross value added (GVA) data in the denominator aligned in sectoral coverage, in 2020 prices. (4) Sectors 
covered: NACE section C excluding C19. (5) Nominator: NACE divisions C17, 20, 23, 24; denominator: NACE section C excluding 
C19 (see above). (6) GVA (denominator) in 2020 prices. Reduction of effort sharing emissions: Data source: European 
Environment Agency, greenhouse gas data viewer; European Commission, Climate Action Progress Report, 2025. For details, see 
the footnote in the "Reduction of effort sharing emissions" section. Sustainable road transport: (7) Source: Eurostat; (8) Source: 
European Alternative Fuels Observatory; (9) Source: Eurostat. For all climate mitigation indicators, the trend arrows compare the 
latest available data (year t) with the data four years earlier (t-4). Sustainable industry: Bioeconomy value added, employment 
and productivity: JRC, Developments of Economic Growth and Employment in Bioeconomy Sectors across the EU. Bioeconomy 
R&D business expenditure: JRC, Business expenditure in Research and Development (R&D) in the EU bioeconomy. Damage cost for 
industrial pollution: EEA, The costs to health and the environment from industrial air pollution in Europe, 2024. Water industrial 
pollutants releases: EEA, Industrial releases of pollutants to water and economic activity in the EU-27, 2024. Water chemical 
status: WISE, Surface water bodies: Chemical status, 2024 and WISE Groundwater bodies: chemical status, 2024. Other indicators: 
Eurostat. For circular economy indicators, the trend arrows compare the latest available data (year t) with the data two years 
earlier (t-2). 

87 

Climate mitigationTrendIndustry decarbonisation201820192020202120222023202420182023GHG emissions intensity of manufacturing production, g/€ (1)706698676610542572502330-Share of energy-related emissions in industrial GHG emissions (2)41.640.539.840.441.641.1-55.557.9Energy-related GHG emissions intensity of manufacturing and construction, g/€ (3)419.0410.3402.0368.2346.4360.1-203.9163.0Share of electricity and renewables in final energy consumption in manufacturing, % (4)30.129.129.229.928.628.929.842.843.9Energy intensity of manufacturing, GWh/€ (4)1.921.881.991.811.581.631.611.271.05Share of energy-intensive industries in manufacturing production, % in GVA (5)11.7013.4514.6114.4212.1913.2013.43--GHG emissions intensity of production in sector [...], g/€ (6)- paper and paper products (NACE C17) 385          335          300                 224            652                  712           555             722             619            - chemicals and chemical products (NACE C20) 4,610        3,454       2,859              14,199       9,108                15,047       12,500        --- other non-metallic mineral products (NACE C23) 7,034        7,801       6,211              4,303         5,078                5,344         5,274          2,495           2,352          - basic metals (NACE C24) 1,609        773          1,733              1,614         972                  395           377             2,842           3,099          Reduction of effort sharing emissions201820192020202120222023202420182023GHG emission reductions relative to base year, % -4.0-0.53.94.3- domestic road transport15.418.64.512.921.436.742.2-1.4-5.6- buildings-27.4-29.6-27.9-24.2-28.1-31.2-36.3-20.3-33.520052021202220232024TargetWEMWAMEffort sharing: GHG emissions, Mt; target, gap, %18.117.318.018.818.8-16.7%-8.2%-21.3%Sustainable road transport2018201920202021202220232024202520182021New zero-emission vehicles, electricity motor, % (7)0.300.441.773.182.872.561.851.038.96Number of publicly accessible AC/DC charging points (8)--4177801093107418392305446956n/aShare of electrified railways, % of total (9)37.2537.0737.0737.9838.0238.7138.7155.4756.49Sustainable industryTrendEU-27Circular economy transition20182019202020212022202320242018latest dataMaterial footprint, tonnes per person15.215.614.816.115.015.616.914.813.7Circular material use rate, %5.0            5.4           5.5                  6.1             6.8                    6.1             5.911.612.2Resource productivity, €/kg1.2            1.3           1.1                  1.3             1.5                    1.6             1.62.13.0Employees in circular economy4.0            4.64.5                  4.6             4.0                    3.9             -2.12.0Patents in circular economy0-           -                  -            12.312.0Recycling rate           25.3           30.2                  29.5             31.4                   34.2            36.0 36.7            46.4048.1Plastic recyling 37%36%34%34%35%28%-41%42%Construction and demolition waste (CDW) recovery 78-898889Bioeconomy industry 2018201920202021202220232024CAGR 2018-202320182023Value added, million EUR3,7203,9783,7644,4215,0485,523-6.8%642,438863,436Employment, total number of people employed201,879180,769183,100186,801179,996166,467--3.2%17,649,04017,085,642ProductivityValued added per worker, thousand EUR18.422.020.623.728.033.2-10.3%36.450.5Valued added per worker, % of national average69.978.778.980.683.086.8--62.270.7R&D business expenditureTotal bioeconomy (biomass producing and converting sectors)3937382055535.1%15,67223,335Total R&D business expenditure241294300337521591-16.1%196,587259,525Zero pollution industry201820192020202120222023202420182021Damage cost for industrial pollution2.42.01.81.7---414.9352.7Water industrial pollutants releases 2021change (2010)2021change (2010)2021change (2010)2021change (2010)291          no data4,168,400        no data46,080              no data362,280      no data Water chemical statusGood1,590              Good (%)0.8                    Poor384.0Poor (%)19%EUTOCPhosporusCroatiaCroatiaCd, Hg, Ni, Pbnitrogen 
 
   
 
ANNEX 9: AFFORDABLE ENERGY TRANSITION 

for 

prices 

industrial 

undermine  electrification.  In  the  first  half  of 
2025,  household  gas  and  electricity  prices  were 
stable  and  well  below  the  EU  average,  at  EUR 
46/MWh  and  EUR 150/MWh  respectively.  On  the 
other hand,  while industrial  consumers paid some 
of  the  highest  prices  in  the  EU  back  in  2024, 
electricity 
consumers 
(EUR 153/MWh) followed a decreasing trend 2025, 
dipping below the EU average (EUR 164/MWh) (259). 
Gas  prices  for  industrial  consumers  remained 
below  the  EU  average,  despite  slightly  increasing 
in  the  first  semester  of  2025.  While  wholesale 
costs account for 74% of the  industrial  electricity 
price,  network  costs,  carbon  costs,  and  taxes 
represent  12%,  6%  and  7%  respectively  of 
industrial  consumers  (260). 
electricity  bills  for 
Overall,  gas  prices  in  Croatia  remain  considerably 
cheaper than electricity, partially due to the higher 
taxation  rate  applied  to  electricity  compared  to 
gas,  with  taxes  and 
(excluding  VAT) 
accounting  on  average  for  8%  of  electricity  bills 
for non-household consumers compared to 1% for 
gas.  As  a  result,  electricity  was  3  times  more 
expensive than gas for large industrial consumers 
during the first half of 2025, falling to 2.7 if taxes 
are excluded. For households the reduction is even 
greater,  with  the  electricity-to-gas  price  ratio 
decreasing from 3.3 to 2.7 if taxes are excluded. 

levies 

This  annex  outlines  the  progress  made  and 
the  ongoing  challenges  faced  in  increasing 
energy  affordability,  while  advancing  the 
transition 
the 
implementation  of  past  energy-related  country-
specific recommendations. 

to  net  zero. 

reflects 

It 

Croatia’s  2025  energy-related  country-
specific  recommendations  highlighted  the 
need to address the country’s high electricity 
prices  by  accelerating  the  deployment  of 
renewables 
(including  by  unlocking  grid 
connections),  upgrading  transmission  and 
distribution  grids  and  improving  non-fossil 
flexibility  through  the  roll-out  of  storage 
The 
solutions 
recommendations  also  called  for  procedures  on 
permitting,  energy 
communities  and  multi-
apartment  solar  installations  to  be  streamlined, 
the  uptake  of  energy  efficiency  measures  and 
decarbonisation of heating and cooling in buildings 
to  be  improved,  and  harmful  fossil  fuel  subsidies 
to be phased out.  

smart  meters. 

and 

to 

procedures 

permit-granting 

Croatia’s  progress  towards  achieving 
its 
country-specific  recommendations  on  energy 
remains  uneven.  While  investment  is  underway 
in  transmission  infrastructure,  storage  and  smart 
meters  and  while  steps  have  been  taken  to 
streamline 
and 
recognise energy communities, there are continued 
renewables, 
the  deployment  of 
barriers 
especially  solar 
in  multi 
apartment  buildings,  due  to  outstanding  issues 
with  grid  connection 
rules  and  fragmented 
permitting  procedures.  Progress  on  energy 
efficiency and the decarbonisation of heating and 
cooling,  particularly  in  residential  buildings,  also 
continues  to  be  slow.  At  the  same  time,  Croatia 
has  failed  to  take  concrete  steps  to  phase  out 
fossil fuel subsidies. 

installation  projects 

Energy prices and costs 

While government intervention has managed 
to keep household energy bills in Croatia well 
below  the  EU  average,  and  electricity  prices 
for  industrial  consumers  have  dipped  below 
the  EU  average  since  2024’s  second 
semester,  disproportionate  fiscal  burden  on 
electricity  still  distort  price  signals  and 

(259) This  contrasts  with  Croatian  wholesale  electricity  prices, 
which  are  among  the  highest  in  the  EU.  A  possible 
explanation  is  the  growing  deferential  in  network  and  fiscal 
costs borne  by  Croatian industrial  consumers  relative  to  the 
EU average (Eurostat). This could imply that grid investment 
costs and fiscal burden may be deferred onto other actors (or 
simply neglected when it comes to grid investments), rather 
than reflecting genuinely cheaper energy procurement. 

(260) European Commission own calculations based on Eurostat. 

88 

 
 
 
 
 
Graph A9.1: Electricity and gas prices for 
household and non-household consumers, first 
half of 2025 

neighbouring  markets.  As  a  result,  price  spreads 
(262)  in  Croatia  averaged  EUR 139/MWh  in  2025, 
well above the EU average of EUR 121/MWh (263). 

Graph A9.2: Low-carbon electricity generation vs. 
electricity wholesale prices, 2025 

(i) For household consumers, the consumption band is DC for 
electricity and D2 for gas. 
(ii) For non-household consumers, the consumption band is ID 
for electricity and I4 for gas. VAT and recoverable charges are 
not displayed for non-household consumers as these are 
typically recovered by businesses. This also applies to the ‘% 
of taxes and levies’, which is shown excluding VAT and 
recoverable charges for non-household consumers. 
(iii) ‘Without taxes and levies’ indicates the retail price 
excluding all taxes and levies. It always includes the 
energy/supply and network cost components, which are not 
disaggregated in Eurostat’s six-monthly price dataset. 
Source: Eurostat 

In  2025,  Croatia’s  wholesale  electricity 
prices  averaged  EUR 106/MWh,  compared  to 
an EU average of EUR 85/MWh, making them 
the sixth highest in the EU. Despite fossil fuels 
accounting  for  a  decreasing  share  of  electricity 
generation,  they  still  accounted  for  23.6%  of 
generation  in  2025,  maintaining  their  structural 
role  as  the  dominant  marginal  price  setting 
technology  and  keeping  costs  elevated  (48%  of 
for  26%  of  electricity 
price  setting  hours 
generation).  Driven  by 
rising  natural  gas 
procurement  costs (261),  average  day  ahead 
electricity  prices  in  Croatia  increased  by  12%  in 
2025.  Croatia  also  remains  exposed  to  severe 
price spikes  during peak  demand  hours,  reflecting 
the decline in solar output in the evening and early 
morning 
limited  non-fossil 
flexibility. This then requires thermal generation to 
be  ramped  up  significantly  in  order  to  balance 
supply and demand, either domestically or through 

combined  with 

(261) Short run marginal costs of gas in the EU increased from EUR 
96 EUR MWh in 2024 to nearly EUR 103 per MWh in 2025. 
Short  run  marginal  costs  are  the  sum  of  the  variable  costs 
associated  with  producing  electricity  using  hard  coal  and 
fossil  gas.  These  are  fuel  costs,  carbon  costs  and  variable 
operating and maintenance costs.  

Unavailable data for Cyprus and Malta. Wholesale price is 
given as average of day-ahead electricity prices over 2025. 
EU-27 average is calculated as consumption-weighted. EU 
low-carbon share is calculated out of total EU electricity 
generation. Low-carbon share by country is calculated out of 
total public electricity generation. Low-carbon includes 
renewables and nuclear. 
Source: Eurostat, ENTSO-E, GME, Bloomberg, S&P Global 
Platts 

Flexibility and electricity grids 

While  Croatia  has  established  a  2022-2025 
action  plan  to  improve  compliance  with  the 
EU  requirement  to  ensure  a  minimum 
availability  of  70%  of  capacity  for  cross-
zonal  electricity  trading (264),  there  is  still 
scope  for  further  action.  Available  estimates 
suggest  that  capacity  made  available  for  cross-
zonal  electricity  trading  decreased  in  2024  (265), 
moving  Croatia  further  away  from  the  70% 
requirement. Croatia is a net electricity importer. It 
is  a  net  exporter  with  Serbia  and  Bosnia-
Herzegovina,  but  net  importer  with  Slovenia  and 
Hungary.  Croatia’s  action  plan  is  focused  on 
increasing  capacity  with  Hungary  and  Slovenia 

(262) Spread  refers  to  the  difference  between  the  highest  and 
lowest hourly day-ahead electricity prices in a single day. 

(263) Source: Ember. 

(264) TSOs  are 

required  under  EU 

law  to  make  70%  of 
transmission  capacity  available  for  electricity  trading  with 
neighbours by the end of 2025. 

(265) ACER  Monitoring  Report  on  cross-zonal  electricity  trade  and 

congestion management in the EU (2025). 

89 

 
 
 
 
 
through  network  development  and  optimisation, 
and on improving congestion management. 

challenge of its ageing transmission infrastructure, 
particularly its 110 kV and 220 kV lines (268). 

Although  Croatia  has  seen  a  decrease  in 
allocated  capacity  at  its  border  connection 
points,  its  electricity  interconnection  level 
has  remained  well  above  the  EU  target  (266), 
standing  at  36%  as  of  2026.  Since  2023, 
Croatia,  together  with  Slovenia  and  Austria,  has 
been  implementing  ‘GreenSwitch’,  a  smart  grid 
project  of  common  interest,  supported  by  the 
Connecting  Europe  Facility,  which  is  intended  to 
modernise  and  digitise  the  electricity  grids  of  all 
three participating countries, while increasing their 
hosting capacity. 

on 

electricity 

recommendation 

Croatia  has  taken  a  limited  number  of 
measures  to  address  the  2025  country-
specific 
further 
upgrading 
transmission  and 
distribution  grids.  It  will  only  be  possible  to 
enable the uptake of renewables and improve grid 
flexibility  and  resilience  by  further  strengthening 
the national grid. Under its recovery and resilience 
plan (RRP), Croatia is investing in its national grid. 
Investments 
include  an  ongoing  upgrade  of 
550 km of the high voltage network (220/110 kV), 
the  replacement  of  electricity  transformers  and 
reconstruction  of  electrical 
substations,  an 
upgrade  of  96  km  of  submarine  cables  for  the 
distribution  network,  and  an  upgrade  of 
underground  cables  connecting  six  islands  to  the 
mainland grid. Furthermore, under the RRP and the 
Modernisation  Fund,  Croatia  is  promoting  the 
uptake  of  battery  storage  systems.  Key  to 
unlocking Croatia’s full wind and solar potential is 
a 
expand  Dalmatia’s  400 kV 
transmission  capacity  along  its  main  north-south 
axis. While the technical details and final scope of 
this  project  are  still  under  consideration,  it  is 
expected  to  at  least  include  the  construction  of  a 
2x400 kV  transmission  line  running  between  the 
Konjsko and Tumbri substations, additional 400 kV 
reinforcement of the Melina substation and in the 
Dubrovnik 
the 
regions, 
reinforcement  and  expansion  of 
transformer 
stations (267).  Croatia 
is  also  faced  with  the 

project 

Istria 

and 

and 

to 

(266) The  EU  set  an  interconnection  target  of  at  least  15%  by 
2030  under Regulation  (EU) 2018/1999  on  the  Governance 
of the Energy Union and Climate Action. 

is  scope  to 

Croatia  has  taken  measures  to  address  the 
2025  country-specific  recommendation  on 
in  electricity  storage,  however 
investing 
there 
increase  demand-side 
response  and  consumer  empowerment.  In 
addition  to  the  270 MW  Velebit  pumped  storage 
hydro  plant  that  is  currently  in  operation,  Croatia 
has plans for a new pumped storage plant (Vrdovo 
450 MW  project)  and  is  currently  developing  its 
first  grid-scale  battery  and  virtual  power  plant 
(VPP)  system  with  a  60 MW/120 MWh  capacity 
near  Šibenik.  Using  RRP  co-financing,  Croatia  also 
launched a public call in October 2025 worth EUR 
50  million  to  support  businesses  in  installing 
batteries  at  existing  and/or  planned  solar  power 
plants  (target  of  100 MWh  installed  capacity).  In 
2026,  Croatia  is  also  planning  to  launch  an 
for  supporting  citizens  with 
integrated  call 
investments  in  micro-solar  panels  and  energy 
storage,  financed  by  the  European  Regional  and 
Development Fund. 

(except 

services 

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 
energy 
communities).  In  practice,  however,  the  absence 
of a dedicated independent aggregator framework 
limits  DERs’  access  to  wholesale  markets.  While 
the number of licensed aggregators in Croatia has 
been  gradually  increasing  (in  March 2025,  ENNA 
Next become the latest new aggregator to provide 
balancing services), Croatia continues to have one 
of the most concentrated retail energy markets in 
the  EU (269),  with  its  national  market  having  the 
second 
lowest  number  of  active  electricity 
suppliers in the EU (270). 

(268) Integrated national energy and climate plan for the Republic 
(541625de-25ba-4eca-b027-

of  Croatia  2021-2030 
a4aec50f1d80_en). 

(269) Source:  Rewarding  flexibility:  How  retail  contract  choice  can 
help  unlock  consumer  flexibility  -  2025  Retail  Monitoring 
Report.  Note:  market  concentration  measured  using  the 
Herfindahl-Hirschman Index. 

(267) Draft  NDP  published  in  public  consultation  by  Croatian 

(270) 2024  Market  Monitoring  Report  on  Energy  Retail  and 

Energy Regulatory Agency (HERA - Savjetovanja). 

Consumer Protection, ACER-CEER. 

90 

 
 
 
Renewables and long-term contracts 

In  2025,  renewable  electricity  generation  in 
Croatia  was  driven  by  from  historically 
strong  hydro  capacity,  greater  rooftop  solar 
adoption,  and  higher  wind  output,  which 
together led to a record share of renewables 
in  the  electricity  mix  (76.4%  in  2025  vs 
73.7% in  2024)  (274).  Hydro  represented  39.9%, 
biomass  6.5%  and  solar  7.8%  of  the  electricity 
mix.  Wind  power  represented  22.2%  of  all 
generation  in  2025,  up  from  17.8%  in  2024, 
thanks  to  favourable  weather  conditions  and  the 
commissioning  of  two  new  wind  farms,  namely 
Opor  (27  MW)  and  Boraja  II  (45  MW).  Installed 
capacity for renewables represented 5,051 MW in 
2025.  Installed  capacity  for  wind  energy  grew  to 
1.4  GW  in  2025  (compared  to  1.3  GW  in  2024, 
+5.5%),  whilst  installed  capacity  for  solar  grew 
strongly (+46.2% compared to 2024), reaching 1.3 
GW.  Nevertheless, Croatia still has untapped solar 
and  wind  potential,  especially  at  utility  scale.  The 
investment  policy  presented  in  Croatia’s  revised 
RRP  from  2025  included  an  additional  measure 
that will ensure EUR 74 million for strategic green 
investments,  such  as  solar,  wind  and  other 
renewables,  including  geothermal.  Under  the  EU’s 
Technical  Support  Instrument,  Croatia  is  currently 
developing  a  policy  framework  which  is  designed 
to help unlock offshore wind energy potential and 
thus 
the  deployment  of 
renewables. 

further  accelerate 

In 

empowerment 
terms 

Croatia  has  taken  measures  to  address  the 
2025  country-specific  recommendation  on 
advancing  the  roll-out  of  smart  meters,  but 
still  lags  behind  the  EU  average  in  terms  of 
and  market 
consumer 
participation. 
consumer 
of 
empowerment, the share of household consumers 
that  switched  supplier  increased  to  6.26%  (up 
from  less  than  2%  in  2023)  which  indicates 
increased  consumer  participation  in  the  market. 
For  non-household  consumers,  the  full  scale  roll-
out  of  smart  meters  (95%)  was  completed  in 
flow  of 
2024,  enabling 
information.  34%  of  final  household  consumers 
had  smart  meters  in  2024  (271),  representing  an 
increase  of  10%  compared  to  2023.  This  was 
achieved thanks to Croatia’s nationwide roll-out of 
smart  meters  co-financed  by  its  RRP  which  saw 
100 000  smart  meters 
in  2025. 
Nevertheless,  Croatia  is  still  far  behind  the  EU 
target  to  roll  out  smart  meters  to  80%  of  final 
customers  and  has  been  impeding  uptake  of 
dynamic  price  contracts.  Development  of  energy 
communities  is  still  low  in  Croatia,  with  only  nine 
communities  currently  established  (272),  meaning 
Croatia is still lagging considerably behind the rest 
of the EU in this regard. 

the  bi-directional 

installed 

In  2024,  electricity  accounted  for  20.0%  of 
Croatia’s  final  energy  consumption  (FEC) 
(slightly  below  the  EU  average  of  23.4%),  a 
share which has remained largely unchanged 
over  the  last  decade (273),  partly  due  to  an 
unfavourable  electricity-to-gas  price  ratio 
that  disincentivises  electrification  and  cost-
effective  decarbonisation.  Electricity  accounts 
for 26.5% and 25.8% of household and industrial 
FEC  respectively  (see  Annex  8).  In  the  transport 
sector,  the  share  of  FEC  accounted  for  by 
electricity  remained  negligible  at  0.9%.  Further 
progress  in  electrification  across  sectors  would 
help  to  cost-effectively  decarbonise  the  economy 
and  bring  the  benefits  of  affordable  renewable 
generation to consumers. 

(271) Rewarding  flexibility:  How  retail  contract  choice  can  help 
unlock consumer flexibility - 2025 Retail Monitoring Report. 

(272) Out  of  which  only  three  were  officially  approved  by  the 

national regulator. 

(273) The  CAGR  (compound  annual  growth  rate)  was  -0.17% 
between  2015  and  2024.  The  minimum/maximum  shares 
were 20% and 20.8% respectively. (Source: Eurostat). 

(274) ENTSO-E. 

91 

 
 
 
Graph A9.3: Croatia’s installed renewable capacity 
vs electricity generation mix 

Electricity mix is given as net electricity generation (gross 
electricity production minus consumption of power stations’ 
auxiliary services). Electricity produced in pumped hydro 
plants is excluded from total net electricity production, as it 
was previously counted as electricity produced from another 
source. 
“Other” includes renewable municipal waste, solid biofuels, 
liquid biofuels, and biogas. 
Source: IRENA, Eurostat 

to 

Croatia has taken some measures to address 
the  2025  country-specific  recommendation 
on  accelerating  deployment  and  grid 
connections for renewable energy projects. In 
April  2026,  HERA  adopted  its  long-awaited  new 
grid  connection  fee  (275).  While  this  may  partially 
unlock  the  situation,  the  grid  connection  rules 
themselves  have  not  been  updated  and  continue 
to  present  barriers 
renewable  energy 
(276).  For  years,  the  absence  of 
deployment 
updated fees had held up to 3.5 GW of grid-scale 
renewable  projects,  and  for  some, energy permits 
have since expired. With the help of EUR 30 million 
in 
the  European  Regional 
Development  Fund,  Croatia  intends  to  further 
support the development of geothermal energy in 
2026, at locations previously identified by the RRP, 
by  investing  in  four  geothermal  exploration  wells 
at two locations. Under its RRP, Croatia carried out 
a  major  reform  of  self-consumption  in  2025, 
introducing  a  new  system  and  creating  incentives 
for  self-consumption  as  well  as  for  consumers to 
become self-consumers. 

financing 

from 

rules, 

clarifying 

procedural 

installing  solar  photovoltaic  facilities 
in 
In  May  2025, 
multi-apartment  buildings. 
Croatia  amended  its  Renewable  Energy  Sources 
and  High-Efficiency  Cogeneration  Act  (277).  This 
strengthened  the  legal  framework  for  permitting 
reinforcing 
by 
transparency  and  proportionality,  and  formally 
recognising  renewable  energy  communities 
in 
national law. Simplified procedures for small-scale 
installations, 
including  the  continued  use  of 
positive  administrative  silence,  remain  in  force. 
However,  without  a  fully  operational  one-stop-
shop,  Croatia’s  permitting  procedures  are  still 
fragmented,  limiting  the  overall  impact  of  its 
legislative  changes.  However,  this  could  improve 
following  Croatia's  upcoming  transposition  of  the 
Renewable Energy Directive III. 

After  delivering  a  successful  renewable 
energy  auction  in  2024  which  allocated 
support  to  more  than  400 MW  of  solar 
project capacity, no new auction was held in 
2025. No new schedule on the expected allocation 
of  support  for  renewables  had  been  published  on 
the Union Renewables Development Platform as of 
the end of 2024. 

first 

recorded 

two  power 
its 
Croatia 
purchase  agreements  (PPAs)  in  2025,  which 
kickstarted 
the  country’s  PPA  market. 
Regulatory  barriers  and  the  constraint  to  the 
renewable  energy  projects  are 
pipeline  of 
preventing a sufficient supply of PPAs and thus a 
solid PPA market from forming.  

Overall, renewables as a share of gross final 
energy consumption (based on the Renewable 
Energy  Directive  methodology)  continued 
their  downward  trend  in  2024,  falling  to 
26.7%  (vs  an  EU  average  of  24.5%),  the 
same level recorded in 2012, after their peak 
in 2021 at 31.3% (278). 

Croatia  has  taken  measures  to  address  the 
2025  country-specific  recommendation  on 
streamlining permitting, including for energy 
communities,  and  simplifying  procedures  for 

(275) HERA - Obavijesti 

(276) Pravila o prikljucenju na prijenosnu mrezu - čistopis 

14.7.2023.pdf 

(277) Croatia updates Act on Renewable Energy Sources and High-

Efficiency Cogeneration - Interreg Central Europe. 

(278) Eurostat. 

92 

 
 
 
 
Energy efficiency 

the 

stricter 

energy 

requirements 

accelerating 

Croatia has not taken sufficient measures to 
country-specific 
2025 
address 
on 
recommendation 
the 
implementation 
efficiency 
of 
measures,  especially  in  residential  buildings 
and reduce the dependence on fossil fuels in 
the  heating  sector,  including  by  accelerating 
the use of efficient and green solutions, such 
as  heat  pump.  Several  relevant  acts  were 
adopted  and  entered  into  force  on  1  January 
the  Construction  Act,  whose  general 
2026: 
objectives 
include  sustainability  and  energy 
efficiency;  the  new  Energy  Efficiency  Act  which 
introduces 
for  public 
authorities  and  businesses  to  reduce  energy 
consumption  by  2030  and  to  cut  greenhouse  gas 
emissions  by  2050.  The  Act  establishes  the 
mandatory  application  of  the  “energy  efficiency 
first” principle. Nevertheless, Croatia’s final energy 
consumption (FEC) in 2024 was not in line with the 
trajectory for meeting its expected contribution by 
2030. In 2024, FEC increased by 4.1% on 2023 to 
7.4  Mtoe,  continuing  the  generally  upward  trend 
since 2019. Progress in industry,  services and the 
residential  sector  was  eclipsed  by  significant 
underperformance  in  the  transport  sector  which 
consumes  more  energy  than  any  other  sector  in 
Croatia.  While  FEC  has  decreased  slightly  since 
2019 in industry (-1.3%), services (-5.8%) and the 
residential  sector 
increased 
(-1.2%), 
considerably in the transport sector (+22.9%). 

it  has 

Croatia  has  again  seen  no  significant 
improvement  in  the  energy  efficiency  of  its 
residential  sector (279)  despite  this  being  a 
key  policy  focus  and  the  subject  of  a 
country-specific 
Limited 
access  to  metering  data  for  consumers,  notably 
regarding heating, and a lack of significant market 
signals  were  behind  the  low  levels  of  energy 
efficiency  improvements  and  electrification  of 
domestic heating needs. Final energy consumption 
in  Croatia’s  residential  sector  remained  largely 

recommendation. 

(279) CSR.4.2025:  Accelerate  the 

implementation  of  energy 
efficiency  measures,  especially  in  residential  buildings  and 
reduce the dependence on fossil fuels in the heating sector, 
including  by  accelerating  the  use  of  efficient  and  green 
solutions, such as heat pumps. 

(280). 
unchanged  between  2019  and  2024 
Consequently,  there  is  still  more  work  to  be  done 
to  achieve  a  highly  energy  efficient  and 
decarbonised  building  stock  by  2050.  Substantial 
investments  are  nonetheless  being  made  in  post-
earthquake  reconstruction  process  and  in  energy 
renovation  projects,  supported  by  the  Recovery 
and Resilience Plan (RRP) with around EUR 2 bn, to 
be completed by end-August 2026. 

Croatia  has  submitted  its  draft  national 
building  renovation  plan,  demonstrating  the 
country’s  clear  commitment  to  creating  a 
predictable  pathway  towards  achieving  an 
energy  efficient  and  decarbonised  building 
stock  which,  at  present,  is  responsible  for 
40%  of  total  final  energy  consumption.  The 
plan  therefore  acknowledges  the  importance  of 
the  sector  for  improving  the  country’s  energy 
efficiency. Heating and cooling account for 80% of 
Croatia’s  residential  final  energy  consumption, 
with  renewables  supplying  34.8%  (281)  of  total 
energy  used  for  heating  and  cooling  across  all 
sectors.  Electricity  in  Croatia  was  3.2  times  more 
expensive  than  gas  in the  first  half  of  2025.  This 
means that end users who choose a heat pump for 
heating save energy but end up paying more. 

Security of supply and diversification   

Croatia  has  invested  heavily  in  its  gas 
infrastructure  in  order  to  better  diversify 
supply and improve regional energy security. 
The  Central  and  South-Eastern  Europe  Energy 
Connectivity  Action  Plan  on  Gases  identified  four 
REPowerEU  projects  in  Croatia.  These  projects,  of 
which  some  are  complete  and  others  pending 
completion,  are  of  critical  importance:  (i) the  Krk 
LNG terminal expansion, increasing capacity to 6.1 
bcm/y  (completed),  (ii) Zlobin-Bosiljevo  pipeline 
Bosiljevo-Sisak-Kozarac 
(completed), 
pipeline  (scheduled  for  completion  in  mid-2026), 
(iv) the 
(Slovenia) 
interconnection  (scheduled  for  completion  in  mid-
for 
is  of  major 
2026)  which 
diversification.  Concerning 
renewable  gases, 
Croatia still has to further define its hydrogen and 
the  necessary 
biomethane  needs  and  plan 

(Croatia)-Zabok 

importance 

(iii) the 

Lucko 

(280) Eurostat, 2025. 

(281) Eurostat, 2025. 

93 

 
 
 
such  subsidies  still  represented  0.33% (285)  of 
Croatia’s  GDP (286),  close  to  the  EU  weighted 
average  of  0.32%.  However,  on  9 March  2026, 
Croatia chose to reimpose a fuel price cap due to 
soaring  oil  prices  triggered  by  the  conflict  in  the 
Middle East. It also maintains a regulated price cap 
on household gas supply (alongside a reduced VAT 
rate  of  5%  on  energy  products  in  force  until  31 
March  2027)  which  has  been  continuously 
renewed  since  the  2022  energy  crisis  and 
currently  extended  until  30  September  2026. 
Furthermore,  it  continues  to  operate  other  fossil 
fuel subsidies without a planned phase-out before 
2030  which  do  not  specifically  address  energy 
poverty or genuine energy security concerns, such 
as  partial  excise  duty  refunds  on  diesel 
in 
transport  and  an  excise  duty 
commercial 
exemption  on  gasoil  for  agriculture,  fisheries  and 
aquaculture. Additionally, Croatia’s 2023 Effective 
Carbon Rate (287) averaged EUR 62.3 per tonne of 
the  EU  weighted  mean  of 
CO₂,  below 
EUR 84.80 (288). 

infrastructure in line with the requirements of the 
hydrogen and decarbonised gas market package. 

in 

Croatia’s 

As  lower  natural  gas  and  coal  consumption 
was  offset  by  an  increase  in  demand  for  oil 
and  petroleum  products,  the  share  of 
renewables 
energy  mix 
stagnated  in  2024  as  the  country  continued 
to  be  exposed  to  the  harmful  effects  of 
imported  fossil  fuels.  Oil  and  its  derivatives 
accounted for 44.6% (up from 41.4% in 2023) of 
gross  inland  consumption,  natural  gas  for  24.2% 
and  coal  for  2.7%  (down  from  4%  in  2023)  (282). 
Renewables (including biofuels) contributed 27.6% 
(283). 

In  response  to  the  regional  crisis  in  the 
Middle  East,  Croatia  has  capped  maximum 
retail fuel prices (e.g., ~€1.62/litre for petrol) 
introduced  a  €450  million  support 
and 
package,  including  a  2-cent  excise  duty  cut 
on  diesel,  €70/month  aid  for  vulnerable 
households,  and  5-10%  compensation  on 
energy-intensive 
for 
electricity 
industries.  Households  continue  to  benefit  from 
annual  savings  of  €53  on  electricity,  €48  on  gas, 
and  €56.91  on  heating  due  to  existing  measures. 
Croatia  contributed  to  the  IEA  collective  action  to 
release  400  million  barrels  of  emergency  oil 
reserves.  

costs 

Fossil fuel subsidies 

the 

Croatia  has  failed  to  take  measures  to 
address 
country-specific 
2025 
recommendation on taking concrete steps to 
phase  out  fossil  fuel  subsidies,  in  particular 
in 
2024, 
environmentally  harmful (284)  fossil  fuel  subsidies 
without  a  planned  phase-out  before  2030 
decreased, mainly thanks to the planned phase out 
of  government-imposed  fuel  price  caps.  However, 

transport 

sector. 

the 

In 

(282) Electricity and heat are excluded in order to avoid double-

counting. The focus is on primary energy sources. 

(283) Gross inland consumption (Eurostat). 

(284) Explicit fossil fuel subsidies (e.g. direct transfers) and implicit 
fossil  fuel  subsidies  (i.e.  tax  expenditures  linked  to  forgone 
tax  revenues  that  have  an  identifiable  fiscal  impact  for  the 
central  budget)  that  support  fossil  fuel  energy  production, 
transmission and/or consumption.  

(285) European  Commission  calculation  based  on  underlying  data 
from  the  Study  on  energy  subsidies  and  other  government 
interventions in the EU – 2025 edition, Enerdata. 

(286) 2024 Gross Domestic Product at market prices, Eurostat. 

(287) 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. 

(288) OECD (2024), Pricing Greenhouse Gas Emissions 2024. 

94 

 
 
 
 
 
ANNEX 10: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT 

is 

(including 

Croatia’s  high  exposure  to  climate  risks  and 
increasing  pressure  on  its  natural  resources 
call  for  rigorous  implementation  of  policies, 
significant  investment  and  limiting  fiscal 
exposure  to  preserve  its  competitiveness.  A 
comprehensive  and  legally  binding  framework  for 
climate  adaptation 
in  place,  but  actual 
implementation  and  monitoring  remain  issues  at 
all  levels.  Croatia  would  benefit  from  significant 
investment  in  enhancing  resilience  in  different 
sectors 
infrastructure)  and 
in  key 
limiting  macro-fiscal  impacts  with  a  combination 
of  measures.  In  addition,  Croatia  is  rich  in  water 
resources, but inefficiencies in water management 
could  jeopardise  water  resilience  in the long  term 
and impact sustainable economic growth. The risk 
is 
of  seasonal  water  scarcity  and  droughts 
increasing,  while  water  leakages  are  among  the 
highest  in  the  EU  and  the  ecological  status  of 
surface waters is declining. Reversing these trends 
in  water 
investment 
will 
infrastructures, 
in  nature-based  solutions  for 
water retention and in measures that maintain the 
aquatic  ecosystem’s  good  status.  On  a  positive 
note,  nature-based  solutions  are  slowly  gaining 
ground  across  sectors.  Finally,  the  future  2026-
2035 forest management plan will play a key role 
by  spelling  out  additional  measures  that  will  be 
needed  to  meet  the  2030  target  for  land  use, 
land-use change and forestry (LULUCF). 

require  continuing 

Climate adaptation and preparedness  

require 

that  will 

Croatia  is  highly  exposed  to  climate  change 
impacts 
significant 
investment across sectors. Croatia is in two of 
the  three  regions  that  have  been  identified  as 
hotspots  of  climate  risks:  southern  Europe  and 
low-lying  coastal  regions (289).  It  is  particularly 
exposed  to  heatwaves,  droughts,  floods (290)  and 
wildfires (291).  These  are  increasingly  affecting 
agriculture (292)  and  water  management 
in 

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

(290) Croatia’s  2021  flood  risk  management  plan  identifies  two 
key  challenges  of  climate  change:  sea-level  rise  and  an 
increased frequency of urban flooding due to storms. 

(291) Croatia’s  annual  share  of  land  mass  burned  by  wildfires  is 

among the highest in the EU (see EFFIS). 

(292) Croatia’s  agricultural  production  is  dominated  by  rain-fed 
crops. Croatia has a smaller average size of farm units than 

95 

the 

but 

also 

fisheries 

particular, 
and 
aquaculture (293),  land  use  and  forestry,  energy 
and  tourism (294)  sectors  (as  shown  in  the  2025 
analysis (295)). Croatia recorded a lower number of 
fires and area burnt in 2025 than in the past (296), 
but  it  is  increasingly  evident  that  wildfires  are  no 
longer  confined  to  the  summer  months.  In  2022-
2024, Croatia had one of the highest heat-related 
mortality  rates  in  the  EU (297).  Croatia  estimates 
that  the  cost  of  implementing  all  the  measures 
listed  in  its  national  climate  adaptation  strategy 
will  be  EUR  3.6  billion  by  2040.  Almost  50% 
concern agriculture (298) while the transport sector 
recent  study (299) 
is  not  covered  at  all.  A 
commissioned by DG CLIMA estimates that Croatia 
will  need  to  invest  almost  EUR 885 million  per 
year  up  to  2050  (0.8%  of  annual  GDP  and 
significantly  more  than  the  EU  average  of  0.5%), 
primarily 
retrofitting  and 
reinforcement  (more  than  55%  of  the  total), 
followed by ecosystems restorations (around 25%) 
and health (around 12%) (300) while investments in 
the  resilience  of  agriculture  play  a  relatively 
smaller  role  when  comparing  to  other  Member 
States.  

infrastructure 

in 

in the EU as a whole, an ageing workforce and a low share of 
irrigated land. 

(293) The  increasing climate  and  environmental  pressures  directly 
undermine the fish stock recovery in the Adriatic Sea, thereby 
threatening the fishing sector. 

(294) Croatia  risks  becoming  a  less  attractive  destination  due  to 

high temperatures and issues with water availability. 

(295) European Commission, 2025, 2025 Country Report – Croatia, 

COM(2025) 211 final.  

(296) According  to  the  EFFIS,  the  number  of  fires  and  the  area 
burnt were considerably lower in 2025 than the 2006-2024 
average. 

(297) Janoš,  et  al.,  2025,  Heat-related  mortality  in  Europe  during 
reduce 

forecasting 

to 

2024  and  health  Emergency 
preventable deaths. 

(298) Followed by the water sector (20%) and forestry (20%). 

(299) European Commission, 2026, Assessment of EU and Member 
States  adaptation  investment  needs,  Table  25.  The  study 
provides detailed estimates of adaptation investment needs 
at the level of the EU and individual Member States per type 
of measure. It relies on a common methodology that makes 
estimates  comparable  across  the  EU.  Four  accompanying 
methodological reports provide a detailed description of how 
the results were estimated to ensure full transparency. 

(300) Typical  investments  in  ecosystems  include  soil  restoration, 
wildfire  prevention,  biodiversity  protection  and  coastal 
ecosystems  restorations.  Typical  investments  in  health  are 
linked  to  occupational  health  and  safety,  wastewater 
treatment facilities upgrade and wildfire disaster response. 

 
 
 
 
 
 
 
its 

and 

and 

acts 

binding 

updating 

strategies, 

A  comprehensive  and  legally  binding,  top-
down  policy  framework  is  now  in  place,  but 
implementation  and  monitoring  are  still  an 
issue. Croatia has in recent years strengthened its 
adaptation  and  disaster-risk  management  policy 
framework (301)  at  the  national  level  by  adopting 
legally 
by 
mainstreaming  adaptation  into  sectoral  policy 
documents (302) 
national 
vulnerability  and  risk (303)  assessments  (see  the 
2025  country  report (304)).  As  per  the  Ministry, 
around  half  of  the  activities  planned  in  the 
national  adaptation  strategy (305)  have  been 
completed,  but  the  proportion  is  considerably 
smaller  for  measures  in  the  agriculture,  forestry, 
fishing  and  aquaculture,  and  energy  sectors. 
However,  given  that  the  long  overdue  action  plan 
for adaptation has still not been adopted and that 
a  comprehensive  monitoring, 
reporting  and 
evaluation  methodology  and  system  have not 
been  rolled  out  yet (306),  it  is  difficult  to  credibly 
assess 
reducing 
vulnerabilities  and  improving  resilience.  That  said, 
in  2025  Croatia  started  to  set  up  the  National 
Centre  for  Climate  Adaptation  and  reinforced  the 
administrative  capacities  within  its  ministry  in 
charge  of  climate  adaptation.  This  should  help 
improve  governance,  coordination  and  monitoring. 
The  decision  to  establish  a  commission  for 
intersectoral coordination of policies and measures 
has  been  adopted.  This  could  not  only  strengthen 
implementation but also help increase the political 
visibility and engagement of relevant stakeholders 
in 2026. At the sub-national level, around 63% of 

progress 

terms 

of 

in 

(301) The Croatian Disaster Risk Management Strategy until 2030 
and the National Disaster Risk Assessment adopted in 2024. 

(302) The  national  adaptation  strategy  sets  out  a  number  of 
measures  for  agriculture,  forestry,  water  management, 
fishing and aquaculture, biodiversity, energy, tourism, health, 
spatial planning and risk management. 

(303) There is currently only a  statutory requirement to perform a 
climate risk assessment (CRA) at the national level with  the 
implicit  requirement  for  CRA  updates  to  be  done  as  part  of 
the process of revising the strategy, which is legally required 
every five years. 

(304) European Commission, 2025, 2025 Country Report – Croatia, 

COM(2025) 211 final. 

(305) These  measures  are  mostly  linked  to  general  actions,  risk 
management,  spatial  planning,  tourism,  health,  biodiversity 
and water management 

(306) The methodology needs to be developed under the national 
adaptation  plan  measure  on  the  ‘development  of  impact 
indicators of the implementation of the adaptation strategy 
for vulnerable sectors and society’. 

96 

the  population  was  covered  by  adaptation 
measures (307), even though all counties and  large 
cities  are  legally  required  to  adopt  an  adaptation 
programme.  In  2025,  the  focus  shifted  from 
funding  the  development  of  regional  and  local 
adaptation plans, reports and green infrastructure 
measures to strengthening sub-national capacities 
(e.g. for  climate-proofing).  The  network  of  climate 
officers has still not been set up, even though this 
would  strengthen technical  capacities to integrate 
climate goals into projects, strategic and planning 
documents.  The  share  of  Croatia’s  population 
covered  by  the  EU  Covenant  of  Mayors  has  been 
steadily 
55% 
and 
(EU-27: 34%) 
in  2024.  Furthermore,  26%  of 
signatories  have  submitted  a  sustainable  energy 
and  action  plan  (SECAP)  on  time  (i.e. within  two 
years  of  their  initial  commitment  to  the  EU 
Covenant)  and  10%  of  signatories (308)  submitted 
at 
the 
recommended  timeframe  (i.e. at  least  two  years 
after  submission  of  their  SECAP).  This  indicates  a 
growing 
Croatian 
municipalities  to  increase  climate  resilience  but 
also  shows  that  implementation  of  policies  is 
lagging behind at the local level.  

least  one  monitoring 

report  within 

commitment 

increasing 

among 

stood 

at 

Climate  risks  have  a  direct  and  significant 
effect on Croatia’s economy, while insurance 
coverage  remains  low.  Between  1980  and 
2024, Croatia recorded EUR 4.7 billion in economic 
losses (309) 
caused  by  weather-related  and 
climate-related  extreme  events.  It  has  one  of  the 
highest ratios of natural catastrophes damages to 
GDP (310).  The  latest  studies  show  that  extreme 
weather events are likely to have a prolonged and 
intensifying 
in 
Croatia (311),  with  significant  regional  impacts  and 
seasonal variations. However, Croatia’s 2% rate of 
insurance  coverage  against  weather-related  and 
climate-related events is one of the lowest in the 
(EU-27: 19% (312)).  Households  and  small 
EU 

impact  on  economic  activity 

(307) National information database. 

(308) European Commission. 

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

related extremes in Europe. 

(310) ECB  and  EIOPA,  2024,  Towards  a  European  system  for 
natural  catastrophe  risk  management,  Chart  2.  This  figure 
includes earthquakes which happened in 2020-2023. 

(311) Usman,  Parker  and  Vallat,  2025,  Dry-roasted  NUTS:  early 
estimates of the regional impact of 2025 extreme weather. 

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

related extremes in Europe. 

 
 
 
farmers  are  particularly  exposed (313).  Forest  fire 
prevention  has  been  considerably  strengthened  in 
recent  years (314).  Croatia  has  developed  a  rather 
holistic  approach  to  flood  risk  management (315). 
However,  it  is  currently  not  mandatory  to  have 
insurance  coverage  for  the  two  highest  risks 
(floods  and  fires) (316).  In  the  event  of  a  disaster, 
compensation is granted on an ad hoc basis. Some 
initial  steps  have  been  taken  to  explore  the  role 
that  insurance  companies  can  play  in  covering 
flood-related  damages,  but  there  seems  to  be  a 
lack of awareness about climate risks, both among 
businesses  and  general  population.  The  fact  that 
disaster-related  damages  are  covered  from  the 
state budget seems to have reduced incentives to 
purchase  private  insurance.  There  is  currently  no 
national insurance scheme (317) in place that could 
improve 
insurance  coverage  and  reduce  the 
insurance  protection  gap (318).  In  2026,  Croatia 
plans 
the  green  budgeting 
methodology,  but  public  finances  currently  seem 
to be very exposed to climate risks.  

to  mainstream 

of 

the 

ensure 

resilience 

investment 

key 
To 
in 
infrastructure,  significant 
systematic  climate-proofing 
is  necessary. 
Croatia  recognises  that  its  energy  sector  is  very 
vulnerable  to  climate  change.  It  has  assessed the 
consequences of future water availability and risks 
(e.g. insufficient  or  disrupted  water  supply  for 
hydropower  generation,  additional  cooling  needs 
and  flood  damages (319).  The  national  adaptation 

to 

into 

climate-related 

strategy  states  that  almost  EUR 250 million  will 
need  to  be  invested  in  this  sector  by  2040.  The 
transport vulnerability index of the TEN-T network 
to climate change is one of the highest in the EU. 
This is mainly due to the transport sector not being 
the  national  adaptation 
mainstreamed 
strategy,  limited  logistic  capacity  and  limited 
availability  of  adequate  funds  to  effectively 
disruptions (320). 
respond 
Croatia’s  transport  infrastructure  was  particularly 
exposed  to  floods  in  the  past,  but  extreme 
temperatures  are  likely  to  have  an  important 
impact  in  the  future.  The  highest  costs  are 
expected  for  adaptation  to  coastal  floods  and 
heatwaves.  An  estimated  total  of  EUR 1.4 billion 
will need to be invested until mid-century in TEN-T, 
mostly  in  maritime  ports  (EUR 694 million)  and 
railways 
has 
reported 
in  TEN-T 
adaptation  in  the  EU  until  2023  and  plans  to 
invest  around  EUR 2 billion  until  2035 (322).  The 
share  of  companies 
in 
improving their resilience against  physical  climate 
risks is below the EU average (323) and experience 
shows that the topic is not well understood overall. 
The  new  Climate  Act (324) 
requires  strategic 
documents  and 
in 
investment 
infrastructure needs to apply climate-proofing (325) 
as  part  of  the  assessment.  In  addition,  in  2025 
Croatia  developed  national  climate  proofing 
guidelines  for  projects  co-financed  by  EU  funds, 
organised  training  programmes  and  developed 
materials to increase awareness.  

(EUR 477 million) (321).  Croatia 
the  highest 

that  have 

investment 

invested 

implies 

that 

(313) Up  to  25%  of  the  population  or  companies  find  insurance 

unaffordable. 

(314) European Commission, 2025, 2025 Country Report – Croatia, 

COM(2025) 211 final. 

in 

(315) This is thanks to continuous and significant investments and 
modernisation  efforts 
infrastructure,  water  retention, 
monitoring and early warning systems combined with various 
risk  assessments  and  mapping  exercises  linked  to  water 
management  and  floods.  The  new  river  basin  management 
plan (2028-2033) also includes measures related to drought 
management. 

(NbS) 

Nature-based 
are 
solutions 
increasingly  deployed,  especially  in  urban 
areas.  Nature-based  solutions  and  prevention 
play  a  key  role  in  increasing  resilience.  In  Croatia, 
they  are  typically  used  in  the  context  of  fluvial 
floods actions and ‘to the extent possible’ (e.g. the 

2030  energy  and  climate  objectives,  NECP  assessment, 
COM(2025) 274 final. 

(316) The estimated protection gap score for 2025 is 3 (high) for 
floods  and  2.5  for  forest  fires  (medium  high).  EIOPA,  2025, 
Dashboard on insurance protection for natural catastrophes. 

(320) Support  study  on  the  climate  adaptation  and  cross-border 
investment needs to realise the TEN-T network, Publications 
Office of the European Union, 2024. 

(317) This  type  of  schemes  supplements  private  insurance  cover 
for  natural  catastrophes  by  improving  risk  awareness  and 
prevention, while increasing insurance capacity through more 
affordable (re)insurance. 

(318) ECB  and  EIOPA,  2024,  Towards  a  European  system  for 

natural catastrophe risk management. 

(321) Ibid. 

(322) Ibid. 

(323) EIB, Investment survey 2024. 

(324) Official Gazette 67/2025. 

(319) European 

Commission, 

document 
accompanying the EU-wide assessment of the final updated 
national  energy  and  climate  plans  Delivering  the  Union's 

working 

Staff 

97 

(325) As  a  minimum  assessment  of  climate  change  exposure, 
of 

vulnerability, 

proposal 

risks 

and 

sensitivity, 
countermeasures. 

 
 
 
 
Drava  river  management  transboundary  project, 
which  is  financed  by  LIFE (326),  or  the  Sava-Kupa 
large-scale  project,  which  is  co-financed  by  the 
Cohesion  Policy),  or in  the  context  of disaster  risk 
management (e.g. fire protection). The new RBMPs 
(river  basin  management  plans)  up  to  2027  build 
on the VEPAR project and strongly advocate NbS in 
the  context  of  flood  management.  NbS  have  not 
been  deployed  widely  and  systematically  across 
other sectors so far, but there has recently been a 
shift in the urban context (327) from pilots to larger 
and  more  permanent  projects  co-financed  by  EU 
funds.  Croatia  is  currently  developing  a  catalogue 
with  examples  by  sector  and  this  could  further 
help  mainstream  and  accelerate  the  uptake  of 
NbS. 

Water resilience 

Croatia  faces  seasonal  water  scarcity, 
particularly  in  the  Adriatic  coast  and  karst 
regions,  where  water  availability  varies 
sharply  during  the  summer  tourist  season. 
Agriculture,  water  utilities  and  energy  production 
are among the most water-dependent sectors (328). 
index  plus 
The  national  water  exploitation 
(WEI+) (329)  indicates  low  overall  pressure  thanks 
to  abundant  renewable  freshwater  resources. 
However, 
regional 
disparities  is  evidenced  by  the  JRC  European 
Drought  Risk  Atlas,  which  shows  that  inland 
Croatia  (Slavonia)  has  one  of  the  highest  risks  of 
drought impact on agriculture in the EU (330). Water 
scarcity can disrupt many sectors of the economy, 
in  agriculture,  reducing 
reducing  crop  yields 

the  persistence  of 

large 

(326) LIFE 3.0 – LIFE14 NAT/HR/000115, Link. 

(327) A  number  of  policy  tools  have  been  developed  (e.g.  a 
mapping  methodology  and  handbooks)  and  green 
infrastructure  has  been  included in  the  spatial  development 
strategy  and  programmes.  In  major  urban  areas,  however, 
adaptation  measures  have  not  been  fully  integrated  into 
spatial planning and general preparedness could be better. 

(328) EEA,  2025,  Water  abstraction  by  economic  sector,  2000-

2023. 

(329) Eurostat,  Water Exploitation Index, plus. WEI+ indicates how 
much  water  is  used  compared  with  the  total  renewable 
freshwater  resources  available  for  a  given  territory  and 
period. 

production  from  freshwater  aquaculture,  reducing 
power  generation  from  hydropower  and  thermal 
energy, and creating problems for water-intensive 
processes in industry.  

Water  productivity  in  Croatia (331)  stood  at 
EUR 82  per  m³  of  abstracted  water  in  2022, 
below the EU-27 average of EUR 151 per m³. 
This  reflected  inefficiencies  in  abstraction-heavy 
sectors  like  energy  and  public  water  supply, 
despite  an  upward  trend.  These  inefficiencies 
impair  competitiveness,  especially  during  peak 
seasons.  In  2023,  public  water  supply  accounted 
for  65%  of  freshwater  abstraction,  with  energy 
production  at  27% (332).  Since  2014,  abstraction 
has risen by 25%, driven by increased reliance on 
surface water (40% of abstraction in 2023) rather 
than groundwater.  

The  good  ecological  status  of  Croatia’s 
surface water bodies has declined steadily. It 
fell between the first, second and third river basin 
management plans (RBMPs) from 50% to 42% to 
33% (333).  This  decline 
is  mainly  driven  by 
persistent  pressures  (e.g. discharges  from  areas 
not  connected  to  sewerage  networks,  diffuse 
agricultural  pollution  and  physical  alterations  of 
water bodies).  

Chemical status is a critical challenge. This is 
particularly  the  case  for  coastal  and  transitional 
waters, which are affected by pollution (95% and 
97%  of  them  fail  to  achieve good limiting  access 
to high-quality water for industrial and agricultural 
use). It is equally worrying that, compared with the 
previous  RBMP  cycle,  the  number  of  heavily 
modified  water  bodies  has  almost  doubled  (from 
135 to 256) – particularly for lakes and rivers. 

ageing 

is 
Croatia’s 
exacerbating challenges for its water sector. 
Nearly half of all drinking water is lost (334), with a 

infrastructure 

(331) Water  productivity  is  a  metric  that  is  calculated  by  dividing 
GDP  (in  chain-linked  volume)  by  total  water  abstraction.  It 
indicates the average economic value (GDP) a Member State 
creates for each unit of water it takes from nature. 

(332) EEA,  2024,  Water  abstraction  by  economic  sector,  2000-

2023. 

(333) WISE,  Surface  water  Bodies:  ecological  status  or  potential. 
Note  that  the  deterioration  can  be  due  to  more  accurate 
monitoring rather than a genuine decline of parameters. 

(330) Rossi,  et  al.  (JRC),  2023,  European  Drought  Risk  Atlas, 
Publications  Office  of  the  European  Union.  See  also  the 
European Drought Observatory. 

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

98 

 
 
 
particularly  critical  situation  in  the  capital  Zagreb 
and  in  coastal  counties  that  are  also  affected  by 
seasonal  demand  spikes.  Croatia  is  addressing 
these issues by investing significantly in the sector 
using  the  recovery  and  resilience  plan  (RRP)  and 
cohesion  policy  funding.  Croatia’s  RRP  reforms 
include  the  adoption  of  a  national  water  loss 
reduction  action  plan  in  June  2024.  This  includes 
measures to improve system data, active leakage 
control  (identification  and  remediation  of  leaks), 
water  meter  replacement,  pipeline  planning  and 
replacement  and  staff  training (335).  Water  loss 
reduction action plans are about to be adopted at 
water  operator  level.  One  RRP  reform  integrated 
water  operators,  reducing  their  number  from  200 
to  41.  Additionally,  further  to  cohesion  policy 
investments (336) in the water sector, the RRP aims 
to  cut  water  losses  and  improve  monitoring 
through  public  water  supply  and  digital  metering 
projects,  as  well  as  by  building  and  renovating 
water  supply  systems.  This  should  significantly 
reduce Non-Revenue Water and improve seasonal 
resilience.  

around EUR 680 million to achieve its objective of 
guaranteeing water protection (339). 

Nature restoration 

Croatia’s economy is structurally exposed to 
nature  loss  because  has  one  of  the  highest 
dependencies  on  ecosystem  services  in  the 
EU (340).  More  than  half  of  gross  value  added 
(GVA)  relies  directly  on  the  ecosystem  (59%)  – 
well  above  the  EU  average  of  44%.  This 
vulnerability  is  particularly  acute  in  the  tourism 
sector, which contributes around 20% of GDP and 
depends  directly  on  healthy  coastal,  marine  and 
terrestrial  ecosystems.  Other  key  sectors  like 
agriculture, forestry, fishery, mining, water utilities 
and  healthcare  are  heavily  dependent  on 
ecosystems (341).  Their  degradation  might  directly 
impact the competitiveness of companies working 
in these sectors.  

Croatia has slightly increased its compliance 
rate with the Urban Waste Water Treatment 
Directive  (UWWTD).  Its  compliance  rate  was 
7.3% in 2022 (up from 5.4% in 2020), the lowest 
in the EU. Significant load is not yet collected and 
treated  or  is  collected  and  discharged  without 
treatment (337).  Croatia  is  investing  in  wastewater 
infrastructures  through  the  RRP  and  cohesion 
policy.  An  amendment  to  the  cohesion  policy 
operational  programme  adopted  in  2025  has 
increased  its  allocation  for  water  infrastructures 
by 20%, bringing the total investment in the sector 
to over EUR 1 billion. The annual  cost  of new and 
renewed urban wastewater infrastructure between 
2024  and  2032 
reach 
is 
for  collection  systems  and 
EUR 299 million 
EUR 128 million  for  urban  wastewater  treatment 
plants.  Altogether,  this  represents  a  significant 
investment  of  EUR 111  per 
inhabitant  each 
year (338).  In  general,  Croatia  still  needs  to  invest 

expected 

to 

Croatia has an exceptionally rich biodiversity 
(38.2%  of  its  territory  is  designated  as  a 
protected area (342)), but habitat degradation 
is increasingly widespread. Almost a third of its 
GDP  is  dependent  on  natural  systems.  Wetlands 
that deliver essential water-retention and climate-
regulation 
the  most 
functions  are  among 
threatened  ecosystems.  Natural  water  bodies  are 
quickly  becoming  artificially  modified.  However, 
healthy  aquatic  habitats  provide  vital  ecosystem 
services  in  Croatia,  so  their  protection  and  the 
reduction of hydro-morphological pressures is key 
for  Croatia’s  economic  sustainability (343).  More 
positively,  Croatia  has  extended  the  area  of  its 
marine  protected  areas  up  to  approximately  32% 
in order to meet the requirements of the 2030 EU 
is 
Biodiversity 
also 
fisheries 
supporting 

Strategy (344). 
the 

Croatia 
of 

establishment 

(339) European Commission, 2025, Environmental Implementation 

Review, Croatia country report. 

(335) Croatian Ministry of Economy and Sustainable Development, 
28  June  2024,  National Action  Plan  for Reduction of  Water 
Losses in the Republic of Croatia. 

(340) Hirschbuehl  et  al. 

(JRC),  2025,  The  EU  economy’s 
dependency on nature, Vasilakopoulos, P., editor(s), European 
Commission. 

(336) Croatia  increased  its  allocation  for  drinking  water  and 
wastewater 
its 
cohesion policy operational programme. This brings the total 
investment in the sector to over EUR 1 billion. 

infrastructures  with  an  amendment  to 

(337) Internal documents, implementation of Directive 91/271/EEC 

(UWWTD), 2022. 

(338) Ibid. 

(341) Ibid. 

(342) Eurostat,  Protected  Areas  Indicator;  Bioportal  –  Nature 

Protection Information System (web GIS platform). 

(343) European Commission, 2025, Environmental Implementation 

Review, Croatia country report. 

(344) Croatian Marine Protected Area Network. 

99 

 
 
 
restricted  areas  in  order  to  protect  nursery  and 
spawning grounds at the national and Adriatic sea-
basin  levels  (e.g. Kvarneric  and  Jabuka/Pomo  Pit). 
Improved monitoring, data collection and fisheries 
control  are  key  to  preserving  Croatia’s  marine 
biodiversity  and  to  supporting  the  resilience  and 
livelihoods of fisheries-dependent coastal regions. 

Croatia  has  recently  taken  steps  to  align 
with  the  EU  Biodiversity  Strategy  objective 
of making at least 25 000 km of rivers free-
flowing  by  2030.  In  2024,  Croatia  launched  its 
first projects to remove obsolete river barriers (345). 
These efforts support the objectives of the Water 
Framework  Directive  of 
restoring  freshwater 
ecosystems and the natural function of rivers and 
mitigating the impact of floods. A good example is 
the  VEPAR  project,  which  is  co-funded  by  the 
European  Regional  and  Development  Fund.  This 
has  modernised  flood 
risk  management  by 
introducing  guidelines  on  the  socio-economic 
infrastructure  measures 
feasibility  of  green 
(including  nature-based 
solutions)  and  by 
upgrading  over  650 hydrological  monitoring 
protection 
stations 
infrastructure  and 
improve 
Croatia's  capacity  to  predict,  manage  and  reduce 
the risk of floods (346).  

thus  significantly 

digitalise 

flood 

that 

Nature  degradation  is  further  amplified  by 
invasive alien species. 28 invasive alien species 
of  EU  concern  were  recorded  in  Croatia  in  2024, 
EUR 170 (347)). 
estimated 
causing 
(348)).  Nitrogen 
Eutrophication 
to 
threat 
deposition 
industrial 
from  agriculture  and 
combustion  remains  a  critical  driver  of  this 
degradation. 

an 

(a 

These positive developments contrast with a 
persistent  biodiversity  finance  gap.  Croatia 
faces  an  estimated  EUR 592 million  shortfall  in 
funding  for  its  conservation  priorities,  despite 

(345) Open  Rivers  Programme,  eight  barrier  removals  in  Plitvice 

Lakes National Park, Croatia.  

(346) VEPAR Project – Improvement of Non-Structural Measures of 

Flood Risk Management in the Republic of Croatia. 

(347) Neobiota,  2021,  Economic  cost  of  invasive  alien  species 
across  Europe.  European  Commission,  Directorate-General 
for  Environment,  EMRC,  Logika  Group  and  RPA  Europe;  
European Commission, 2025, Environmental Implementation 
Review, Croatia Country Report, Link.   

(348) EEA,  2024,  Eutrophication  caused  by  atmospheric  nitrogen 

deposition in Europe. 

policy 

investment 

cohesion 
to 
EUR 200 million.  This  shortfall  underscores  the 
need 
in  habitat 
for 
restoration (349). 

investment 

increased 

up 

of 

Sustainable agriculture and land use 

fires,  which  have  sharply 

Croatia’s  carbon  removals  fall  short  of  the 
level  of  ambition  needed  to  meet  its  2030 
target  for  land  use,  land-use  change  and 
forestry  (LULUCF).  Croatia  is  one  of  the  most 
heavily  forested  countries  in  the  EU,  but  net 
carbon  removals  in  the  LULUCF  sector  have  been 
declining since 2005. This has recently been driven 
by sanitary logging due to wind-throw events and 
forest 
increased 
reforestation costs because the scale of damages 
makes  natural  regeneration  difficult.  To  meet  its 
2030  LULUCF  target,  additional  carbon  removals 
of  0.6 million  tonnes  of  CO2  equivalent  (CO2-eq) 
are  needed (350).  The  latest  available  projections 
show  a  gap  to  target  of  1.2 MtCO2-eq  for 
2030 (351).  Additional  measures  are  therefore 
needed  in  the  land  sector  to  reach  the  2030 
target.  In  addition  to  increasing  LULUCF  net 
removals,  further  investment  in  healthy  forests 
and  soils  is  key  to  building  resilient,  biobased 
product  value  chains  and  enabling  a  growing, 
competitive 
particular, 
continued improvements in the monitoring system 
of  net  removal  data  and  projections  will  play  a 
crucial  role  in  supporting  timely  and  effective 
action in the sector. 

EU  bioeconomy. 

In 

The  future  forest  management  plan  (2026-
2035) is crucial for helping to meet the 2030 
target.  While  measures  are  relatively  cost-
efficient in this sector, the sector currently suffers 
from  a  number  of  factors:  (i) a  lack  of  financial 
incentives  and  business  models  to  encourage 
carbon  sequestration;  (ii) regulatory  hurdles  that 
prevent  afforestation  of  abandoned  agricultural 
land;  (iii) somewhat  fragmented  ownership (352); 

(349) European Commission, 2025, Environmental Implementation 

Review, Croatia country report. 

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

Regulation (EU) 2023/839. 

(351) Climate action progress report 2025. 

(352) Around three quarters of Croatian forests are publicly owned 
and  managed  by  a  state-owned company (Hrvatske  Šume), 

100 

 
 
 
 
(iv) labour  shortages (353);  and  (v) a  generally  low 
level of awareness about this sector’s contribution 
to  decarbonisation.  In  2025,  Croatia  continued  its 
efforts  to  address  some  of  the  challenges  in  the 
sector  by  planting  new  trees (354),  finalising  its 
second  national  inventory  of  forest  resources  in 
Q1 2026  and  improving  the  accuracy  of  its  net 
removal 
projects 
(e.g. CROLIS  co-financed  by  LIFE).  The  new  forest 
management plan (2026-2035) that is currently in 
the 
preparation  will  be  key 
remaining  challenges. 
the 
government  presented  its  long-awaited  strategy 
for bioeconomy until 2035 to the parliament. 

to  addressing 
In  January  2026, 

targeted 

through 

data 

Croatia’s  share  of  agricultural  land  that  is 
organically  farmed  is  gradually  increasing. 
Between  2012  and  2024,  the  share  rose  from 
2.4%  to  9.0% (355).  At  this  rate,  Croatia  will 
probably  meet  its  national  target  of  12%  of  its 
agricultural  land  being  organically  farmed  by 
2030. However, this national target is much lower 
than  the  EU’s  25%  target.  6.9%  of  Croatian 
agricultural land features landscape  elements like 
woods and grasslands, with a slightly lower figure 
of  5.8%  of  those  elements  specifically  on  arable 
land (356). The estimated rate of soil loss by water 
erosion  is  above  the  threshold  of  2 t/ha (357). 
However,  Croatia  is  not  affected  to  the  same 
degree by wind erosion and tillage erosion. 

Croatia  faces  environmental  and  public-
health  risks  due  to  persistent  agricultural 
pollution pressures and the rapid transfer of 
contaminants 
into  groundwater  systems. 
Croatia’s  functional  urban  area  has  considerably 
expanded  in  the  last  few  years.  Net  land  taken 
between 2018 and 2021 accounted for 433 parts 
per  million  per  year  of  Croatia’s  total  urban 

but a large majority of private owners own only 1-2 hectares 
of forest each. 

(353) These labour shortages are due to ageing of the workforce in 
the sector itself. This is compounded by a general decline in 
population  in  rural  areas.  The  resulting  reduction  in  active 
forest  management  due  to  labour  shortages  could  reduce 
forests’ long-term resilience. 

(354) The  action  plan  adopted  in  2024  includes  the  goal  of 

planting 1 000 000 additional trees per year by 2030. 

(355) Context 
farming. 

indicator  C.33,  agricultural  area  under  organic 

(356) The  Croatian  CAP  Strategic  Plan  2023-2027  –  Context 

indicator C.21. 

surface.  Most  land  has  been  taken  from  arable 
land.  This  ongoing  ‘land  take’  and  the  associated 
soil-sealing  makes  ecosystems 
resilient, 
decreases carbon sequestration and impairs flood 
protection (358). 

less 

Water  quality  pressures  are  intensifying. 
Under  the  EU  Nitrates Directive,  12%  of  Croatia’s 
groundwater monitoring stations recorded average 
nitrate  concentrations  in  excess  of  25 mg/l  (and 
1.5%  above  50 mg/l,  the  EU  threshold  for  safe 
drinking water) between 2016 and 2019 (359). This 
trend underscores systemic agricultural  pressures, 
despite Croatia’s relatively low livestock density of 
0.5 livestock  units  per  hectare  in  2020 (360)  (EU 
average: 0.75).  A  16%  reduction  in  agricultural 
ammonia emissions between 2018 and 2023 (361) 
underscores  improvement  in  emission  control. 
Croatia  is  projected (362)  to  meet  its  reduction 
commitments  to  be  achieved  by  2030.  However, 
the  persistence  of  nitrate  pollution  indicates  gaps 
in nutrient management strategies. 

regulatory 

Pesticide  contamination  remains  an  issue. 
33%  and  17%  of  rivers  and  lakes  water  bodies, 
exceeded 
thresholds  for  pesticide 
residues  between  2018  and  2023 (363).  These 
figures are similar to the equivalent EU figures of 
27%  and  18%.  Groundwater  bodies  are  better 
preserved  by  pesticide  contamination,  with  only 
(EU 
5%  of 
them  exceeding 
average: 19%).  Pesticides  not  only 
threaten 
aquatic ecosystems  but  also  pose  long-term  risks 
to  human  health  through  contaminated  drinking 
water  and  food  chains.  Croatia  ranks  the  best  in 
the EU for soil contamination, as the concentration 
of  pesticides  in  all  samples  does  not  exceed 

threshold 

the 

(358) EEA,  2022,  Land  take  and  land  degradation  in  functional 

urban areas. 

(359) EEA, 2025, Nitrate in groundwater in Europe. 

(360) Eurostat, Livestock density index, Link. 

(361) EEA,  Air  pollutant  emissions  data  viewer 

(Gothenburg 

Protocol, Air Convention) 1990-2023. 

(362) EEA,  2025,  Magnitude  of  emission  reductions  (percentage) 
required  by  EU  Member  States  to  meet  their  emission 
reduction  commitments  for  2030  onwards,  based  on  2023 
data. 

(363) EEA,  2024,  Pesticides  in  rivers,  lakes,  and  groundwater  in 

(357) European Commission, EUSO Soil Degradation Dashboard. 

Europe. 

101 

 
 
 
0.05 mg kg (364),  whereas  this  occurs  57%  of  the 
times at EU level. 

(364) Vieira  et  al.  (JRC),  2023,  Pesticides  residues  in  European 
agricultural  soils  –  Results  from  LUCAS  2018  soil  module, 
Publications Office of the European Union. 

102 

 
 
Table A10.1:Key Adaptation Indicators 

(1) The data show the average for the timespan 2006-2024 based on reporting from EFFIS - European Forest Fire Information 
System. (2) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters, 
based on modelling of the risk from floods, wildfires, windstorms, and the insurance penetration rate. Scale: 0 (no protection gap) 
– 4 (very high gap). EIOPA, 2025, Dashboard on insurance protection gap for natural catastrophes. (3) 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. (4) 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). (5) Indicator refers to concentrations of nitrate (NO3) 
in groundwater, measured as milligrams per litre (mg NO3/L). Nitrate 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 is limited to 50 
mg NO3/L to avoid threats to human health. (6)  Net removals are expressed in negative figures, net emissions in positive figures. 
Reported data are from the 2025 greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in 
Regulation (EU) 2023/839 – Annex IIa. 
Source: Eurostat, EEA, JRC 

103 

Climate adaptation and preparedness:EU-27201920202021202220232024latest dataDrought impact on ecosystems0.071.923.0931.860.05-2.76[area impacted by drought as % of total]Forest fires burned area (1)11,818     27,477     9,342       32,943     2,768       15,886     354,510     [burned area in ha. per year]Economic losses from extreme events-          66            -          383          160          19            40,452       [EUR million at constant 2022 prices]Insurance protection gap (2)---2              2              2              -[composite score between 0 and 4]Sub-national climate adaptation action32            35            38            41            50            55            34              [% of population covered by the EU Covenant of Mayors for Climate & Energy]Water resilience:EU-27201920202021202220232024latest dataWater Exploitation Index Plus, WEI+ (3)0.20         0.25         0.24         0.34         0.23         -4.53            [total water consumption as % of renewable freshwater resources]Water productivity77            72            80            82            82            -151[EUR per m3]Water abstractionWater abstraction by source (% from surface water)39.42%38.63%39.76%41.18%40.32%-Water abstraction by sectorAgricultureElectricity coolingManufactu-ringPublic water supplyMining and QuarryingConstru- ction 4.14%27.37%3.12%65.08%0.29%0.00%Status of water bodies (4)[% of water bodies in a good status]Surface water bodies (ecological)-----33%38%Groundwater bodies (quantitative)-----98%93%Nature restoration:EU-27201920202021202220232024latest dataEcosystem dependency---59%--44%[% of direct dependency]Protected area383838.238.238.226.4[% of terrestrial protected areas]Invasive alien species (IAS)-----2829.2[number of IAS of Union concern]Damage cost of IAS----0.171.69[EUR billion]Eutrophication 261261295[AAE of area at risk of euthrophication]Sustainable agriculture and land use:EU-272012-20182018-2021latest dataYearly net land taken by Member State118          433          670            [ppm of total urban surface per Member State]Land conversion in functional urban area [% of total land taken from 2018-2021]Arable land32%Complex and mixed cultivation0%Forests14%Herbaceous vegetation associations25%Open spaces with little or no vegetation1%Pastures26%Permanent crops2%Water0%Wetlands0%201920202021202220232024latest dataNitrates in groundwater (5):::::[mgNO₃/l]Livestock density0.610.540.75(number of livestock units per hectare of utilised agricultural area)Ammonia emissions 91%88%91%94%94%-94%[% of total utilised agricultural area]Pesticide contamination on rivers and lakes water bodiesrivers33%27%[% of monitoring sites with pesticides exceeding thresholds, 2018-2023]lakes17%18%Pesticide contamination in soil 0%57%[% of samples with a concentration over 0.5 mg/Kg⁻¹]Net greenhouse gas removals from LULUCF (6)-5723.4-5657.0-5762.7-4866.5-5525.7--198,421 [ktCO₂-eq] 
 
   
 
FAIRNESS 
ANNEX 11: LABOUR MARKET 

Croatia’s  labour  market  has  strengthened 
markedly,  yet  structural  challenges  persist. 
Employment  and  unemployment  have  reached 
historically  favourable  levels.    While  Croatia  is  on 
track  to  reach  its  2030  employment  rate  target,  
achieving    a  more  inclusive  labour  market  and 
robust  economic  growth  will  require:  (i)  reaching 
activating 
the 
underrepresented groups (particularly older people, 
low-skilled  workers  and  persons  with  disabilities) 
and  better  using  their  potential;  (iii)  addressing 
skills  mismatches 
skills 
intelligence  and  relevant  labour  market  training 
with  stronger  employer 
involvement  and  (iv) 
reducing regional disparities.  

improved 

through 

target; 

2030 

skills 

(ii) 

The  2025  country-specific  recommendations 
for  Croatia  highlighted  the  need  to  reduce 
labour  and  skills  shortages  by:  (i)  removing 
obstacles  to  labour  force  participation;  (ii)  better 
targeting  active 
to 
vulnerable  groups;  (iii)  attracting,  developing  and 
retaining  talent;  and  (iv)  strengthening  labour 
market  policies  and  their  coordination  with  social 
services. 

labour  market  policies 

to 

led 

Labour market outcomes continue to improve 
and  are  approaching  EU  averages,  but 
regional  disparities  remain.  The  employment 
rate reached a record high of 74.4% in 2025 (EU: 
76.1%),  very  close 
the  country’s  2030 
to 
employment  target  of  75%.  The  unemployment 
rate has steadily declined since 2014 (17.3%) and 
is now historically low, well below the EU average 
(4.9% vs 6%). Strong economic activity and labour 
demand 
long-term 
unemployment  in  2025  (1.8%).  Labour  market 
slack (365)  decreased 
in  Q4-2025, 
remaining  significantly  below  the  EU  average 
(11.0%).  However,  youth  unemployment  remains 
above the EU average (18.3% vs 15.2% in 2025), 
and labour force participation, although increasing 
in  recent  years,  is  still  below  the  EU  average 
(72,4%  vs  75.7% 
the 
macroeconomic  skills  mismatch,  which  arises 
when the skills of available workers and those who 
get  hired  differ,  is  relatively  high  (23.3%  vs  EU: 
19.2%  in  2025).  Regional  disparities  in  labour 

in  2025).  Moreover, 

to  6.8% 

record 

low 

(365) The labour market slack is the underuse of labour resources, 
those 

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

force  participation  are  substantial,  ranging  from 
77,6%  in  the  City  of  Zagreb  region  (Q4-2025)  to 
68.3%  in  the  Pannonian  region,  well  below  the 
national average of 72.3% (366).  

Graph A11.1: Key rates: activity, employment, 
unemployment, long-term unemployment, youth 
unemployment, NEET 

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 
Long-term unemployment rate (% of labour force), total, ages 
15-74 
Youth unemployment rate (% of labour force), total, ages 15-
24 
NEET: Young people neither in employment nor in education 
and training (% of population), total, ages 15-29 

Source: Eurostat, LFS [lfsi_emp_a, une_rt_a, lfsi_neet_a, 
une_ltu_a, lfsi_emp_a] 

Despite  overall  increase  in  labour  market 
participation,  older  people  and  low-skilled 
in  the 
workers  remain  underrepresented 
labour  market.  While  some  progress  has  been 
made in  recent  years,  Croatia  still  has  one  of  the 
lowest  employment  rates  for  older  workers  (55-
64) in the EU, at 54.9% in 2025 (EU: 66.4%), with 
an  even  lower  employment  rate  for  those  aged 
60-64 (40.9% vs EU: 53.1% in 2024). These gaps 
partly  reflect  historically  high  retirement  rates, 
the 
driven  by  early 

retirement  ages  and 

(366) Source: Croatian Bureau of Statistics - Labour force statistics. 

104 

50556065707580010203040506020092010201120122013201420152016201720182019202020212022202320242025%%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) 
 
 
 
   
 
 
 
 
widespread  use  of  early  retirement  schemes 
among  specific  population  groups.  Policy  and 
legislative  measures  are  being  developed  to 
encourage  people  to  stay  in  the  workforce  for 
longer.  Working  pensioners  are  concentrated  in 
cities (almost 40% in the City of Zagreb and Split-
Dalmatia  counties  alone),  while  participation  is 
much  lower  in  rural  areas.  The  employment  rate 
for  low-skilled  workers  (20-64)  is  also  well  below 
the  EU  average  (42.0%  vs  58.2%  in  2025)  and 
lags significantly behind the employment rates for 
medium-skilled  (72.3%)  and  high-skilled  (88.1%) 
workers.  This  gap  largely  reflects  skills  profiles 
that are unsuitable for labour market needs. 

through 

The  employment  situation  for  persons  with 
disabilities  remains  challenging.  The  disability 
employment  gap  decreased  to  39.7 pps  in  2025, 
but  it  still  remains  well  above  the  EU  average 
(24.2 pps).  Only  46.5%  of  persons  with  some  or 
severe disabilities are active in the labour market, 
compared with 64.4% in the EU (367). Nearly half of 
young  persons  with  disabilities  are  not 
in 
employment,  education  or  training,  the  second 
highest  rate  in  the  EU  (46%  vs  EU:  28%).  Since 
2019,  the  number  of  persons  with  disabilities 
employed 
the  Croatian  Employment 
Service 
(CES)  mediation  has  been  steadily 
increasing. However, there are regional disparities: 
more  than  40%  of  all  unemployed  persons  with 
disabilities registered with CES are in just 3 out of 
21  counties  (City  of  Zagreb,  Osijek-Baranja  and 
Split-Dalmatia).  Participation  of  persons  with 
disabilities in active labour market policies (ALMPs)  
has been expanded in 2026 with the possibility of 
employing people with disabilities on the part-time 
basis  through  employment  support.  Employers 
often deny the right to reasonable adjustments to 
working conditions and work organisation (368). This 
the 
indicates 
employment 
disabilities, 
particularly through awareness raising.  

the  need 
of 

to  further  promote 

persons  with 

disabilities. 

Efforts are made to improve the situation of 
persons  with 
is 
implementing  the  National  Plan  for  Equalising 
Opportunities  for  Persons  with  Disabilities  2021-
2027,  and  personal  assistance  services  are 
regulated through the Law on Personal Assistance, 

Croatia 

(367) European  comparative  data  on  persons  with  disabilities  - 

data 2023 - European Commission. 

(368) Croatian  Ombudsman  for  Persons  with  Disabilities  (2025), 

Report of the Ombudsman for 2024. 

to 

improve 

is  working 

with  support  from  the  European  Social  Fund  Plus 
(ESF+).  Under  the  Technical  Support  Instrument 
(TSI),  Croatia 
the 
assessment of remaining work capacity of persons 
with  disabilities  to  support  their  inclusion  in  the 
initiatives,  for 
labour  market.  Further  policy 
example  on  flexible  working  arrangements  and 
targeted  ALMPs,  would  be  beneficial  expanding 
employment  and 
training  opportunities  and 
improving labour market inclusion. 

of 

under 

regulations 
foundations 

social 
including  work 

The  lack  of  an  institutional  or  regulatory 
social  economy  framework  constrains  the 
economy 
development 
organisations, 
integration 
social  enterprises.  Croatia  does  not  have  a 
specific social economy strategy or framework law 
in  place,  and  no  dedicated  tax  incentives  or 
procurement preferences have been introduced for 
social  enterprises. As a result, the social economy 
for 
general 
operates 
associations, 
and 
cooperatives, 
institutions. In the absence of an agreed definition 
and  common 
identifying 
eligible  bodies  for  targeted  support  remains 
challenging, 
limiting  policy  effectiveness  and 
access  to  finance  for  social  enterprises  that 
labour  market 
support 
integration. 
organisations 
therefore  compete  on  equal  terms  with  profit-
oriented  firms  despite  their  focus  on  producing 
social  value.  Work  on  a  national  social  economy 
strategy 
effective 
implementation  will  require  increased  capacity 
among  stakeholders  at  national  and  regional 
levels, as well as stronger commitment and cross-
cutting coordination across ministries and funding 
programmes. 

recognition  criteria, 

vulnerable  groups’ 

economy 

started, 

Social 

has 

but 

its 

Croatia’s  shrinking  working-age  population 
poses  challenges  to  the 
labour  market. 
Croatia’s  population  is  expected  to  decrease  and 
age,  driven  by  declining  birth  rates  and  rising  life 
expectancy.  According  to  the  2021  census,  the 
population  is  projected  to  decrease  by  22%  to 
3.01  million  by  2070. Labour  force  participation 
and  employment  rates  among  the  working-age 
population  are  projected  to  rise  throughout  this 
period,  partly  reflecting  the 
in  the 
retirement  age  for  women,  which  affects  both 
early  and  statutory  retirements 
(see  below). 
Nevertheless, the absolute size of the working-age 
population 
life 
expectancy  is  expected  to  rise  significantly. As  a 
result,  the  old-age  dependency  ratio  (the  ratio  of 

is  projected  to  decline,  and 

increase 

105 

 
 
people aged 65 and over to those aged 20-64) is 
set  to  grow  from  38.9%  in  2022  to  62.2%  by 
2070,  which  will  put  additional  pressure  on  an 
already  strained  healthcare  system  (see  Annex 
15).  To  tackle  these  challenges,  Croatia  has 
introduced  a  pension  reform,  including  a  gradual 
increase  in  the  pensionable  age  for  women  (by 
three  months  every  year),  reaching  65  in  2030, 
and  the  possibility  of  combining  pension  rights 
with employment. 

the 

of 
(CES)  may 

Croatian 
Limited 
capacities 
reduce 
Employment  Service 
effectiveness of labour market integration of 
vulnerable people. The ESF+ is financing ALMPs 
aimed at activating, reskilling and upskilling groups 
under-represented  in  the  labour  market.  Labour 
market  integration  of  these  groups  may  require 
further strengthening CES capacities to: (i) provide 
targeted,  integrated  and  innovative  services  at 
national  and  regional  levels;  (ii)  regularly  monitor 
and review ALMPs; and (iii) better coordinate policy 
measures  with  social  services,  training  providers 
and key labour market players.  

labour  shortages 

The  working  conditions  and  integration  of 
migrant  workers  are  becoming  increasingly 
important  issues.  The  employment  rate  of  non-
EU  nationals  is  higher  than  that  of  the  overall 
population,  standing  at  around  80%  (EU:  65.2%). 
Amid  persistent 
in  some 
economic  sectors,  promoting  legal  migration  and 
attracting  and  retaining  talent,  including  those 
from  non-EU  countries,  is  becoming  increasingly 
pressing.  In  March  2025,  Croatia  amended  its 
Foreigners Act to facilitate the hiring and retention 
of  non-EU  nationals  in  the  labour  market  and  to 
improve  their  social  protection  and  inclusion. 
Complementary  measures 
to 
Croatian  language  training  at  all  levels  through  a 
skills voucher system, including shorter non-formal 
learning programmes. In addition, since 2025, non-
EU  nationals  with  temporary  residence  permits 
have  been  able  to  register  as  unemployed  and 
access CES advisory services.  

include  access 

skilled  occupations  is  falling,  while  the  share  of 
workers in low-skilled occupations is already above 
the  EU  average  and  has  increased  since  the 
COVID-19  pandemic.  This  points  to  a  structural 
reliance on low-skilled employment. 

individual 

recent  efforts 

Skills  mismatches  continue  to  constrain  the 
labour  market,  with  workforce  shortages  in 
in 
many  sectors.  Croatia’s 
upskilling and reskilling initiatives are supported by 
the Recovery and Resilience Facility and the ESF+, 
including  steps  to  create 
learning 
accounts.  However,  participation  in  adult  learning 
remains limited, with particularly low rates among 
vulnerable  groups 
(see  Annex  13).  Skills 
mismatches  contribute  to  labour  shortages,  the 
underuse of qualifications and fewer employment 
opportunities for medium-skilled workers and low-
skilled.  The  job  vacancy  rate  remained  stable  at 
1.5%  in  Q4-2025  and  below  the  EU  average  of 
2.1%, consistent with its pre-pandemic level (1.4% 
in  Q4-2019).  However,  this  aggregate  figure 
masks  important  differences  across  sectors,  with 
the  highest  shortages  being  reported  in  2025  in 
areas  such  as  postal  and  courier  activities, 
construction,  machinery  repair  and  installation, 
food 
recruitment 
agencies (369).  In  October  2025,  the  share  of 
employers expecting labour shortages to limit their 
production  was  around,  higher  or  significantly 
higher  than  the  EU  average  in  several  sectors:  it 
was  22.5%  for  companies  in  the  services  sector 
(EU: 23.1%), 40.5% for companies in industry (EU: 
17.5%)  and  48.9%  in  the construction  sector (EU: 
27.5%).  A  breakdown  by  occupation (370)  shows 
that  shortages  are  most  acute  in  elementary 
occupations  and  among  hospitality  workers,  sales 
workers  and  transport  workers.  The  declining 
working-age  population  risks  further  exacerbating 
labour  shortages,  especially  among  people  with 
lower 
Croatia’s 
economic  competitiveness.  Strengthening  adult 
education  and  training  coverage  and 
labour 
initiatives  such  as 
market  relevance  through 
individual 
learning  accounts  (ILA)  would  help 
mitigate these risks. 

qualifications, 

undermining 

beverages, 

and 

and 

Croatia  faces  an  imbalance  between  an 
increasing number of people obtaining higher 
education  qualifications  and  the 
limited 
number  of  new  jobs  for  high-skilled  roles. 
‘job 
Unlike  most  advanced  economies  facing 
polarisation’  (i.e.  an  increase  in  both  high-skilled 
and  low-skilled  occupations,  with  a  decrease  in 
mid-skill  occupations),  Croatia  is  experiencing  a 
different trend. The share of employment in high-

(369) Business and Consumer Surveys (ECFIN). 

(370) EURES - Demand for occupations | Cedefop. 

106 

 
 
Graph A11.2: Employment by type (permanent, 
temporary, self-employed), year-on-year changes 

In 

predominantly  in  low-wage  sectors.  It  would  be 
beneficial  for  social  partners  to  build  up  their 
the  Croatian 
capacity. 
January  2025, 
government  set  up 
for  Social 
the  Office 
Partnership 
to  promote  social  dialogue  and 
partnership.  The  Office  will  work  with  social 
partners to develop measures to be included in the 
future  action  plan 
for  promoting  collective 
bargaining. 

about 

remains 

relatively 

potential 

Concerns 
downward 
pressures  on  competitiveness  are  emerging. 
Although Croatia has made some progress, labour 
productivity 
low  with 
pronounced  regional  differences  (see  Annex  18), 
posing  a  significant  challenge  to  sustainable 
economic  growth.  Over  the  past  decade,  wage 
growth  has  consistently  exceeded  the 
levels 
suggested  by  standard  macroeconomic  drivers  of 
wage  growth (372).  As  a  result,  unit  labour  costs 
have  increased  significantly  in  recent  years:  they 
grew  by  11.3%  in  2023  and  10.8%  in  2024  and 
were forecast to increase by 8.9% in 2025. While 
export  market  shares  have  risen  (2021-2023), 
continued  strong  wage  growth  could  weigh  on 
competitiveness in the future.  

including 

The  green  and  digital  transitions  are  facing 
in  energy-intensive 
bottlenecks.  Employment 
industries increased to  2.4%  of  total  employment 
in  2025  (vs  EU:  3.5%).  In  2025,  shortages  were 
reported  for  several  occupations  relevant  to  the 
construction 
green 
transition, 
professions,  such  as  air 
conditioning  and 
refrigeration  mechanics,  electrical  mechanics  and 
fitters  or  insulation  workers.  At  the  same  time, 
participation  in  education  and  training  within 
energy-intensive 
industries  decreased  slightly, 
from 9.5% in 2015 to 8.4% in 2024, and remains 
below  the  EU  average  (11.7%).  Croatia’s  recovery 
and  resilience  plan  includes  a  revised  national 
skills development plan,  which  aims to  encourage 
people to  acquire  green  skills  as  part  of  Croatia’s 
energy efficiency and renovation plan.  

ICT  sector  in  Croatia  is  strengthening.  ICT 
specialists  account  for  4.9%  of  those  in  total 
employment in 2025, marginally down from 5.0% 
in 2024, and in line with the EU average of 5.0%. 
The share of female ICT specialists was estimated 
at 18.4% in 2025, below the EU average of 19.5%, 

(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 
remains  strong.  After  a 
significant  increase  of  more  than  13%  in  2023, 
nominal  wage  growth  rose  by  8.9%  in  2024  and 
by 10.9% in 2025. It is projected to grow again, by  
7%  in  2026,  above  the  EU  average  for  all  five 
years.  Real  wages  have  grown  at  a  rapid pace  as 
well (4.8% in 2023, 4.3% in 2024,  6.0% in 2025 
and  a  projected  2.2%  in  2026),  supported  by 
robust nominal wage growth and rapid disinflation. 
The  statutory  minimum  wage  increased  by  56% 
between  January  2022  and  January  2025,  a  rise 
of 21% in real terms. However, wages remain low 
compared with other Member States.  

in 

Croatia 

bargaining 

is 
Collective 
decentralised  in  the  private  sector  and  is 
mostly  centralised  in  the  public  sector.  The 
collective bargaining coverage rate stood at 65.3% 
(2024) (371).  The  most  common  type  of  collective 
bargaining  encountered  in  the  private  sector  is  a 
traditional 
collective 
of 
agreements.  Larger  companies  also  conclude  in-
house  collective  agreements.  While  the  public 
sector  (including  the  civil  and  public  service)  and 
state-owned  enterprises  are  almost  entirely 
covered by collective agreements, a large number 
lack  coverage, 
of  workers 

in  private  sector 

sectoral 

system 

(371) OECD/AIAS ICTWSS v2.0. 

(372) Wage  benchmarks  are  predicted  by  developments 

in 

inflation, productivity and the unemployment rate. 

107 

-150-100-500501001502002007-Q42008-Q42009-Q42010-Q42011-Q42012-Q42013-Q42014-Q42015-Q42016-Q42017-Q42018-Q42019-Q42020-Q42021-Q42022-Q42023-Q42024-Q42025-Q4thsHRPermanent employeesTemporary employeesSelf employmentOverall 
        
 
 
so  women  remain  under-represented  overall. 
Demand  for  ICT  specialists  remains  strong  across 
sectors,  but  supply  continues  to 
lag  behind 
demand.  Croatia  performs  slightly  above  the  EU 
average  in  terms  of  digital  skills  among  the 
broader population, with 63.4% of individuals aged 
16–74 having at least basic digital skills in 2025, 
compared with the EU average of 60.4%. However, 
this  level  remains  well  below  the  Digital  Decade 
2030  target  of  80%.  The  recovery  and  resilience 
plan  aimed to  tackle  upskilling  and  acquiring  new 
skills related to the green and digital transitions by 
introducing new ALMPs for long-term unemployed 
people  and  people  from disadvantaged  groups  by 
using  the  voucher  system  for  adult  education. 
ESF+  funding  also  contributes  to  green  skills  and 
jobs,  adding  to  Recovery  and  Resilience  Facility 
investments and aligning vocational education and 
training  with  the  green  transition’s  labour  market 
needs. 

108 

 
 
ANNEX 12: SOCIAL POLICIES 

country-specific 

Croatia  continues  to  face  significant  social 
policy  challenges.  Inadequate  social  protection, 
low  pension  adequacy  and  high  poverty  risks  for 
vulnerable  groups,  especially  older  people,  people 
with  disabilities,  rural  communities  and 
low-
income households, have resulted in slow progress 
towards  the  2030  poverty  reduction  target.  The 
2025 
recommendations 
addressed  the  adequacy  of  social  benefits,  which 
remains  relatively  low,  including  for  pensions. 
Increasing the efficiency and efficacy of the social 
protection  system  could  improve  its  capacity  to 
reduce  poverty.  The  2025  recommendations  for 
Croatia also called for improving access to formal 
home-based  and  community-based 
long-term 
care,  which  remains  insufficient  given  the  rising 
demand  and  increasing  pressures  on  residential 
care.  Addressing  these  challenges  will  contribute 
to 
inclusive  growth  and 
competitiveness. 

improving  Croatia’s 

towards 

Croatia’s  progress 
the  2030 
national poverty reduction target is slow. The 
percentage  of  people  at  risk  of  poverty  or  social 
exclusion (AROPE) reached 20.7% in 2025 (20.9% 
EU  ) (373).  This  was  mainly  driven  by  monetary 
poverty, with the at-risk-of-poverty (AROP) rate at 
19.5%  in  2025,  substantially  higher  than  the  EU 
average of 16.3% .  Progress towards the national 
2030  target  of  reducing  the  number  of  people  at 
risk  of  poverty  or  social  exclusion  by  298 000 
compared with 2019 continues to be limited, with 
only  64 000  fewer  people  at  risk 
in  2025 
compared with 2019. Tackling the various types of 
poverty  and  achieving  the  national  anti-poverty 
target  will  require  a  comprehensive  approach,  as 
set out in the EU anti-poverty strategy. Croatia has 
a  2021-2027  national  plan  to  fight  poverty  and 
social exclusion, supported by the European Social 
Fund  Plus  (ESF+),  and  a  new  action  plan  for  its 
implementation  is  to  be  adopted  soon.  Clear 
objectives  for  the  measures  contained  in  the 
action plan and their swift implementation will be 
required  to  allow  Croatia  to  speed  up  progress 
towards the 2030 poverty reduction target.   

Certain  groups  face  disproportionately  high 
risks of poverty. 32.9% of people over 55 were 
at  risk  of  poverty  or  social  exclusion  in  2025 
(19.8%  EU),  and  for  those  over  65  this  number 
was even higher at 40% (18.8% EU). The relative 
median  at-risk-of-poverty  gap  was  28%  in  2025 

(22.5%  EU),  and  the  persistent  at-risk-of-poverty 
rate was especially pronounced for those over 65, 
at 32.5% in 2025 (10.9% EU). In 2025, 39.8% of 
persons  with  disabilities  faced  risks  of  poverty  or 
social  exclusion  (28.8%  EU)  and  the  gap  when 
compared  with  persons  without  disabilities  was 
24.2 percentage points (pps), one of the highest in 
the  EU.  In  addition,  poverty  rates  for  long-term 
unemployed  people  and  inactive  groups  are  also 
comparatively higher. The Roma population, albeit 
small,  faces  extremely  high  poverty  risks,  at  86% 
according to the latest available data (374). 

Regional  disparities  in  poverty  rates  are 
pronounced.  The  AROPE  rate  climbed  to  30%  in 
Pannonian  Croatia,  compared  with  12.4%  in  the 
city  of  Zagreb.  25.7%  of  the  population  living  in 
rural  areas  was  at  risk  of  poverty  in  2025, 
compared  against  14.8%  in  the  cities.  After 
deducting  housing  costs,  the  AROP  rate  of  people 
living in rural areas stood at 30.9% compared with 
18.4% in the cities. 

is 

Child  poverty  has  decreased  in  Croatia.  In 
2025,  the  AROPE  rate  for  children  was  15.7% 
(24.3%  EU)  and  the  number  of  children  at  risk  of 
poverty  decreased  by  25 000  in  comparison  with 
2024.  Croatia  seems  to  be  on  track  to  reach  its 
target to reduce the number of children at risk of 
poverty  and  social  exclusion  by  94 000  by  2030 
(from  the  2019  figure  of  134 000),    by  2025  it 
managed  to  reduce  the  number  by  34 000.  The 
implementing  the  European  Child 
country 
Guarantee (ECG) according to its 2023 action plan, 
supported  by  the  recovery  and  resilience  plan 
(RRP) and the ESF+. The 2024 ECG national report 
notes improvements, especially in the introduction 
of  free  school  meals  for  all  pupils  in  primary 
schools  and  early  childhood  education  and  care, 
yet  major  gaps  persist  across  several  domains, 
especially regarding healthcare and the integration 
of  children  of  vulnerable  groups,  minorities  and 
non-EU  nationals.  Croatia  benefits  from  technical 
support through  the  Technical  Support  Instrument 
for the implementation, monitoring and evaluation 
of the national action plan for the ECG.  

The  limited  spending  and  effectiveness  of 
the  social  benefit  system 
remains  a 
considerable challenge. In 2025, social benefits 
(excluding  pensions)  reduced  poverty  only  by 

(373) Break in time series. 

(374) Roma  survey  2021 
Fundamental Rights. 

|  European  Union  Agency 

for 

109 

 
 
 
 
 
 
23.5%,  one  of  the  lowest  levels  in  the  EU,  well 
below  the  EU  average  of  33.2%.  The  impact  is 
even  lower  in  Pannonian  Croatia,  standing  at 
22.91%.  Expenditure  on  social  protection benefits 
as  a  share  of  GDP  is  at  21.6%  in  2024.  Croatia 
allocates  42%  of  total  social  benefit  spending  to 
old-age  and  survivor  benefits,  while  disability 
benefits  account 
for  10.7%.  Spending  on 
unemployment  benefits  and  social  exclusion 
benefits  is  comparably  low,  at  0.2%  and  0.1%  of 
GDP (375).  Only  5.3%  of  social  benefits  were 
means-tested in Croatia, compared  with 10.9% in 
the  EU  in  2023,  and  only  3.5%  of  disability 
benefits were means-tested compared with 27.2% 
in the EU. In 2025, only 50.4% of people aged 18-
64  at  risk  of  poverty  received  benefits,  compared 
with 72.2% in the EU in 2024, and the gap is even 
higher for those with low work intensity (68.1% vs 
83.1% in the EU). 

Croatia  made  changes  to  its  social  welfare 
law  and  benefits  structure.  Several  measures 
were introduced to increase the adequacy of social 
benefits.  The  national  minimum  income  scheme 
was reformed under the RRP to gradually increase 
the  basic  amount  (to  EUR 170  in  2025,  from 
EUR 106  in  2021),  make  it  more  targeted  and 
ease eligibility conditions. A national  basic  benefit 
for  citizens  without  a  pension  was  introduced  in 
2020  and  expanded  in  2024;  similarly  to  the 
minimum income benefit, the basic amount is set 
at  EUR 150,  reaching  20 000  recipients  in  2025. 
Disability  benefits  underwent  a  reform  that 
combined  several  benefits  into  a  single  benefit, 
increasing  the  adequacy  and  changing  the  scope, 
which  significantly  increased  the  coverage  of  the 
different  levels  of  the  benefit,  but  also  raises 
questions  about  the  efficiency  and  sustainability 
of  this  benefit.  The  unemployment  benefit  was 
amended  in  the  Labour  Market  Act  (2024)  to 
increase  the  amount  to  35%  of  the  base  (from 
30%)  for days 91 to 180 of unemployment.  With 
these reforms, Croatia made  changes to different 
social  benefits  with  a  view  to  increase  their 
adequacy.  However,  the  effectiveness  of  these 
reforms is still to be assessed (376).  

recent  reforms,  the  adequacy  indicator  for  the 
minimum  income  benefit  is  among  the  lowest  in 
the EU, at 30.8% of the poverty threshold (56.3% 
EU)  in  2023 (377)  and  at  29%  of  the  minimum 
wage  in  2024,  down  from  32.9%  in  2021 (50% 
EU). Compared to median income, the adequacy of 
the  minimum  income  benefit  for  a  single-person 
household is at only 19% and  reaches 26% for a 
household  with  two  adults  and  two  children (378). 
The  method  for  setting  the  minimum  level  of 
benefits 
specific 
methodology (379),  though  it  has  been  subject  to 
conditional  indexation  since  2025.  In  addition, 
coverage is low: only 9% of the population at risk 
of poverty were recipients of the minimum income 
benefit in 2024. 

follow 

does 

not 

a 

increase 

Croatia faces significant challenges in terms 
of pension adequacy. Its aggregate replacement 
ratio  is  persistently  among  the  lowest  in  the  EU 
(0.37  in  2025  vs  EU  0.6)  contributing  to  high  at-
risk-of-poverty  rates among pensioners (36.3% in 
2025 vs 15.4% EU average in 2024) and high old-
age  poverty  rates  (see  above).  Pensions  are 
particularly low for self-employed workers such as 
farmers.  The  low  aggregate  replacement  ratio  is 
attributed  to  short  working  lives  with  limited 
contribution  years  (see  2025  country  report) 
in  average 
although  the  substantial 
earnings  among  the  working-age  population  also 
played  a  role  recently.  The  outlook  for  future 
pension adequacy is also a source of concern. The 
theoretical  replacement  rate  is  expected  to  be 
significantly  lower  in  2062  compared  to  2022, 
with  a  projected  9.6 pp.  decrease  for  a  40-year 
career  with  average  earnings  (380).  Given  the 
currently 
contribution  periods, 
extending working life to accrue additional pension 
rights  could  help  ensure  adequate  pension  levels, 
especially  as  life  expectancy  increases.  Increasing 
the  average  retirement  age,  promoting  healthy 
and  active  ageing  and  reducing  early  retirement 
options  could  significantly  lift  the  average  age  of 
the 
exit  while 
labour  market 
employment rates of older workers.  

low  average 

increasing 

income  scheme  does  not 
The  minimum 
protect  people  at  risk  of  poverty.  Despite 

(377) DG EMPL data based on Eurostat and  OECD TAX-BEN model 

data (‘smoothed over 3 years’ poverty threshold). 

(375) Faces of poverty country report. 

(376) CSR  2025.5.1:  Reduce  poverty  and  income  inequality  by 
including 

increasing  the  adequacy  of  social  benefits, 
pensions, while maintaining fiscal sustainability. 

(378) OECD  Data  Explorer  •  Adequacy  of  minimum 

income 

benefits. 

(379) The minimum levels are based on the opinion of the National 

Council for the Development of Social Policies. 

(380) 2024 Pension Adequacy Report. 

110 

 
 
 
Croatia  made  several  adjustments  to  its 
the  RRP,  Croatia 
pension  system.  Under 
increased  the  minimum  pension  (by  3%)  and  the 
survivor’s pension and introduced the combination 
of  an  old-age  or  disability  pension  with  a  partial 
survivor’s pension as of 2023. Since 2017, income 
tax  has  been  reduced  by  50%  for  all  pensioners. 
Incentives 
for  working  past  age  65  were 
introduced,  such  as  an  increased  pension  accrual 
factor for deferred retirement (from 0.34 to 0.45), 
as were incentives making it easier for employers 
to  retain  older  workers.  In  2025,  a  new  pension 
law  amendment  was  introduced:  (i)  the  minimum 
pension was increased by an additional 3%; (ii) the 
pension  indexation  ratio  between  the  wage  index 
and  the  consumer  price  index  was  modified  from 
70:30  to  85:15,  assigning  greater  weight  to  the 
index that is more favourable to pensioners; (iii) an 
annual  pension  supplement  linked  to  years  of 
contributions  was 
introduced  for  all  pension 
beneficiaries  (iv)  the  added  period  has  been 
extended  from  6  to  12  months  per  child  and  will 
be  added  to  the  total  contribution  period  for  new 
pensioners  retiring  from  1  July  2025.  (v)  the 
increased  by  10%, 
disability  pensions  were 
effective from 1 January 2026. (vi) the penalty for 
early retirement has been abolished for early old-
age pension beneficiaries, once they reach the age 
of 70, effective from 1 January 2026. (381). 

Graph A12.1: Population at risk of poverty or 
social exclusion (AROPE) 

Source: Eurostat, EU-SILC [ilc_peps01n] 

towards 

Access  to  long-term  care  is  hampered  by 
availability  and  affordability  challenges, 
leading  to  high  unmet  needs.  The  long-term 
care (LTC) system is fragmented and underfunded, 
with  public  spending  among  the  lowest  in  the  EU 
(0.5 % of GDP against 1.7 % EU average in 2022) 
residential 
and  significantly  skewed 
care (382). This results in an insufficient availability 
of 
community-based  and  home-based  LTC 
services.  The  share  of  potential  dependants  aged 
65  and  over  receiving  public  home  care  and 
residential  care  is  very  low  (1.3%  for  home  care 
and  3.7%  for  residential  care  compared  with 
29.6% and 17.7% respectively in the EU in 2022). 
Out-of-pocket  costs  for  LTC  are  more  than  three 
times  the  EU  average  for  people  with  severe 
needs, leading to high poverty risks (383). The share 
of  older  people  with  self-reported  unmet  care 
needs  was  the  highest  in  the  EU  in  2019  (71.0% 
of  those  aged  65  and  over  vs  46.6%  in  the  EU). 
16.3%  of  Croatians  in  need  of  LTC  cite  financial 
reasons  as  a  barrier  to  accessing  home  care  (vs 
10.6%  on  average in  the EU  in  2024)  and  26.4% 
of  people  report  great  difficulties  in  affording 
home care (vs 8.2% on average in the EU in 2024). 
Furthermore, the governance, structure and access 
mechanisms of residential care, community-based 
care and home care lack transparency and operate 
inefficiently.  The  process  of  deinstitutionalisation 

(381) CSR  2025.5  Reduce  poverty  and  income  inequality  by 
including 

increasing  the  adequacy  of  social  benefits, 
pensions, while maintaining fiscal sustainability. 

(382) Ageing Report 2024. 

(383) OECD 2025. 

111 

101520253035404520152016201720182019202020212022202320242025% of populationChildren (<18y)Working age (18-64)Older people (65+) 
 
   
 
for  vulnerable  households.  The  percentage  of 
the  population  unable  to  keep  their  homes 
adequately  warm  was  below  the  EU  average 
(4.2%  in  2025  vs  8.8%  EU).  The  share  of 
households  that  faced  arrears  on  utility  bills  was 
still  above  the  EU  average  but  has  been  trending 
in the right direction (7.3% in 2025 vs 6.9% in the 
EU  in  2024).  Energy  poverty  is  likely  to  remain 
relatively  contained  under  the  EU  emissions 
trading  system  for  buildings  and  road  transport 
(ETS2).  From  2026,  the  Social  Climate  Fund  will 
help  mitigate  these  impacts  through  targeted 
energy-efficiency  investments.  Transport  poverty 
is currently less of an issue, with only 2.6% unable 
to  afford  a  car  in  2025.  ETS2  is  nevertheless 
expected  to  increase  transport  fuel  expenditure, 
the  affordability  and 
meaning 
availability  of  public  transport (388)  may  become 
essential. 

tackling 

that 

and  expanding 
the  provision  of  community 
services  is  progressing  very  slowly.  Since  the 
beginning  of  the  drive  to  move  from  residential 
care  to  home  care,  only  a  few  LTC  homes  for 
persons  with  disabilities  have  been  completely 
transformed into providers of services rather than 
long-term  accommodation,  and  the  total  number 
of people placed in such residential care homes in 
Croatia  has  not  significantly  decreased (384).  The 
lack  of  community-based services  to  support (385). 
In  addition, 
is 
understaffed  and  faces  labour  shortages.  The 
workforce  ratio  stands  at  1.6  workers  per  100 
people  aged  65  and  over,  half  of  the  EU  average 
of  3.3  in  2024.  The  LTC  and  personal  assistance 
workforce  faces  considerable  challenges  due  to 
poor  working  conditions:  low  pay,  high  workload, 
insufficient  training,  and  a  lack  of  occupational 
health and safety standards application (386). 

the  Croatian  LTC  system 

Croatia recently adopted a new LTC strategy. 
The  operational  plan  for  long-term  care  was 
adopted  in  2025.  The  focus  is  now  on  LTC 
workforce  planning,  setting  up  a  governance 
framework  at  national  and  regional  level  and 
stepping  up  the  effective  implementation  of  the 
operational  plan,  supported  by  funding  from  the 
ESF+  and  European  Regional  Development  Fund. 
The operational plan together with the social plans 
developed  by  all  counties  (adopted  in  2025)  are 
expected  to  serve  as  a  basis  for  a  needs 
assessment  and  the  development  of  community-
in  a  targeted  and  regionally 
based  services 
balanced  way.  Exploring  structural  policy  changes 
in  social  services  and  LTC  could  improve  the 
effectiveness  of  these  plans.  By  considering 
aspects  like  governance,  structure,  pricing  and 
access,  and  integrating  a  strategic  approach  to 
social economy actors, outcomes might be notably 
improved (387).  

Energy  and 
remains 
moderate  and  has  been  improving,  including 

transport  poverty 

(384) Eurofound  (2024),  Paths  towards  independent  living  and 
in  Europe,  Publications  Office  of  the 

inclusion 

social 
European Union, Luxembourg. 

(385) According  to  data  from  the  Ombudsman  for  Persons  with 
Disabilities,  the  most  common  reason  why  a  person  with  a 
disability is placed in an institution is that their family cannot 
provide adequate support (Ombudsman (2025) Report for 2024). 

(386) European  Semester  2025-2026  country  fiche  on  disability 

equality Croatia, European Disability Expertise. 

(387) CSR  2025.5. 

Improve  access 
community-based long-term care. 

to  formal  home-  and 

(388) No data on public transport accessibility in Croatia exists on 
the  Commission’s  Transport  Poverty  Hub  because  the  data 
on  Croatia’s  National  Access  Point  (set  up  as  part  of 
Delegated  Regulation 
(the  MMTIS 
Delegated Regulation)) covers only parts of the country. 

(EU)  2017/1926 

112 

 
 
 
ANNEX 13: EDUCATION AND SKILLS 

and 

physics) 

The challenges facing the Croatian education 
and  training  system  pose  a  risk  to  human 
capital  formation  and  future  economic 
growth.  Croatia  is  carrying  out  a  comprehensive 
improve  education  outcomes,  but 
reform  to 
implementation  delays  and  teacher  shortages 
(especially  for early  childhood  education  and  care 
(ECEC),  mathematics 
create 
obstacles. Students’ mathematics and digital skills 
are  below  the  EU  average.  Large  share  of 
teachers,  especially  those  under  30,  intend  to 
leave  the  profession  within  the  next  five  years. 
Improving  labour-market  relevance  of  vocational 
education  and  training  (VET)  and  ongoing  adult 
education and training reforms aim to reduce skills 
mismatches  and  persistent  labour  shortages  in 
some  economic  sectors.  The  participation  rate  in 
adult 
jeopardising  the 
country’s  potential,  productivity  growth,  and 
country-specific 
competitiveness. 
The  2025 
for 
the  need 
recommendations  highlighted 
ensuring  stronger  education  at  every  level  and 
strengthening provision of relevant skills to reduce 
skills shortages. 

learning  remains 

low, 

Participation  in  ECEC is  increasing, but  staff 
shortages  remain  an  issue.  In  2024,  the 
participation  rate  of  children  between  the  age  of 
three  and  the  start  of  primary  education  was 
88.7%,  3  percentage  points  (pps)  higher  than  in 
2023,  but  still  among  the  lowest  in  the  EU  (EU 
average 95%) (389). This also has a negative effect 
on  women’s  employment  and  career; 
the 
percentage  of  women  employed  in  managerial 
positions was the second lowest in the EU in 2024. 
While  recent  state  co-financing  aims  to  reduce 
regional  disparities  in  ECEC,  teachers  working 
conditions  and  salaries  still  vary  by  location, 
negatively  affecting  the  attractiveness  of  the 
profession.  Severe  staff  shortages  in  ECEC  (390) 
often  lead  to  work  being  done  in  large  groups 
many  ECEC  centres  (391),  impacting  the  quality  of 
ECEC.  The  number  of  enrolment  places  for  ECEC 
teacher  studies  increased  between  2019  and 

(389) Eurostat (educ_uoe_enra21). 

(390) Number  of  vacancies  for  ECEC  teachers  grow  significantly 
above  total  number  of  vacancies  for  the  education  sector. 
Number  of  vacancies  for  ECEC  teachers  in  2025  grew  by 
108%  since  2016,  while  total  number  of  vacancies  for 
education sector grew only 31% in the same period. (Source: 
Hrvatski  zavod  za  zapošljavanje  -  Statistika  On-Line  - 
Slobodna radna mjesta).  

(391) Education and Skills in Croatia, OECD, 2025. 

2023,  but  interest  in  them  has  decreased  since 
2022  (with  the  proportion  of  unfilled  places  at 
higher  education  increasing  from  17%  in  2022 to 
21.5% in 2023) (392).  

(393)  and 

rehabilitators 

There  is  a  lack  of  specialists  both  in  ECEC 
and  in  schools  to  support  the  education  of 
children with special needs (SEN). ECEC centre 
leaders  highlight  the  lack  of  specialists  such  as 
educational 
speech 
therapists,  often  limiting  enrolment  opportunities 
for  children  with  SEN  (394).  More  psychologists, 
speech  therapists  and  other  support  staff  are 
needed  in  schools  (395),  and  28.6%  of  teachers 
report  a  need  for  more  training  for  working  with 
children  with  SEN  (vs  EU  24.6%).  In  primary  and 
secondary  school,  8.5%  of  all  pupils  have  SEN. 
According 
‘SEN’ 
encompasses  both  gifted  pupils  and  pupils  with 
difficulties.  Work  with  gifted  pupils  should  be 
organised  within  mainstream  education  and 
(396). 
according  to  their  preferences,  abilities 
Almost all students (99% or more) are enrolled in 
mainstream education in schools (397).  

to  Croatian 

term 

law, 

the 

Teachers  are  dissatisfied  with  certain 
working  conditions  and  the  recognition  they 
receive  from  society,  and  a  large  share  of 
them plan to leave the profession within five 
years.  The  share  of  teachers  satisfied  with  their 
salaries is one of the lowest in the EU (22.5%; EU 
average:  37.3%),  and  has  decreased  by  2.5  pps 
since  2018.  Only  9.5%  of  teachers  believe  that 
their  profession  is  valued  by  society  (EU  average: 
15.4%).  Teachers’  workload 
is 
significantly  higher  than  the  EU  average  of  39 

(43.5  hours) 

(392) Domović,  V.  &  Drvodelić,  M.  (2024).  Teacher  shortage  in 
Croatia  –  a  challenge  for  educational  policy,  initial  teacher 
education  and  educational  institutions.  European  Journal  of 
Teacher Education, 48(1), 64-80. 

(393) Specialist  who 

recognises 

the  child’s  developmental 
difficulties,  works  with  the  child  on  removing  them,  and 
determines  the  child’s  special  needs  and  the  adaptations 
needed. 

(394) Office  of  the  Ombudswoman  for  Children  (2025).  Annual 

report for 2024. 

(395) Bakić 

et 

al. 

from 
Croatia. Empowering  Teachers  Across  Europe  to  Deal  with 
Social, Emotional and Diversity-Related Challenges, 81. 

Perspectives 

(2024). 

From 

(396) https://www.european-agency.org/activities/legislative-

definitions. 

(397) EASIE  Cross-Country  Reports,  based  on  the  2019/2020  and 
https://www.european-

2022/2023 
agency.org/activities/data/cross-country-reports. 

school 

years. 

113 

 
 
 
 
 
 
 
hours and has increased by 0.9 hours since 2018. 
However, more teachers have permanent contracts 
(92.2%) and receive induction (78.3%) than the EU 
average  (82.3%  and  66.0%,  respectively)  (398). 
Digitalisation  of  education  records  is  in  its  early 
phases,  with  paper  records  often  still  maintained 
in  parallel,  increasing  the  workload  While  fewer 
principals  state  that  they  lack  qualified  teachers 
(17.7%)  than  the  EU  average  (20.4%),  this  share 
has  increased  by  10.6  pps  since  2018.  A  much 
higher  share  of  all  teachers  plans  to  leave  the 
profession  in  the  next  five  (399)  years  (after 
adjusting for the ones that will retire), than the EU 
average  (every  fifth  teacher  vs  every  eighth 
teacher)  (400).  Among  teachers  under  the  age  of 
30, 26.4% plan to leave the profession in the next 
five years, far more than the EU average of 15.4% 
(401). Young teachers mainly plan to leave for a job 
outside education (63% of them).  

Graph A13.1: Teachers planning to leave the 
profession within five years (not retiring ones) in 
HR vs EU 

lacking 

Qualified  STEM  teachers  are  also 
in 
primary  schools,  lacking  the  interest  to  enter 
education  sector  due  to  comparatively 
lower 
salaries (403). Hiring of unqualified teachers results 
in  inadequate  knowledge  quality,  which  hinders 
enrolment  in  physics  studies  (404)  and  negatively 
affects mathematics and digital skills of students. 
The underachievement rate is high in mathematics 
(32.9%;  EU  average:  29.5)  (405).  Students  in  rural 
areas  score  57  to  63  points  lower  in  basic  skills 
than  those  in  cities,  depending  on  the  skill  (see 
Annex  18  for  other  regional  challenges).  More 
eighth grade students do not reach a basic level of 
digital  skills  than  the  EU  average  (47%  vs  43%) 
(406).  In  2022,  Croatia  introduced  scholarships  for 
students studying to become STEM teachers (with 
the condition that recipients work in schools for as 
long  as  they  have  received  the  scholarship).  This 
has reduced the drop in enrolments for most STEM 
studies,  but  not  for  many  two-subject  teaching 
programmes  that  include  physics  (407)).  In  May 
2025,  two  thirds  of  former  recipients  of  such 
scholarships who had graduated started working in 
schools.  Databases  for  monitoring  demand  and 
supply,  numbers  of  unqualified  teachers  and 
attrition  rates  would  help  better  analyse  the 
teacher  shortage  situation  and  provide  valuable 
insights for policymakers (408). 

Source: OECD TALIS 2024 

the  quality  of 
Teacher  shortages  put 
education  at  risk,  especially  for  science, 
technology,  engineering  and  mathematics 
(STEM) skills. Croatia faces a persistent shortage 
in  secondary 
of  qualified  subject 
education, especially in STEM subjects. The teacher 
in  remote, 
shortage 
(402). 
depopulated  and  underdeveloped  areas 

is  especially  pronounced 

teachers 

infrastructure 

Primary  school  reforms  intended  to  improve 
basic skills are expected to be delayed due to 
investments.  All 
delayed 
primary  schools  were  planned  to  start  working  in 
single  shift  from  2026/2027,  and  to  introduce 
whole-day  schooling  from  2027/2028.  The  State 
in 
Audit  Office  reported  considerable  delays 
contracting of relevant infrastructure projects (409). 
Some 
including  Zagreb,  have 
problems  finding  locations  for  constructing  new 

larger  cities, 

(403) PROGRAM  POLITIKE  ‘PUT  U  DIGITALNO  DESETLJEĆE  2030’, 

Zagreb. Official Gazette 38/2024. 

(404) Erceg  et  al.,  2023.  Causes  of  the  Shortage  of  Physics 
Teachers in Croatia. Education Sciences, 13(8): 788-805. 

(398) Data from TALIS 2024 survey. 

(399) Croatian national TALIS 2024 report. 

(405) OECD, 2023, PISA. 

(406) IEA, ICILS 2023. 

(400) This  group  might  also  include  recently  graduated  STEM 
teachers  with  a  teaching  obligation  due  to  the  earlier 
scholarship, as their obligation would end within five years. 

(401) This  group  might  also  include  recently  graduated  STEM 
teachers  with  a  teaching  obligation  due  to  the  earlier 
scholarship, as their obligation would end within five years. 

(402) Bakić et al., 2024. 

(407) During  2019-2023,  81%  of  places 

combined 
mathematics/physics  studies  remained  unfilled  (Domović 
and Drvodelić, 2024).  

in 

(408) Domović and Drvodelić, 2024. 

(409) State Audit Office (2025). Report on the performance audit: 
Use  of  funds  available  from  the  Recovery  and  Resilience 
Facility in the Republic of Croatia. 

114 

21.126.412.815.4051015202530TotalUnder age of 30TotalUnder age of 30HREU% 
      
 
 
schools.  Only  4%  of  students  are  attending 
schools working in single shift (410) (see also Annex 
18),  far  below  the  100%  needed  to  introduce 
whole-day school. The whole-day school reform is 
in  its  third  year  of  experimental  implementation; 
while  monitoring  exists,  no  official  evaluation 
results  have  been  published.  This  prevents  public 
the  OECD’s 
insight, 
recommendation 
strengthen 
for  Croatia 
governance  by  improving  the  collection,  analysis, 
use  and  communication  of  education  data  ensure 
long-term success of school reforms (411).   

contradiction 

to 

to 

in 

(i) 

in: 

mentors  with 
teaching  methodologies  and 
resources,  and  enhancing  the  quality  of  work-
based learning in companies. VET providers require 
support 
implementing  new  curricula; 
(ii) programme  profiling;  and  (iii)  aligning  the 
educational  offer  with  the  needs  of  learners  and 
the  economy,  specifically  by  strengthening  their 
autonomy  and  flexibility,  improving  access  for 
learners  with  disabilities  and  other  vulnerable 
groups,  and  investing  in  infrastructure,  including 
regional centres of competence.  

Croatia  has  made  significant  efforts  to 
increase  the  quality,  attractiveness  and 
labour-market  relevance  of  VET.  The  share  of 
in  medium-level  education  that  are 
learners 
enrolled  in  vocational  programmes  is  one  of  the 
highest  in  the  EU  (71.2%  in  2024;  EU  average: 
52.9%).  41.7%  of  VET  pupils  in  Croatia  were 
enrolled  in  STEM  fields  in  2024  (EU  average: 
36.6%).  18.1%  of  these  pupils  were  female  (EU 
average: 15.9%). However, the employment rate of 
people  who  have  recently  completed  VET  lags 
behind the EU average (74.5% vs 80.2% in 2025). 
A  comprehensive  VET  curricula  reform,  in  place 
since  the  school  year  2025/2026,  focuses  on 
aligning  VET  with  labour  market  needs  by  a  shift 
from outdated subject-based to modular learning-
outcome-oriented  curricula  based  on  occupational 
and  qualification  standards.  Developed  with 
support  from  the  European  Social  Fund  Plus 
(ESF+), these modular curricula promote problem-
based teaching and learning by integrating theory 
and practice. Optional modules make it possible to 
tailor  learning  to  the  local  context  and  individual 
learners’ needs.  

However,  the  supply  of  work-based  learning 
and  continuous  support  lags  behind,  amid 
ongoing  VET  reforms.  In  2025,  participation  in 
work-based 
learning  was  still  below  the  EU 
average, at only 38.7% of people aged 20-34 who 
had  completed  VET  (EU  average:  66.0%) .  Croatia 
plans  to  expand  the  network  of  companies 
offering  work-based 
learning  by  providing 
incentives  for  companies,  supporting  in-company 

(410) ŠER, 

https://app.powerbi.com/view?r=eyJrIjoiZWE3YTE4OWQtOWJ
mNC00OTJmLWE2MjktYTQ5MWJlNDNlZDQ0IiwidCI6IjJjMTFj
YmNjLWI3NjEtNDVkYi1hOWY1LTRhYzc3ZTk0ZTFkNCIsImMiO
jh9 , p. 17. 

Tertiary educational attainment (TEA) rate is 
below  the  EU  average.  In  2025,  the  TEA  rate 
among  people  aged  25-34  was  42%,  still  slightly 
lower  than  the  EU  average  of  44.8%.  There  are 
gaps according to the gender and the urban-rural 
divide  (see  Annex  18).  There  are  currently  no 
national  data  on  dropout,  but  national  estimates 
are  high:  40-45%  and  exceeding  50%  in  some 
studies (412).  Croatia  has  started  a  project  to 
improve  career  guidance,  monitor  the  progression 
of studies, establish dropout rates and the reasons 
for dropout, reduce dropout rates, and improve the 
TEA.  The  project  is  supported  by  the  European 
Commission’s  Technical  Support  Instrument  and 
implemented 
Student 
the 
accommodation  is  insufficient  to  cover  the  needs 
(see Annex 18). 

OECD. 

by 

In  2025, 

is  progressing. 

recovery  and 
The 
implementation  of 
in  higher 
resilience  plan  (RRP)  reforms 
education 
the 
employment  rate  of  recent  higher  education  (HE) 
graduates (20-34  years) was  81.8% (EU  average: 
87%). The mismatch persists between the number 
of  places  offered  in  various  study  programmes, 
students’ interests, and labour market needs. More 
graduates  are  needed  from  STEM  and  teaching 
studies,  and  fewer  from  design  and  economics 
studies.  The  above-mentioned  project  and 
performance  agreements  should  help  to  better 
align places, interests and needs in the future (413). 
In  November  2025,  nearly  three  years  after  the 
adoption  of 
law,  performance 
relevant 
agreements  were  signed  with  all  nine  public 
universities 
(see  also  Annex 4).  The  new 
information  system  for  registers  in  HE  has  been 
established.  It  consists  of  four  registers,  now  all 

the 

(412) OECD, 2025, Education and Skills in Croatia. 

(413) https://www.hzz.hr/app/uploads/2026/01/preporuke_25-

(411) OECD, 2025, Education and Skills in Croatia. 

1.pdf. 

115 

 
 
 
functional, which will enable graduate tracking and 
help in the design of higher education policies. 

technology 

communications 

Efforts  have  been  made  to  meet  the  needs 
for  advanced  digital  skills  and  information 
(ICT) 
and 
specialists against the background of digital 
transitions. The share of workers (25-64) with at 
least basic digital skills is significantly higher than 
the EU average (76.0% vs 68.9% in 2025) and the 
share  of  ICT  specialists  (4.9%)  was  very  close  to 
the EU average of 5.0% in 2025. However, women 
are  under-represented  in  the  sector  (18.4%  in 
2025; EU average: 19.5%). In rural areas, 34% of 
individuals have only basic overall digital skills and 
only  22%  have  above-basic  overall  digital  skills . 
these 
Croatia  has 
challenges,  such  as  initiatives  under  its  RRP  to 
improve ICT-related education and promote digital 
upskilling.  Nevertheless,  increasing  the  enrolment 
of  students  in  ICT  higher  education  and  VET 
programmes 
strengthening  workforce 
participation  in  ICT  roles  would  allow  Croatia  to 
further  progress  towards  the  EU’s  Digital  Decade 
targets.  

taken  steps 

to  address 

and 

Policy  attention  to  development  of  basic 
adult skills has been increasing. In the area of 
basic  adult  skills,  the  results  of  the  PIAAC  2023 
survey  show  performance  only  slightly  below  the 
OECD  average  in  literacy  and  numeracy,  but 
significantly  lower  in  adaptive  problem-solving. 
Digital  skills  of  adults  stand  out  as  a  relative 
strength,  while  adult  participation  in  civic  life  is 
comparatively  low.  The  share  of  adults  with  at 
least  basic  digital  skills  increased  to  63.4%  in 
(414).  Targeted 
2025 
measures  for  developing  new  basic  skills  training 
programmes  for  adults  are  planned  under  the 
skills voucher scheme.  

(EU  average:  60.4%) 

is 

labour 

essential 

development 

shortages  and 

Skills 
for 
competitiveness  and  fairness,  especially  in 
skills 
light  of 
mismatches.  Croatia  faces  a  mismatch  between 
the  increasing  number  of  people  obtaining  higher 
education qualifications and the limited creation of 
high-skilled  jobs.  In  2024,  the  macroeconomic 
skills  mismatch  remained  above  the  EU  average 
(23.8% 
in  Croatia 
are emerging in  legal,  social,  cultural  and  ICT 

vs  19.2%).  Shortages 

(414) Eurostat: isoc_sk_dskl_i21. 

professions, while hiring difficulties are anticipated 
for  elementary  occupations  and  certain  technical 
roles.  The  main  drivers  of  skills  shortages  are: 
(i) the  mismatch  between  education  and  labour 
market needs: (ii) the digital and green transitions; 
(iii) the  emigration  of  high-skilled  workers;  and 
(iv) the ageing population. Skills mismatches result 
in  fewer  employment  opportunities,  especially  for 
low-qualified workers, who often require upskilling 
or  reskilling  to  meet  labour  market  needs.  The 
employment  rate  for  low-qualified  people  was 
only 42.0% in 2025, among the lowest rates in the 
EU. To address these gaps, the RRP and the ESF+ 
support upskilling and acquisition of skills through 
a  national  skills  development  plan,  active  labour 
market  policies,  and  a  voucher  system  for  adult 
education.  Continuing  the  upskilling  and  reskilling 
measures  and 
investments  currently  financed 
under the RRP and the ESF+, including with a view 
to  creating  individual  learning  accounts  (ILAs), 
could help reduce skills mismatches. 

the 

through 

Ensuring  human  capital  development  for  a 
competitive  and  resilient  economy  requires 
enhanced  skills  intelligence.  Skills  intelligence 
reforms  have  progressed  through  the  transfer  of 
forecasting  responsibilities  to  the  Ministry  of 
Labour,  Pension  System,  Family  and  Social  Policy, 
launch  of  ESF+-supported 
and 
projects  to  improve  data  integration,  develop 
Croatian Qualification Framework tools and pilot a 
model  for  ILAs.  The  current  voucher  system  has 
already  introduced  some  important  aspects  of 
ILAs. Key next steps include widening the scope of 
the  training  offer  and  expanding  the  scheme  by 
ensuring  sustainable  funding  including  private 
funding  components,  as  well  as  ensuring  the 
transferability  and  accumulation  of 
training 
entitlements. Moreover, there is still an insufficient 
level  of  involvement  of  employers  in  providing 
and/or  funding  training  and  in  forecasting  skills 
needs. 

among 

vulnerable 

Adult  learning  participation  remains  low, 
particularly 
groups, 
highlighting  the  need  for  targeted  efforts. 
Despite  good  progress  in  developing  a  high-
learning 
labour-market-relevant  adult 
quality, 
system,  only  23.3%  of  adults  took  part 
in 
education  and  training  (EU  average:  39.5%)  in 
2022.  The  participation  rate  remained  particularly 
low  among  low-skilled  people,  older  people,  rural 
population  and  long-term  unemployed  people. 
While  similar  trends  also  exist 
in  other  EU 
countries,  such  inequalities  are  more  pronounced 

116 

 
 
and 

issues, 

support 

lack  of 
from 
like 

in  Croatia, indicating that there is  scope  for  more 
targeted  strategies  for  these  vulnerable  groups. 
Low  participation  in  adult  learning  is  affected  by 
several  factors:  (i) systemic  barriers,  such  as 
geographical 
financial 
constraints 
including 
accessibility;  (ii) individual  challenges, 
information,  and 
low  motivation, 
employers; 
insufficient 
and 
(iii) institutional 
the  shortage  of 
educators  and  advisers  or  the  complexity  of 
programmes.  Around  one  third  of  adult  learning 
providers are located in the two counties with the 
biggest  cities,  i.e.  the  city  of  Zagreb  and  Split-
Dalmatia,  with  no  providers  located  on  islands. 
Reaching the national 2030 target of at least 55% 
of  all  adults  participating  in  training  every  year 
the  economy’s  growth 
would  help 
potential.  Expanding  the  existing  voucher  system 
to transform it into ILAs, as planned, and ensuring 
its sustainability may help achieve these goals. 

increase 

including 

transition, 

industries,  workers’  participation 

Skills gaps and shortages create obstacles to 
the  green  transition.  In  2025,  shortages  were 
reported  for  several  occupations  relevant  to  the 
construction 
green 
professions,  electrical  mechanics  and  fitters,  and 
insulation  workers.  At  the  same  time,  in  energy-
intensive 
in 
education  and  training  slightly  decreased  from 
9.5% in 2015 to 8.4% in 2024 and remains 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  the  voucher  system 
for adult education. RRP investments in green skills 
are  being  further  reinforced  by  Just  Transition 
Fund interventions and through broader initiatives 
supported by the ESF+. 

117 

 
 
 
 
ANNEX 14: SOCIAL SCOREBOARD 

Table A14.1:Social Scoreboard for Croatia 

Update of 4 May 2026. 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 2026 for details on the methodology 
(https://employment-social-affairs.ec.europa.eu/joint-employment-report-2026_en). 
Source: Eurostat 

118 

23.32.163.410.85.04.7874.44.91.8138.120.715.723.539.73.232.51.4Critical situationTo watchWeak but improvingGood but to monitorOn averageDynamic 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, 2025)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2025)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2025)Self-reported unmet need for medical care (% of the population aged 16+, 2025)Disability employment gap (percentage points, population aged 20-64, 2025)Housing cost overburden (% of the total population, 2025)Adult 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, 2025)Young people not in employment, education or training(% of the population aged 15-29, 2025)Gender employment gap(percentage points, population aged 20-64, 2025)Income quintile ratio (S80/S20, 2025)At risk of poverty or social exclusion (AROPE) rate (% of the total population, 2025)Employment rate(% of the population aged 20-64, 2025)Unemployment rate(% of the active population aged 15-74, 2025)Long term unemployment(% of the active population aged 15-74, 2025)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2024)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2025) 
 
 
 
  
 
 
ANNEX 15: HEALTH AND HEALTH SYSTEMS 

Croatia’s  health  system  faces  significant 
challenges.  These  need  to  be  addressed  to 
improve  the  health  of  its  population,  social 
fairness and productivity, while boosting the 
competitiveness  of  the  economy.  Challenges 
include  low  life  expectancy,  resulting  from  high 
treatable  and  preventable  mortality,  and  limited 
access to care. These issues are mainly caused by: 
(i) an insufficient focus on disease prevention and 
low 
of 
healthcare  workers;  and  (iii) uneven  geographical 
access  to  healthcare.  The  2025  country-specific 
recommendations  (CSRs)  highlighted  the  need  for 
balanced  geographical  distribution  of  health 
workers and facilities, investments in e-health and 
closer  cooperation  between  all  levels  of  public 
administration on health policy. 

(ii) shortages 

investments; 

health 

Graph A15.1: Treatable mortality 

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

Preventable mortality was also high in 2023 
and  has  only  slightly  improved  compared 
with  10 years  ago.  The  expenditure  on 
prevention  as  share  of  total  current  health 
expenditure was 4.8% in 2023 but remains above 
the  EU  average  (3.7%).  A  national  oncology 
network  and  oncology  database  are  being  set  up 
to enable standardised care in line with guidelines 
at all levels. 

Preventable  mortality  in  Croatia  is  closely 
linked to environmental and behavioural risk 
risk 
factors.  Behavioural  and  environmental 
factors accounted for 38% of all deaths in Croatia 
in 2021, which was higher than the EU average of 
29% (415). Mortality linked to air pollution is among 
the highest in the EU (see Annex 8). In 2022, both 
adults and adolescents reported one of the highest 
smoking rates in the EU (22% of adults vs 18% in 
the EU on average). Alcohol consumption in Croatia 
is  also  above  the  EU  average  (11 vs  10 litres per 
person in 2022). Adults in Croatia also have one of 
the  lowest  levels  of  physical  activity  outside 
working  time  of  all  EU  countries  (57%  of  the 
population  reported  never  practising  such  activity 
in  2022  vs  31.6%  for  the  EU).  Levels  of  obesity 
are high, with 17% of adults being obese in 2022 
(vs 15% EU average). Also, the rate of overweight 
and  obese  15-year-olds  increased  from  17%  in 
2014 to 24% in 2022, above the 21% EU average 
in  2022  (416).  Croatia  has  adopted  an  obesity 
prevention  action  plan  for  the  2024-2027  period, 
providing  a  framework  for  addressing  rising 
overweight and obesity rates (417). 

the 

last  10   years 

Life  expectancy  at  birth  in  Croatia  was  still 
low  compared  with  the  EU  average  in  2024, 
and  2023  avoidable  mortality  –  preventable 
and  treatable  –  was  high.  In  2023,  treatable 
mortality was high compared with the EU average, 
suggesting  shortcomings  in  the  effectiveness  of 
the  health  system,  despite  showing  some 
improvement  over 
(see 
Graph A15.1).  Diseases  of  the  circulatory  system 
(cardiovascular  diseases,  or  CVDs)  and  cancer 
remain  the  leading  causes  of  death,  with  the 
former  accounting  for  more  than  39%  of  all 
latter  25%. 
deaths 
Standardised death rates from cancer were one of 
the highest in the EU. Croatia recorded one of the 
largest  gaps  by  gender  in  the  share  of  people 
dying  from  CVDs.  Suicide  rates  have  decreased 
over  time  in  Croatia  but  are  still  among  the 
highest in the EU. 

in  2023,  the 

in  Croatia 

is 

and 

hence 

Poor  health  outcomes  negatively  affect 
Croatia’s  workforce 
its 
productivity  and  competitiveness.  In  Croatia, 
mortality  at  working  age  as  a  proportion  of  total 
the  EU  average, 
mortality 
exacerbating the effects of population ageing on a 
shrinking  labour  force  (see  Annex 11).  Gains  in 
health  status  from  further  prevention  investment 
regards 
could 
non-communicable 
is 
diseases 
estimated  that  up  to  80%  of  CVDs  and  type  2 

impact.  As 

alleviate 

(NCDs), 

similar 

this 

to 

it 

(415) OECD/European Observatory on Health Systems and Policies 
(2025), Country Health Profile 2025: Croatia. State of Health 
in the EU. 

(416) Country Health Profile 2025: Croatia – see earlier footnote. 

(417) Banadinović M, Vocanec D, Džakula A (2024), Action Plan for 
Obesity  Prevention  2024-2027:  policy  analysis.  European 
Observatory on Health Systems and Policies. 

119 

144.9128.3130.8139.7133.5126.194.889.291.793.389.786.8201420192020202120222023per 100 000 populationCroatiaEU 
 
        
 
 
 
diabetes,  up  to  half  of  cancer  cases  and  most 
chronic lung diseases worldwide can be prevented 
(418). For example, preventing all deaths from NCDs 
in Croatia – in particular cancer– would result in a 
1.3%  gain  in  working-life  years  from  2022  to 
is  a 
2040.  The  gain 
significant  potential  increase  and  would  save 
about  447 500 life  years 
in  Croatia  over 
2022-2040.  This  increase  would  mitigate  an 
the 
otherwise  expected  8.9% 
workforce due to demographic ageing of the 2022 
population (7% for the EU) (419). 

in  working-life  years 

reduction  of 

Graph A15.2: Healthcare infrastructure investment 
by year 

Source: Country Health Profiles - Dashboard 

and 

pharmaceuticals 

Health  expenditure  in  Croatia  focuses  on 
outpatient care despite its expenditure being 
one  of  the  lowest  in  the  EU.  Health  spending 
per  inhabitant  in  Croatia  remained  one  of  the 
lowest in the EU in 2023. Croatia’s largest share of 
health  spending  is  on  outpatient  care  (close  to  a 
third  of  total  health  expenditure),  with  close  to 
another  third  on  hospital  services.  Medical  goods 
(retail 
therapeutic 
appliances)  accounted  for  slightly  more  than  a 
fifth  of  health  spending.  Croatia’s  number  of 
hospital  beds  in  2023  is  close  to  the  EU  average 
(472 per 100 000  population). Despite significant 
investments  through  the  European  Regional  and 
Development  Fund  (ERDF),  the  trend  of 
low 
infrastructure  investment  in  the  health  sector 
continued.  Croatia  had  close  to  half  of  the  EU’s 
average  level  of  health  infrastructure  investment 
per  capita  in  2023  (see  Graph A15.2).  Another 
significant  challenge  for  hospitals  in  particular  is 
antimicrobial 
related 
multi-resistant  infections.  Croatia’s  consumption 
of antibiotics in the community and hospital sector 

resistance 

and 

(418) NCD  Alliance  (2025):  Noncommunicable  Diseases  (NCDs) 

overview | NCD Alliance. 

(419) EC/OECD, State of Health in the EU: 2025 Synthesis Report. 

target 

national 

increased  between  2023  and  2024.  More  efforts 
would  be  needed  to  keep  on  track  with  the  2030 
(420).  Under 
recommended 
EU4Health,  Croatia  has  been  participating  in  the 
EU-JAMRAI  2  joint  action  (421)  since  2024,  which 
supports  the  implementation  of  measures  to 
monitor,  prevent  and  manage  antimicrobial 
resistance 
and 
environmental health, while strengthening national 
action plans. 

human, 

animal 

across 

Challenges  in  accessing  healthcare  persist, 
particularly  in  rural  areas.  Comparatively  high 
unmet  needs  for  medical  care  are  reported  in 
Croatia’s  rural  areas  (see  Annex 18).  The  main 
reason  for  unmet  medical  needs  is  distance  with 
one  of  the  highest  self-reported  unmet  needs  in 
the  EU  due  to  travel  time.  For  example,  the 
number  of  people  within  a  10-minute  drive  of  a 
hospital  differs  greatly  between  rural  and  urban 
areas in Croatia (422). Croatia also has a major gap 
in  unmet  needs  between  people  living  above  and 
people  living  below  the  poverty  threshold.  Croatia 
has  taken  several  measures  to  address  the  2025 
CSR  on  balanced  geographical  distribution  of 
health  workers  and  facilities.  Under  its  recovery 
and  resilience  plan  (RRP),  Croatia  has  improved 
access  to  pharmacy  care  and  medicines  in  hard-
to-reach  areas by purchasing  six mobile  caravans 
and two boat pharmacies. A helicopter emergency 
medical  service  and  maritime  emergency  medical 
services  with  high-speed  vessels  have  also  been 
introduced  with  EU  and  state  funding.  Also, 
33 mobile clinic services in primary healthcare are 
in  the  final  phase  of  implementation  under  the 
RRP.  

Croatia’s  pharmaceutical  sector  plays  a 
relatively  modest  role.  Both  employment  in 
pharmaceutical manufacturing and the number of 
clinical  trials  have  decreased  since  2018  and  are 
currently  below  the  EU  average.  Regarding  trade 
and  commercialisation,  Croatia’s  pharmaceutical 
industry  accounts  for  a  rather  modest  share  of 

(420) National  target  set  by  the  Council  Recommendation  on 
stepping up EU actions to combat antimicrobial resistance in 
a One Health approach, 2023/C 220/01. 

(421) EU-JAMRAI 2  |  Joint  Action  on  Antimicrobial  Resistance  and 

Healthcare-Associated Infections. 

(422) TomTom  Multinet  2022,  Geostat  population  grid  2021, 
Eurostat-GISCO  hospital  locations  2023,  as  reported  by 
Eurostat. 

120 

2.83.03.45.35.88.37.86.811.719.619.519.720.421.521.421.921.922.9201520162017201820192020202120222023EUR million per 100 000 populationCroatiaEU 
        
 
 
Table A15.1: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 2023 data (or latest available). 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 Portugal (licensed to practice) and Slovakia (professionally active). Latest data 
update on nurses for Belgium and Sweden: 2022; for France: 2021; for Luxembourg: 2017. 
** latest available 10-year trend: ratio 2023/2014 or 2024/2013; a factor of 2.00 means that it has doubled in 10 years. 
***‘Available hospital beds’ covers somatic care, not psychiatric care. 
Source: Eurostat 

extra-EU exports: 7.2% in 2025 vs an EU average 
of 13.8%.  

to 

reflecting 

Persistent  shortages  of  health  professionals 
limit the provision of healthcare. In 2023, the 
number of practising nurses per 1 000 population 
was one of the lowest in the EU. Moreover, 42% of 
nurses  are  aged  45  or  older.    Croatia  also  has  a 
comparatively low number of nursing graduates in 
relation 
its  population.  These  elements 
combined  pose  a  significant  challenge  to  the 
long-term  accessibility  of  health  services  and, 
more  broadly,  the  care  system  (see  Annex 12).  A 
significant urban-rural divide persists, where urban 
centres  attract  nurses,  while  rural  and  eastern 
counties face persistent shortages. Zagreb County 
shows  the  highest  demand  for  medical  doctors 
and  nurses, 
its  concentration  of 
healthcare  facilities.  Counties  like  Lika-Senj  and 
Virovitica-Podravina  report  minimal  availability  of 
specialised  staff,  with  ratios  exceeding  4:1  for 
certain  roles.  The  density  of  doctors  in  Croatia  (4 
per  1 000  population  in  2021)  was  below  the  EU 
average in 2023. Around 23% of doctors were 55-
64 years  of  age.  The  number  of  general 
practitioners  (GPs)  per  inhabitant  is  among  the 
lowest  in  the  EU,  and  their  share  among  all 
doctors  is  low.  The  remuneration  of  GPs  is  also 
low.  Virtually  all  counties  show  a 
relatively 
shortage  of  medical  doctors,  some 
facing 
particularly  acute  shortages  due  to  high  demand 
and  very  low  supply.  Croatia  has  taken  measures 
to  increase  the  attractiveness  of  the  nursing 
profession,  for  example  through  the  adoption  of 
the Civil Service and Public Service Salaries Act in 

2024,  which  increased  the  wages  paid  from  the 
state  budget.  Particular  attention  is  also  given  to 
increasing the wages of primary-care doctors. New 
measures 
relieving  administrative 
burdens  through  digitalisation  and  providing  the 
opportunity  for  primary-care  doctors  to  contract 
preventive services such as check-ups.  

focus  on 

by 

e-health, 

especially 

Croatia has yet to embrace the opportunities 
offered 
for 
hard-to-reach areas. Croatia is strengthening its 
central  healthcare  information  system  (CEZIH)  for 
internal  referrals  (eReferral),  emergency  medicine 
and  private  healthcare  providers.  Other  measures 
included  the 
integration  of  electronic  health 
records  (EHRs)  within  the  hospital  information 
system  and  clinical  guidelines  (eGuidline).  Staff 
training  was  conducted  in  63 hospitals  with  the 
aim of raising awareness of the obligation to send 
electronic  clinical  assessments.  Investments  to 
boost the digital transformation of Croatia’s health 
sector,  potentially  improving  the  effectiveness  of 
and  access  to  healthcare,  are  planned  under  the 
2021-2027  cohesion  policy  and  the  RRP.  For 
example,  under  the  Croatian  RRP  a  software 
solution has been developed to track and monitor 
usage  of  certain  medicines;  while  telemedicine 
services  (Telecordis)  in  rural  and  remote  clinics 
have  been  implemented  to  improve  equity  of 
access  (see  Annex 18).  These  could  help  support 
the  implementation  of  the  2025  CSR  to  invest  in 
e-health.  Meanwhile,  Croatia’s  health  system 
digitalisation  and  its  uptake  of  e-health  still  lag 
behind  other  EU  countries  and  remain  uneven 
across the population. The shares of people  using 

121 

2020202120222023202410-year change**EU average* (latest year) Cancer mortality per 100 000 population303.9308.2302.4303.4n.a.0.90233.1 (2023)Mortality due to circulatory diseases per 100 000 population 590.9 601.3 591.7 524.1n.a.0.77313.0 (2023)Current expenditure on health, purchasing power standards, per capita1 5061 8661 8682 032n.a.1.913834.9 (2023)Public share of health expenditure, % of current health expenditure 84.2 85.5 85.3 84.9n.a.1.0280.6 (2023)Spending on prevention, % of current health expenditure 3.14.45.34.8n.a.1.663.7 (2023)Available hospital beds per 100 000 population*** 490 482 488 472n.a.0.90440 (2023)Doctors per 1 000 population*3.63.84.04.0n.a.1.204.3 (2023)*Nurses per 1 000 population* 2.0 2.2 2.4 2.5n.a.1.967.6 (2023)*Mortality at working age (20-64 years), % of total mortality15.115.214.315.214.20.8114.3 (2023)Consumption of antibiotics in the community and hospital sectors,      defined daily doses per 1 000 inhabitants 15.7 18.2 20.2 21.2 22.01.1220.3 (2024) 
 
     
 
online  health  services  (excluding  phone)  without 
needing an in-person doctor or hospital visit were 
among  the  lowest  in  the  EU  in  2024.  The  use  of 
EHRs  by  patients  is  close  to  the  EU  average  (see 
Annex 7).  However,  there  are  major  differences 
according  to  people’s  socio-economic  background 
and  region 
(see  Annex 18).  Croatia  receives 
EU4Health  funds  for  the  establishment  of  the 
Croatian  health  data  centre  and  the  expansion  of 
Infrastructure 
MyHealth@EU  Digital  Service 
(eHDSI). 

122 

 
 
ANNEX 16: HOUSING 

in 

Housing  in  Croatia  is  characterised  by  high 
home  ownership,  a  small  long-term  rental 
market  and  an  absence  of  social  housing, 
resulting 
low  mobility  and  housing 
shortages.  Croatia  has  a  high  rate  of  home 
ownership (91%) (423) and very little land available 
for construction. Limited social housing is provided 
outside  the  scope  of  affordable  housing  policy, 
under the country’s social policy. Housing demand, 
albeit  decreasing,  is  high  in  cities,  especially 
Zagreb,  and  in  tourist  and  coastal  areas,  where 
there is a high share of short-term rentals. Despite 
an  estimated  supply  gap  of  around  230 000 
homes,  nearly  30%  of  the  existing  dwellings  for 
permanent residence are unoccupied.  

High  numbers  of  holiday  homes  and  short-
term  rentals  and  its  high  shares  over  the 
residential  stock  are  recorded in the  coastal 
and  island  municipalities,  competing  with 
demand  for  long-term  rental.  In  these  areas, 
short-term  rentals  are  often  the  only  available 
type  of  tourist  accommodation,  especially  where 
the local community heavily relies on income from 
tourism.  Coastal  and  island  municipalities  also 
have the highest share of real-estate sales to non-
Croatian nationals.  

Croatia adopted its first comprehensive plan 
for  affordable  housing  in  2025  and  has 
started  a  rapid  implementation  process.  The 
national plan for housing policy is accompanied by 
an  action  plan  outlining  specific  steps  to  be 
implemented  between  2025  and  2027,  which 
requires  close  monitoring  to  assess  its  progress 
and  its  impact  on  housing  supply  and  on  target 
and vulnerable groups. 

Housing market developments 

A  decade-long  trend  of  rising  house  prices 
continues strongly. Following the 2008-09 crisis, 
house prices fell for several years, both in nominal 
terms  and  relative  to  income.  As  the  economy 
began recovering in the mid-2010s, prices started 
to increase, driven by rising incomes, demand from 
non-residents, favourable financing conditions and 
in  Zagreb  and  a 
damaged  housing  stock 
neighbouring  region  following  two  earthquakes  in 

(423) Eurostat (2025), Distribution of population by tenure status. 

2020.  Price  growth  peaked  at  14.9%  in  2022, 
after  which  it  decelerated  only  mildly,  despite 
some  slowdown  of  demand  (also  from  non-
residents) and rising supply. The house prices also 
show  signs  of  overvaluation,  of  around  17%  in 
2025  (based  on  standard  European  Commission 
methodology).  With  price 
increases  broadly 
matching income growth, the price-to-income ratio 
has remained rather stable over the last decade at 
(424).  Regional 
a 
differences  in  price  levels  remain  pronounced.  In 
2023 higher prices were recorded in Zagreb and in 
coastal  regions  with  strong  tourism  and  a  high 
share  of  housing  stock  used  for  short-term  rent 
(425).  Rental  prices  were  stable  during  most  of 
2010s, with recent growth starting in 2018 (426). 

level  of  affordability 

low 

Graph A16.1: House prices, rents and price-to-
income evolution in HR and EU27 since 2005 

Source: Eurostat 

The  construction  of  new  dwellings  has 
increased  in  response  to  rising  house  prices. 
Investment  in  dwellings  has  been  growing  since 
the late 2010s, with a temporary decline in 2023. 
It  reached  record-high  levels  in  2025,  although  it 
remains  lower  than  the  EU.  In  2023,  4.3  new 
dwellings  per  1 000  inhabitants  were  completed, 
up from the low of 1.8 in 2014, but still below the 
5.9  of  2007-08.  Consequently,  the  growth  in 

(424) As suggested by the Commission’s preliminary estimate and 
measured by the number of years of average income needed 
to buy 100 m2 of a newly built dwelling. 

(425) See  Section  3  and  Table  3.2  in:  EIZG  2024.  ’Pregled  tržišta 

nekretnina Republike Hrvatske 2023’. 

(426) Note  that  the  size  of  Croatia’s  rental  market  for  housing  is 
small,  due  to  the  high  home-ownership  rate  of  91%.  The 
acceleration in 2025 is due to a monthly increase of 35% in 
August.  Still,  in 2025-Q3,  the  rent-to-income  ratio  was  well 
below the long-term average. 

123 

50751001251501752002252502750507091113151719212325Index (2005 = 100)Nominal prices HRNominal prices EU27Rental prices HRRental prices EU27Price-to-income ratio HRPrice-to-income ratio EU27 
 
 
  
 
 
 
housing  stock  has  accelerated,  with  the  annual 
increase  between  2021  and  2023  exceeding  the 
2011-21  average  by  46%.  The  high  and  rising 
number  of  residential  building  permits  issued 
(Graph  A16.2)  suggests  that  the  strong  growth  in 
housing  supply  is  likely  to  continue.  However, 
despite 
increases  and  almost 
600 000  unoccupied  dwellings  for  permanent 
living  in  2021(427),  it  is  estimated  that,  by  2030, 
the  housing  supply  gap  will  amount  to  around 
230 000  units,  with  the  number  of  unoccupied 
dwellings  for  permanent 
to 
increase to 620 000 by that year (428).  

living  expected 

these  supply 

Graph A16.2: House supply indicators in HR since 
2005 

(1) 4-quarter moving sums (averages for prices) 
Source: Eurostat 

Productivity  in  construction  is  relatively  low 
but  improving  quickly.  Despite  rising  producer 
prices  of  dwellings,  the  price  level  of  residential 
construction  investment  in  Croatia  remains  the 
lowest  in  the  EU  at  42.3%  of  the  2024  EU 
average.  As  expected  in  2025  gross  value  added 
per  hour  worked  in  construction  was  low,  at  61% 
of  the  aggregate  EU  value,  but  it  has  converged 
strongly in real  terms over the last decade. There 
are severe labour shortages in construction. 

(427) Croatian  Bureau  of  Statistics  2023.  ‘Census  of  population, 
households  and  dwellings  in  2021  –  housing  units  –  by 
towns/municipalities’. There are significant differences across 
counties,  with  the  share  of  unoccupied  dwellings  for 
permanent living ranging from 21% to 50%. 

(428) EIZG  2024.  ‘Modeliranje  i  projiciranje  ponude  i  potražnje  za 
stambenim  jedinicama  u  jedinicama  lokalne  samouprave 
Republike Hrvatske', Zagreb, September 2024. 

Demand  for  housing  is  slowing  down,  which 
could  restrain  further  house  prices.  Credit 
flows for housing purchases have been increasing, 
fuelled  by  (i)  favourable  borrowing  costs  that 
recently  became  lower  than  those  of  the  euro 
area (429), and (ii) increased borrowing capacity due 
to rising household incomes. At the same time, the 
number  of  apartment  and  house  purchases  has 
been  declining  since  2022,  including  by  non-
residents (430).  Overall,  increasing  housing  supply 
and  decreasing  demand,  despite  real  income 
growth,  low  household  debt  and  low  borrowing 
costs,  may  indicate  that  there  is  limited  potential 
for house prices to grow further.  

Structural policies 

is 

Croatia  has  recognised  housing  as  a  priority 
and 
implementing  a  broad  range  of 
measures  to  address  housing  issues.  The 
national  plan  for  housing  policy  establishes  a  set 
of  objectives  and  a  new  institutional  framework. 
This includes: (i) regulations to strengthen financial 
instruments;  (ii)  programmes  to  increase  housing 
supply and create a residential rental market; and 
(iii)  interministerial  cooperation  in  the  field  of 
affordable  housing.  The  aim  of  the  plan  is  to 
increase  affordable  and  sustainable  housing 
through  several  key  measures  including:  (i)    a 
refund of half of the VAT paid and a refund of the 
real  estate 
tax  paid  by  first-time 
homebuyers  below  the  age  of  45  for  the 
acquisition  of  a  first  residential  property  (under 
certain  conditions);  (ii)  launching  an  affordable 
rental  programme  for  vacant  properties;  and  (iii) 
supporting  the  construction  of  state-subsidised 
housing units.  

transfer 

The  2025-2027  action  plan 
is  being 
implemented  and  legislative  measures  were 
adopted  in  2025.  The  action  plan  sets  the 
following  objectives:  (i)  3 450  new  affordable 
housing units available by 2027; (ii) 48.5% of the 
population  covered  by  local  housing  programmes; 
programmes 
and 

(iii)  20 

housing 

local 

(429) In 2025-Q3, the interest-rate-adjusted price-to-income ratio 
was  lower  than  the  long-term  average  by  around  30%, 
reflecting  the  improved  affordability  for  buyers  using  credit 
financing. 

(430) According to tax administration data. 

124 

2.02.53.03.54.04.5204060801001201401601802000507091113151719212325% of GDPIndex (2005 = 100)Residential building permits in m2, indexResidential buildings producer prices, indexInvestment in dwellings (right-hand side axis) 
  
 
 
developed (431).  In  late  2025  and  early  2026 
implementing legislation was adopted: (i) the  Act 
on  Amendments  and  Additions  to  the  Act  on 
Socially  Incentivized  Housing,  a  subsidy  scheme 
for young families buying a residence for the first 
time;  (ii)  an  update  of  the  Physical  Planning  Act, 
limiting the expansion of building areas if they are 
not equipped with basic infrastructure, banning the 
conversion  of  condominiums  in  tourist  buildings, 
and reintroducing urban land consolidation; (iii) the 
Building Act for the digitalisation of procedures, a 
mandatory  building  management  plan,  and 
simplification of building permits for single-family 
homes;  (iv)  the  affordable  rental  programme 
activating privately owned housing units that have 
not been in use for an extended period; (v) the Act 
on  Building  Management  and  Maintenance 
introducing  restrictions  regarding  the  introduction 
of short-term rentals in multi-family buildings; and 
to  prevent 
(vi) 
unnecessary 
uncontrolled 
expansion  of  construction  zones,  which  has  faced 
criticism 
from  professional  associations  and 
academics regarding its long-term implications for 
spatial and urban development. 

the  Spatial  Planning  Act 
and 
development 

Construction 

The Affordable Housing Act (adopted in April 
2026) aims to provide affordable housing to 
vulnerable  groups  and  citizens  who  are  not 
creditworthy.  It  modernises  the  current  Act  on 
State-Subsidised  Housing 
and 
introduces  the  definition  of  affordability  into  the 
housing legal system and the first model for non-
profit  housing  cooperatives. 
It  also  regulates 
housing construction, the acquisition of residential 
real  estate  financed  or  cofinanced  through  public 
funding,  and  the  management  of  housing  stock 
(432). The Act  defines the target  groups entitled to 
receive  subsidies  or  housing  assistance  covering 
people  with  lower  incomes,  persons  who  do  not 
own  an  adequate  residential  property,  and  at  the 
same time are individuals with income that cannot 
exceed  2.5  times  the  regional  median  net  salary 
for  a  single  person,  and  for  each  additional 
member of the immediate family, the limit of their 

(431) Ministry of Spatial Planning, Construction and State Property 
(2025),  Akcijski  plan  za  provedbu  Nacionalnog  plana  za 
razdoblje 2025. - 2027 (Action Plan for the Implementation 
of 
the  Period  2025–2027), 
for 
https://mpgi.gov.hr/UserDocsImages/dokumenti/NPSP/2025_
03_26_Akcijski_plan_NPSP.pdf Subsequent mentions: Action 
Plan for the Implementation of the National Plan (2025). 

the  National  Plan 

(432) Ministry of Spatial Planning, Construction and State Property 

- Affordable Housing Act open for public consultation. 

total income is increased by 0.5 times the regional 
median  net  salary,  young  people,    families  with 
children,  persons  over  65  years  of  age,  persons 
with disabilities, families in which a member of the 
immediate family is a person with a disability or a 
child  with  developmental  difficulties,  former 
protected  tenants,  police  officers,  active  military 
personnel  and  other  scarce  state  and  public 
officials  and  employees,  persons  with  scarce 
professions, persons who work for another natural 
or  legal  person  in  such  a  way  that  the  work  is 
performed  based  on  a  fixed-term  employment 
contract,  seasonally  or  based  on  a  contract  for 
work,  or  work  is  performed  through  a  craft.  The 
prerequisite is that they do not own adequate (i.e. 
corresponding  to  the  household’s  size  and  needs) 
term  affordable 
residential  real  estate.  The 
housing  refers  to  housing  where  the  rent  price  or 
the  loan  instalment,  together  with  the  average 
utility  and  maintenance  costs,  does  not  exceed 
30%  of  net  household  income  in  a  local  self-
government unit.  

Croatia  has  also  enacted  a  new  tourism and 
property-rental  law  to  reduce  the  rapid 
growth  of  short-term  rental  apartments 
along  its  coast.  The  share  of  legal  short-term 
rental  properties  in  the  entire  housing  stock  in 
Croatia  is  less  than  4%  (out  of  a  total  share  of 
holiday  homes  of  9.7%).  The  measures  include 
tighter  controls  on  licensing  for  tourist  rentals, 
efforts  to  shift  properties  into  long-term  lease 
markets  and  stronger  enforcement  against  illegal 
short-term  use.  The  legislation  introduces  stricter 
regulation 
rentals  and 
encourages  the  conversion  of  units  into  longer-
term housing. The law targets the booming sector 
of  private  holiday  apartments  along  Croatia’s 
coastline,  where  surging  rental  supply  has  been 
linked  to  rising  housing  costs  and  infrastructure 
stress.  Early  feedback  from 
local  authorities 
reports  a  noticeable  drop  in  applications  for  new 
tourist  accommodation  but  official  data  are  not 
yet available. 

for  private  holiday 

implementing 

Croatia  has  started 
tax 
measures to incentivise the use  of dwellings 
living.  On  1 January 2025, 
for  permanent 
Croatia  introduced  recurrent  taxation  on  real 
estate  and  housing  units  not  used  for  permanent 
living (433),  and  increased  taxes  on  income  from 

(433) Dwellings  used  for  the  owner  to  live  in  permanently  and 
those rented for the purpose of permanent living (at least 10 

125 

 
 
 
 
short-term  rent.  The  design  of  the  recurrent 
taxation  on  real  estate  gives  local  authorities  the 
possibility to set the amount of tax (per m2) within 
a  certain  range,  while  the  level  of  short-term 
rental  tax  is  determined  on  the  basis  of  the 
tourism  development  index,  so  that,  for  instance, 
the  short-term  rental  income  in  high-tourism-
development areas is taxed more heavily. 

supply,  matched  with  an 
Inadequate 
increasing  demand  for  short-term  rentals, 
might  trigger  rising  real  estate  prices  and 
declining  affordability (434).  Expanding 
the 
availability of existing dwellings for residential use 
by reactivating unused dwellings and building new 
units intended solely for affordable housing is now 
a  priority  of  the  national  housing  policy.  Previous 
government-supported 
loan  programmes  have 
also  fuelled  housing  price  inflation.  At  the  same 
time, complex planning and permitting procedures 
restrict  new  construction,  while  continued  efforts 
to  clarify  cadastral  records  have  the  potential  to 
encourage investment (435).  

Vulnerable groups 

Official  national  data  on  social  housing, 
housing  for  vulnerable  groups,  persons  with 
disabilities  and  homelessness  are  not 
available.  Comprehensive  data  on  the  current 
living  conditions  and  residential  distribution  of 
persons  with  disabilities,  as  well  as  other 
vulnerable groups, are very limited. A small survey 
conducted  by  associations  of  persons  with 
disabilities in 2021 showed that 84.2% of persons 
with  disabilities  believed  that  their  housing  needs 
were  only  partially  or  not  at  all  met,  given  their 
household 
levels.  The  new  national 
housing  policy  plan  and  its  accompanying  action 
plan set out a legal  and strategic framework that 
addresses  housing  issues  affecting  persons  with 
disabilities.  However, 
remain 
insufficiently regulated, such as the accessibility of 
buildings  and  housing  units.  Although  clear 
objectives  and  indicators  have  been  set  in  most 

certain  areas 

income 

months  a  year)  are  not  subject  to  recurrent  taxation.  See: 
https://porezna-uprava.gov.hr/hr/porez-na-nekretnine-
4814/4814, also for further exemptions. 

(434) EiZ 2024. 

(435) OECD country report 2023. 

areas,  close  monitoring  of  the  implementation  of 
these  strategic  documents  and  related  legislation 
remains essential, together with an assessment of 
their  impact  on  the  living  conditions  of  persons 
with  disabilities  across  all  types  of  housing  and 
regions of the country. 

Croatia  lacks  a  national  policy  for  social 
housing,  which  remains  outside  the  scope  of 
affordable  housing.  When  the  Republic  of 
Croatia  became  independent,  citizens  were  given 
the  opportunity  to  purchase  the  social  housing 
apartments  in  which  they  lived  from  the  state 
under  favourable  conditions  (Act  on  the  sale  of 
social  housing  NN  43/92  and  subsequent 
amendments) (436).  As  a  result,  the  state  lost  its 
housing stock, and housing was entirely left to the 
market,  except  for  social  cases  covered  by  local 
self-government  units  and  special  cases  of 
protected  tenants.  Today,  social  housing  falls 
within the country’s social policy, which falls under 
the  remit  of  several  ministries (437).  Affordable 
housing  addresses  policies  and  measures  related 
to  housing  costs  for  families  that  have  below-
average  income  levels  and  are  above  the poverty 
line.  The  normal  affordability  ceiling  is  total 
housing  costs  that  do  not  exceed  30%  of  the 
household’s  net  income  (438)  and  the  bottom  line 
represents  the  poverty  gap,  i.e.  the  activation  of 
social assistance mechanisms.  

Technical  assistance  programmes,  cohesion 
policy  and  the  Social  Climate  Fund  are  used 
to 
increase  the  supply  of  social  and 
affordable  housing.  To  partially  fill  the  social 
housing  gap,  plans  with  pilot  projects  for  social 
and  affordable  housing  are  being  developed  in 
Zagreb,  Split,  Rijeka,  Osijek  and  Varaždin  with  the 
support of the European Investment Bank. Croatia 
is also making the use the Social Climate Fund to 
invest  in  the  construction  and  renovation  of 
energy-efficient affordable and social  housing for 
households  that  cannot  afford  adequate  housing. 

(436) ZAKON o prodaji stanova na kojima postoji stanarsko pravo. 

(437) The  Ministry  of  Spatial  Planning,  Construction  and  State 
Property  is  in  charge  of  protected  tenants,  the  Ministry  of 
Labour,  Pensions,  Family  and  Social  Policy  takes  care  of 
vulnerable  people  and  citizens  who  cannot  afford  to  live  in 
their homes for social and health reasons, and the Ministry of 
Croatian  Veterans’  Affairs 
responsible  for  housing 
assistance for war veterans and their family members. 

is 

(438) OECD  (2021),  Building  for  a  better  tomorrow:  Policies  to 

make housing more affordable. 

126 

 
 
 
Graph A16.3: Housing affordability selected indicators 

Source: Eurostat and European Commission calculations.  The overburden rate should be read together with the tenure structure 
(homeowner, tenants), that may differ across country and regions. 

Since 2025, a Technical Support Instrument multi-
country project is available to Croatian authorities 
with recommendations and tools for increasing the 
levels  of  investment  in  affordable  and  social 
housing  and  for  improving  the  institutional  and 
administrative  capacity  to 
implement  housing 
policy. 

and 

affordability 

Housing 
deprivation 
indicators are below the EU average but are 
more prominent for vulnerable groups at risk 
of  poverty  or  social  exclusion.  The  share  of 
rent in disposable household income was 15.4% in 
2025,  lower  than  the  EU  average  of  22.5%  in 
2024 (439), and decreased from 18.2% in 2024. For 
vulnerable  groups  at  risk  of  poverty  or  social 
exclusion,  the  indicator  decreased  to  23.3%  in 
2025  (33.5%  EU  in  2024),  leaving  vulnerable 
groups  relatively  more  burdened  with  rent  costs 
than  the  general  population,  but  less  than  EU 
average. The index of house-price-to-income ratio 
stood at 98.4 in 2024, below the 105.7 for the EU 
(2015 = 100). The share of people facing housing 
cost  overburden  has  been  decreasing  since  2016 
and is, at 3.2%, lower than EU average (7.7%) (440), 
but  it  remains  higher  for  households  at  risk  of 
in  comparison  with  average 
poverty  (14.9%) 
households. 
In  2023,  housing  deprivation  – 
defined as homes with a leaking roof, damp walls, 
floors  or  foundations  or  rot  in  window  frames  or 
floors  –  was  at  5.6%  (vs  EU  15.6%).  The  rate 
increased  to  10.4%  for  single  persons  over  65 

(439) Eurostat  (2026)  [ilc_mded02]  Share  of  rent  related  to 
occupied  dwelling  in  disposable  household  income,  by  type 
of 
group 
and 
https://ec.europa.eu/eurostat/databrowser/view/ILC_MDED01/
default/table. 

household 

income 

(440) The overburden rate should be read together with the tenure 
structure (homeowner, tenants), that may differ across 
country and regions.   

years,  and  to  12.1%  for  households  at  risk  of 
poverty. The share of people at risk of poverty not 
able  to  keep  their  homes  adequately  warm  is 
about  seven  times  higher  (13.7%)  than  for  other 
households (1.8%) (441) and overcrowding rates are 
among  the  highest  in  the  EU,  reaching  31.8%  of 
the  population  in  2025  vs  an  EU  average  of 
16.8%. 

Numerous  local  social  housing  programmes, 
actions  and  procedures  against  forced 
evictions  are  in  place,  along  with  efforts  to 
build  shelters  for  the  homeless.  According  to 
the latest census, a total of 1 433 445 households 
were  living  in  occupied  dwellings,  1.0%  of  which 
had  the  status  of  tenant  with  protected  rent.  The 
number  of  homeless  persons  was  estimated  at 
approximately 500 persons in 2021 (0.01% of the 
population),  but  data  collection  is  not  systematic, 
with  NGOs  warning  that  the  total  number  of 
homeless persons is much higher, especially when 
including people living in institutions.  

Despite  the  efforts  made,  the  level  of 
institutionalisation  remains  high.  The  current 
legal  framework  (under  the  Ministry  of  Labour, 
Pensions,  Family  and  Social  Policy)  supports 
groups  of  citizens  who  cannot  afford  to  live  in 
their  homes  for  social  and  health  reasons  and 
provides  affordable  housing  for  Croatian  citizens. 
for 
The 
deinstitutionalisation, 
of 
institutionalisation  and  transformation  of  social 
service providers was adopted in 2025 to speed up 
the deinstitutionalisation process (still around 80% 
of adults with mental  health difficulties and 20% 
of  children  in  need  live  in  institutions).  Between 
2016  and  2024,  37  contracts  on  public  housing 

operational 

prevention 

Croatian 

plan 

(441) Eurostat (2026), Inability to keep home adequately warm. 

127 

 
 
 
 
provision  and  10  contracts  for  the  purposes  of 
deinstitutionalisation  were  signed  (see  Annex  19 
for the regional dimensions of institutionalisation). 

128 

 
HORIZONTAL 
ANNEX 17: 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 on all of them (SDGs 4, 

Graph A17.1: Progress towards the SDGs in Croatia 

8,  9).  For  SDG 4  on  quality  education,  Croatia  is 
improving  across  most  indicators  but  is  still 
lagging  behind  the  EU  for  several  of  them. 
Participation  in  early  childhood  education  (88.7% 
of children aged 3 and over in 2024; EU average: 
95.0%) and adult participation in learning (6.5% of 
the population aged 25-64 in 2025 vs EU average 
of  13.7%)  are  areas  where  Croatia  still  needs  to 
catch  up  to  the  EU  average.  A  significant  part  of 
the recovery and resilience plan (RRP) investments 
is  earmarked  for  schools  and  kindergarten 
construction  and  renovation,  as  well  as  vouchers 
for  adult learning,  which will  contribute to  further 
improving these indicators.  

(Industry, 

innovation 
the 

and 
SDG 9 
infrastructure) 
strongest 
shows 
improvement  among  the  SDGs,  but  the  gap 
with  the  EU  average  remains  significant  for 
several  indicators.  Croatia  is  lagging  behind  on 
the  percentage  of  households  with  a  high-speed 
internet connection and on all the R&D indicators, 

For a detailed progress assessment towards the various SDGs, see the annual Eurostat report ‘Sustainable development in the 
European Union’; for extensive data on the short-term SDG progress of EU countries, see Key findings – Sustainable development 
indicators; for an interactive visualization of SDG progress of EU countries, see SDG country overview. 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 or six 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 29 April 2026. Data refer mainly to the period 2019-2024 or 2019-2025. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

129 

 
 
 
 
 
 
 
most  notably  on  patent  applications 
(19 
applications  to  the  European  Patent  Office  per 
million inhabitants in 2025 vs EU average of 156), 
as  well  as  R&D  personnel  and  R&D  investments. 
To  help  tackle  this,  the  RRP  has  measures 
dedicated  to  increasing  broadband  access  for 
households and stimulating R&D investments.  

indicators 

Almost all indicators for SDG 8 (Decent work 
and  economic  growth)  have  improved  in 
recent  years.  Some 
such  as 
investment share of GDP are now clearly above EU 
average,  partly  due  to  support  from  the  RRP  and 
other  EU  funds.  The  employment  rate  is  closer to 
the  EU  average  after  an  increase  to  74.4%  in 
2025  (EU  average:  76.1%)  and the  percentage  of 
in 
young  people  neither 
education improved from 14.3% in 2019 to 10.8% 
in 2025, below the EU average of 11.0%. 

in  employment  nor 

Croatia  is  moving  away  from  several  SDGs 
related  to  sustainability  (SDGs 6,  7,  13,  14, 
15) and it still needs to catch up with the EU 
average on SDG 13. It is performing worse than 
the  EU  average  on  SDG 13  on  climate  action  and 
is  moving  away  from  the  target.  This  reflects, 
amongst  others, movements  counter  to  EU trends 
for  greenhouse  gas  emissions  per  capita  and  the 
share  of  renewables  in  the  energy  mix  as  well 
as slow  reductions  in  emissions  from  new  cars. 
Croatia  is  performing  better  than  the  EU  average 
on SDG 7 on affordable and clean energy, though 
slightly  moving  away  from  the  target,  partly  due 
to  increases  in  energy  consumption  and  energy 
import  dependency.  Similarly,  Croatia  performs 
better  than  the  EU  average  on  SDG 6  on  clean 
water  and  sanitation,  SDG 14  on  life below  water 
and SDG 15 on life on land. However, it is moving 
away  from  the  targets,  partly  due  to  increases  in 
pesticides  in  rivers,  small  decreases  of  indicators 
related  to  coastal  health,  as  well  as  increasing 
drought  impact  and  soil  erosion  risk,  although, 
except  for  the 
it  still  has  a  better 
performance than EU average in those indicators. 

latter, 

on 

the 

improving 

While 
remaining 
SDGs related to sustainability (SDGs 2, 9, 11 
and 12), it still needs to catch up with the EU 
average  on  SDGs 2,  9  and  12.  For  SDG 9  on 
industry,  innovation  and  infrastructure,  Croatia  is 
improving  but  still  significantly  below  the  EU 
average.  This  is  mostly  due  to  the  R&D  related 
indicators,  but  also  due  to  lower  performance  for 
indicators  linked  to  sustainable  industry  such  as 
air pollution from industry. Croatia needs to catch 

up  on  SDG 12  (Responsible  consumption  and 
production), where it is struggling with low circular 
material use rate and high material footprint with 
16.9  tonnes  per  inhabitant  (EU  average:  13.7). 
Croatia  also  performs  better  than  EU  average  on 
SDG 11  on  sustainable  cities  and  communities, 
however, further efforts are needed to catch up to 
the EU average rates for recycling municipal waste 
(see Annex 8) and reduce premature deaths due to 
fine  particulate  matter.  The  RRP  envisages 
measures to improve some of these shortcomings, 
with  a  dedicated  component  to  improve  waste 
management  and  recycling,  and  investments  to 
boost  the  green  transition  and  the  circular 
economy.  Croatia  is  improving  but  still  lagging 
behind  the  EU  average  on  SDG 2  (Zero  hunger), 
including due to a slightly higher obesity rate and 
lower 
sustainable 
for 
agricultural production indicators. 

performance 

some 

Croatia is improving on most SDGs related to 
social  fairness  (SDGs 1,  3,  4,  5,  8),  while 
moving away from SDGs 7 and 10, but it still 
needs  to  catch  up  with  the  EU  average  on 
SDGs 3, 4, 8, and 10. Croatia performs above EU 
average  for  SDG  1 (No  poverty)  and  improved  on 
some indicators, including the severe material and 
social  deprivation rate, which at 2% is well  below 
the EU average of 6.4%. However, other indicators 
like persons at risk of poverty or social exclusion or 
the in-work at-risk-of poverty rate increased from 
below the EU average in 2019 to levels above EU 
average  in  2024,  possibly  also  due  to  high 
inflation  recorded  in  recent  years  in  Croatia. 
Croatia  is  performing  better  than  the  EU  average 
on  SDG  5  (Gender  equality),  partly  due  to  a 
significantly lower gender pay gap (6.6% in Croatia 
vs 11.1% in the EU in 2024) and employment gap, 
as  well  as  increased  representation  of  women  in 
national  parliament  and  government.  While  for 
SDG 7  (Affordable  and  clean  energy)  Croatia  is 
moving  away  from  the  target,  it  is  at  the  same 
time improving and performing better than the EU 
average  on  access  to  affordable  energy:  4.6%  of 
the  population  were  unable  to  keep  their  home 
adequately  warm  in  2024,  compared  with  an  EU 
average of 9.2%. 

Although Croatia has made improvements, it 
is  still  performing  below  the  EU  average  on 
SDG 3  (Good  health  and  well-being),  SDG 8 
(Decent  work  and  economic  growth)  and 
SDG 10  (Reduced  inequalities).  For  SDG 3, 
healthy life expectancy lower than in the EU (70.7 
years in 2023 vs EU average of 75.3 years), while 

130 

 
smoking prevalence and avoidable mortality  rates 
are  significantly  higher  than  EU  average  (see 
Annex 15).  The  RRP  envisages  measures  to tackle 
these  issues  through  a  dedicated  component  on 
healthcare.  Croatia  is  slightly  moving  away  from 
SDG 10,  with  indicators  such  as  the  income 
quintile  share  ratio  and  the  urban-rural  gap  for 
risk  of  poverty  or  social  exclusion  being  higher 
than  EU  average  and  increasing  between  2019 
and 2024. 

long-term  unemployment 

Croatia  is  improving  on  SDGs  related  to 
macroeconomic stability (SDGs 8 , 16, 17) but 
still  needs  to  catch  up  with  the  EU  average 
on  SDGs  8  and  16.  It  has  made  significant 
progress  in  almost  all  indicators  under  SDG 8 
(Decent work and economic growth), with real GDP 
per  capita  increasing  by  over  25%  between  2019 
and  2024,  though  it  is  still  well  below  the  EU 
average.  The 
rate 
decreased to 1.8% in 2024, below the EU average 
of  1.9%.  Access  to  justice  and  the  corruption 
perception indicators under SDG 16 (Peace, justice 
and  strong  institutions)  such  as  the  perceived 
independence  of  the  justice  system  are  showing 
improvements  but  remain  well  below  the  EU 
average  and  point  to  structural  issues  linked  to 
these  areas.  The  Commission  is  monitoring  this 
through  different  channels  including  the  Rule  of 
Law  Report. 
In  addition,  the  RRP  has  two 
components  dedicated  to  modernising  the  justice 
system  and  preventing  and  combating  corruption. 
General  government  gross  debt,  part  of  SDG 17 
(Partnerships for the goals), was 56.3% of GDP in 
2025,  below  the  EU  average  of  81.7%.  The  debt-
to-GDP ratio is expected to continue to decrease in 
2026,  driven  by  nominal  GDP  growth  that  also 
supports government revenues (see also Annex 2). 

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

131 

 
 
the capital region at 79%, and lowest in Panonska 
(see  Graph  A18.1).  Real 
Hrvatska,  at  53% 
productivity  growth  has  been  the  strongest  in 
Sjeverna  Hrvatska,  due  to 
low 
baseline, but it can also be partially explained by a 
process of relocation of activities from the capital 
city  to  the  neighbouring  counties.  On  the  other 
hand, productivity growth has been the weakest in 
the  capital 
rate 
region,  showing  a  growth 
significantly lower than the national average. 

its  relatively 

Graph A18.1: Labour productivity growth (2024) 
and labour productivity (2024), Croatia (NUTS 2 
regions) 

ANNEX 18: COMPETITIVE REGIONS 

Regional development trends 

in  gaps  between 

Croatia  has  combined  robust  convergence 
with  the  EU  average  in  terms  of  GDP  per 
head  (PPS)  since  joining  the  EU  with  a 
reduction 
its  regions. 
Following a relative stagnation lasting until  2016, 
rapid 
is  experiencing  a  period  of 
Croatia 
convergence, which has brought its GDP per head 
close to 78% of the EU average in 2024, up from 
around 62% in 2013, when Croatia joined the EU. 
Significant disparities persist  between  the  more 
developed  capital  region  Grad  Zagreb  and  the 
other  three  less  developed  regions  (see  Map 
Internal  disparities  have  gradually 
A18.1). 
narrowed  since  2013,  with  all  non-capital  regions 
growing  on  average  faster  than  Grad  Zagreb.  The 
strongest gap  remains between the capital  region 
(131% of the EU average) and Panonska Hrvatska 
(53% of the EU average), with some of its eastern 
counties falling below 50%. 

Map A18.1:  GDP per head compared with the EU 
average. 

Source: Commission calculations based on JRC data 

Human  capital  patterns  mirror  gaps 
in 
regional  competitiveness  and  productivity. 
Though  the  combined  share  of  employment  in 
knowledge-intensive  services  and  high-technology 
sectors  in  Croatia  is  close  to  the  EU  average, 
employment in these sectors in the capital  region 
is  almost  twice  that  of  Panonska  and  Sjeverna 
Hrvatska.  While  the  share  of  employment  in 
knowledge-intensive  services  remained  relatively 
stable between 2018 and 2024 in all regions, the 
growth of high-technology sectors has been robust 
across  the  country,  with  a  peak  of  10.2%  in 
large 
Sjeverna  Hrvatska,  contributing 
productivity growth rate. 

its 

to 

2021-2023 average GDP per head in purchasing power 
standard compared to the EU average. 
Source: Commission calculations based on 16 July 2026 
Eurostat data. 

Despite  all  regions  growing  faster  in  terms 
of  GDP  than  the  EU  average,  substantial 
regional  productivity  gaps  remain.  In  2024, 
productivity  (GDP  per  hour  worked)  at  national 
level was 69% of the EU average. It was highest in 

Differences in regional sectorial composition 
present  opportunities  and  challenges  for 
regional  competitiveness.    Despite  the  capital 
city specialisation in services focusing on financial, 
professional,  scientific  and  technical  activities, 
remains  non-negligible  at  13.2%. 
industry 
Meanwhile  Panonska  and  Sjeverna Hrvatska  have 
the  highest  shares  of  employment  in  industry 
(23.6% and 30.3% respectively, compared with an 
EU average of 15.4%), while Jadranska Hrvatska is 
increasingly  reliant  on  tourism.  In  terms  of  recent 
sector  dynamics,  the  period  2019-2023  saw 
overall growth in the employment share in services 

132 

0.72.23.62.12.01.61006969695379EUCroatiaSjeverna HrvatskaJadranska HrvatskaPanonska HrvatskaGrad ZagrebAverage annual growth2024 (%)Productivity in 2024GDP/hour, EU27 = 100 
 
 
 
 
   
 
Table A18.1:Main development trends, challenges and the concentration of resources 

Source: European Commission based on Eurostat data; categories of regiona based on Map 18.1. 

and  a  decline  in  manufacturing  and  logistics 
activities.  Overall,  there  is  a  potential  for  building 
on  existing  sectorial  strengths  and  clear  regional 
specialisations  are  emerging  (442).  These  sectorial 
strengths  include  agri-food  and  wood  processing 
industry  in  Panonska  Hrvatska,  the  blue  economy 
(focused  on  coastal 
fisheries  and 
aquaculture)  in  Jadranska,  in  addition  to  health 
sector, which is also present in Sjeverna Hrvatska. 
with strong potential in advanced manufacturing. 

tourism, 

Key challenges for regional 
competitiveness 

innovation 
Regional  competitiveness  and 
are 
performance, 
lagging outside the capital region. In terms of 
the  R&I  spending  (443),  the  territorial  pattern  is 
its 
polarised 

between  Grad 

Zagreb  and 

improving, 

although 

(442) Industrial  transition  plans  of  Panonska,  Sjeverna  and 

Jadranska Hrvatska. 

(443) Only  Grad  Zagreb  is  in  the  Moderate+  performance  group, 
while  least  performant  is  Panonska  Hrvatska.  Regional 
Innovation Scoreboard 2025. 

133 

Specific territoriesNational cohesion aspects Main development trendsLess developed regions(population 3.06 million)Despite strong and above-average real GDP growth in the last decade, three less developed Croatian regions are characterised by productivity standing far below the EU average and lagging behind in competitiveness. The gap reflects persistent gaps in demographic dynamics, labour productivity, investment attraction as well as employment and education opportunities. These three regions continue to face significant challenges in strengthening their competitiveness and moving towards a more competitive and higher value-added economy. Sjeverna Hrvatska stands out in terms of productivity growth (at 69% of the EU average) thanks to strong manufacturing and above EU average business sector R&I spending. While Jadranska Hrvatska is overly reliant on tourism, Panonska Hrvatska (at 53% of the EU average) shows the most challenges due to having the lowest employment rate, a shrinking population, and a higher concentration of workers in agriculture (15% of employment).  More developed region (population 0.8 million)The average annual growth of GDP per capita (in PPS) in Zagreb has been above the EU average and has reached 131% in 2024. The region benefits from higher labour productivity, a more diversified economic structure and a greater concentration of knowledge-intensive services and innovative activities. While productivity is higher than in other Croatian regions and counties, it is only 79% of the EU average and annual productivity growth over the past decade has been below national average. Increasing productivity gains will require continued investment in skills, digitalisation and innovation, while additional support is needed to address congestion, waste and water management challenges. Rural and sparsely populated areas of Panonska Hrvatska and Dalmatian hinterland – the least developed areas according to national developments index - are facing structural challenges, exacerbated by ageing and declining population, lower rates of educational attainment and economic activity, and where delivery of basic services is particularly challenging to ensure (heath, education, social, transport, connectivity). Limited availability and uptake of public transport reinforce car dependency and reduce accessibility of services.  Urban areas, particularly the capital region and coastal cities, face increasing pressures related to housing affordability, congestion, commuting flows and infrastructure capacity, which weigh on quality of life and functional efficiency. Meanwhile, islands face distinct territorial challenges related to connectivity, both transport and digital, service delivery, climate risks and strong impact of high seasonality of the predominant economic activity -  tourism.  In addition, counties (Istria and Sisak-Moslavina) face higher structural adjustment transition challenges linked to the decarbonisation of industry (cement, chemical) and phasing out of coal-fired power generation. These processes require long-term investment in climate-neutral technologies in addition to economic diversification, while using the potential of the local workforce. The Just Transition Fund supports economic diversification in these counties by investing in SMEs, including incubators, and upskilling. Overall, Croatia faces substantial investment needs to meet and sustain compliance with EU standards in transport, waste and water infrastructure. Connectivity is largely dependent on road transport, even in urban areas, while rail connectivity is lagging far below EU average. Greening the transport sector presents an opportunity to counter the last decade’s increasing greenhouse gas (GHG) emissions. Despite progress in water and wastewater investments, access to water services remains uneven across regions, with significant challenges related to non-collected urban wastewater and high-water losses. Regional disparities remain in waste management as well as flood protection and climate risk mitigation. 
 
 
 
  
 
region 

indicators, 

surrounding 
Sjeverna  Hrvatska 
of 
(respectively  above  and  close  to  2%  of  GDP)  and 
the  rest  of  the  country  (below  0,7%),  Sjeverna 
Hrvatska saw large growth from 2018 to 2025 in 
numerous 
including  business  R&D 
expenditure  (444),  the  dimension  where  Zagreb 
shows  one  of  the  strongest  decreases  despite 
generally  outperforming  other  Croatian  regions, 
given 
research 
the  below  average 
capacities.  Additionally, 
cooperation  between  academia  and  industry  (see 
Annex  4),  particularly  in  Panonska  and  Jadranska 
Hrvatska,  mirrored  by  stagnant  business  R&D 
expenditure  in  those  regions,  hinders  technology 
transfer and researcher mobility. It also points to a 
lack  of  integration  between  regional  university 
hubs and innovation ecosystems. 

the  concentration  of  public 

in 

to 

an 

support 

opportunity 

organisations, 

less  developed  regions 

Regional  smart  specialisation  priority  niches 
present 
boost 
competitiveness  in  less  developed  regions. 
Leveraging traditional sectors in line with regional 
industrial  transition  plans,  along  with  ICT  and 
defence,  can  create  new  sources  of  growth  and 
(445). 
employment 
Despite  continuous  support  to  the  network  of 
business 
prominent 
innovation  cluster  activity  facilitating  integration 
into  global  value  chains  and 
of  businesses 
investments in high-tech sectors, has not emerged 
yet  (446)  (see  Annex  5).  Over  the  last  decade, 
including  Foreign  Direct 
private 
Investments  (FDI)  (447)  have  been  concentrated  in 
the  capital  region  and  Jadranska  Hrvatska,  the 
latter  predominantly  tourism  related.  By  contrast, 
Panonska  Hrvatska  attracted  only  3%  of  total 
national FDI, constrained by lower business density 
(448),  lack  of  targeted  investment  promotion  and 
skilled workforce (see Annex 11). In particular, the 
least  developed  counties  and  municipalities 
struggle to attract investment and retain talent. 

investments 

(444) Ibid. 

(445) Industrial  transition  plans  of  Panonska,  Sjeverna  and 

Jadranska Hrvatska. 

(446) Croatian network of business support organisations. 

(447) OECD  -  FDI  Qualities  Review  of  Croatia:  Advancing  the 
Investment  Promotion  and 

for 

Strategic  Framework 
Facilitation (2023). 

(448) National bureau of Statistics - NUMBER AND STRUCTURE OF 

BUSINESS ENTITIES IN 2024 BY COUNTY. 

Map A18.2:  Average annual population change at 
NUTS 3 level (2015-2024) 

Source: Eurostat and JRC 

Demographic  decline  is  a  major  concern  in 
Croatia,  most  notably  in  some  of  the  less 
developed regions. A shrinking workforce affects 
local  economic  growth  and  competitiveness  while 
local  self-
weakening  the  fiscal  capacity  of 
government units and hampering delivery of basic 
services (see  Annex  7).  Croatia  has  experienced a 
population  loss  of  over  9%  between  2011  and 
2021,  driven  by  natural  decrease  and  migration 
losses.  The  least  developed  municipalities  and 
counties  in  Croatia,  classified  in  its  national 
development  index  as  least  developed  assisted 
areas  (449),  face  the  most  critical  situation,  with 
strong  population  decreases  and  isolated  pockets 
of poverty. Notably, in Panonska Hrvatska, 31% of 
the population is at risk of poverty (see Annex 12) 
while  the  region  also  experiences  the  sharpest 
decline in the country, especially in the population 
aged  15-39.  Panonska  Hrvatska  also  has  the 
lowest employment rate (67.2%).  

(449) Assisted  areas—municipalities  and  counties  scoring  below 
national  development  averages, as  defined  by  the  Regional 
Development Act. There are four categories for counties and 
eight categories for municipalities. Development is measured 
periodically  using  an  index  composed  of  six  indicators: 
unemployment 
income  of 
local/regional  budget  per  capita,  population  change,  rate  of 
education, ageing index. 

income  per  capita, 

rate, 

134 

 
 
 
 
 
 
Access  to  primary  education  is  becoming 
increasingly  difficult  in  some  less  developed 
regions. Declining numbers of school-age children 
have  led  to  primary  schools’  closures,  reducing 
accessibility  of  primary  education  -  particularly  in 
Sjeverna  and  Panonska  Hrvatska  -  with  many 
areas  falling  below 
the  15-minute  walking 
distance  threshold).  In  parallel,  urban  areas  face 
pressures  from  multi-shift  schooling.  Most  three-
shift  schools  are  in  Splitsko-dalmatinska  county, 
with a smaller number in Zadar and Zagreb.  While 
the  upgrades  and  the  transition  to  single-shift 
operation  are  underway  with  strong  support  from 
EU funding, significant infrastructure gaps remain, 
with  hundreds  of  schools  still  operating 
in 
multiple-shifts (450) (see Annex 13).  

Health  facility  density  varies  significantly 
across  Croatia,  with 
central  Croatia, 
particularly  Zagreb,  having  far  greater 
concentration  than  rural,  eastern,  hilly-
mountainous  areas  and  islands.  Healthcare 
workforce  distribution  mirrors  these  disparities, 
resulting  in  acute  shortages  of  primary  care 
practitioners  in  underserved  territories  (451),  which 
is  being  partly  addressed  with  the  provision  of 
mobile health infrastructure (see Annex 15). There 
is  scope  to  expand  telemedicine  and  develop 
sustainable 
for 
emergency and specialised care in those areas. 

long-term  medical  services 

The  availability  of  affordable  housing  is 
increasingly challenging in the capital region 
and  in  coastal  counties,  impacting  access  to 
education  as  well.  Jadranska  Hrvatska  and 
Zagreb  are  particularly  affected  by  decreasing 
housing  affordability.  Due  to  a  high  housing 
overcrowding 
coupled  with 
deteriorating  housing  affordability  since  2020 
(since  2012  in  Zagreb  and  coastal  counties)  (452) 
as well as high share of short-term rentals, certain 
segments of the population cannot afford to either 
buy  or  rent  a  housing  unit  (see  Annex  16).  The 
largest housing gaps are recorded in the county of 
Splitsko-dalmatinska,  the  city  of  Zagreb,  the 
counties  of  Zagrebačka  and  Osječko-baranjska 

(34.4%), 

rate 

(450) EC,  Directorate-General  for  Education,  Youth,  Sport  and 
Culture,  Education  and  training  monitor  2025  –  Croatia, 
Publications Office of the European Union, 2025 

(451) OECD/European Observatory on Health Systems and Policies 
(2025), Country Health Profile 2025: Croatia. State of Health 
in the EU, OECD Publishing, Paris. 

(452) National Plan for Housing Policy Plan, 2025. 

and 

rising 

accommodation 

(see  Map  A18.4).  It  also  lead  to  a  shortage  of 
rents, 
student 
particularly  in  the  four  biggest  university  cities 
(Zagreb,  Rijeka,  Split  and  Osijek).  The  situation  is 
most acute in Zagreb,  which hosts around half of 
the  country’s  student  population.  Given  that 
around  70%  of  students  in  the  Zagreb  region 
come  from  other  regions  of  the  country  (453), 
limited  access to  affordable  accommodation  risks 
in  educational 
deepening  regional 
attainment, 
from 
disadvantaged backgrounds. 

inequalities 

especially 

students 

for 

Map A18.3:  Housing gap 2023. Croatia (NUTS 3 
regions) 

Source: Economic Institute of Zagreb, 2025. 

learning, 

Tertiary  education  attainment  and  adult 
learning opportunities are limited outside the 
capital  region.  Regional  disparities  in  tertiary 
education  attainment  and  adult 
in 
addition  to  stark  urban-rural  divide,  persist.  Gaps 
remain  pronounced,  with  the  tertiary  education 
attainment  rate  among  young  people  in  cities 
being  22.1  percentage  points  higher  than  among 
those  in  rural  areas,  and  this  gap  has  been 
widening since 2023 (454). Regional differences are 
also  substantial,  with  the  capital  region  recording 
a tertiary education attainment rate of more than 
double  that  of  Panonska  Hrvatska.  This  points  to 
barriers  in  access  to  higher  education  and  fewer 
upskilling opportunities outside urban centres (see 
Annex  12),  resulting  in  a  shortage  in  skilled 
workers  that  weakens  regional  competitiveness 
and productivity. 

(453) OECD  (2025),  Education  and  Skills  in  Croatia,  Reviews  of 

National Policies for Education, OECD Publishing, Paris. 

(454) European  Commission:  Directorate-General  for  Education, 
Youth,  Sport  and  Culture,  Education  and  training  monitor 
2025 – Croatia. 

135 

 
 
 
 
 
 
Table A18.2:Key regional indicators (at NUTS 2 level) for Croatia 

Dark green - the indicator is 120% or more of the EU average. 
Light green - the indicator is 100% or more, but less than 120% of the EU average. 
Yellow - the indicator is 90% or more, but less than 100% of the EU average. 
Light red - the indicator is 75% or more, but less than 90% of the EU average. 
Dark red - the indicator is below 75% of the EU average. 
This colour scale applies to 'positive' indicators, where higher values are favourable. 
For 'negative' indicators (where higher values are unfavourable), the colours are reversed. 
Source: EUROSTAT and JRC 

the 

and 

tourists  compared  with  86.5% 

The  coastal  region  Jadranska  Hrvatska 
accounts for most of  the tourism in Croatia. 
In  2024,  Panonska  Hrvatska  accounted  for  only 
3.5%  of 
in 
Jadranska  Hrvatska  (455).  Tourism  spatial  and 
concentration  generates  additional 
temporal 
pressure 
the 
environment 
on 
infrastructure  in  coastal  areas,  which  is  already 
suffering from the impacts of climate change (see 
Annex 10). This creates  negative externalities and 
significant  congestion  problems.  Enhancing  island 
connectivity and decarbonising maritime transport 
present  opportunities  for  the  stagnating  Croatian 
(456). 
in 
shipbuilding 
Strengthening 
and 
generational  renewal  of  small-scale  fishers  by 
supporting  investments  and  addressing  pressures 
retains  diverse 
from 
employment  opportunities  in  coastal  areas  and 

the 
economic 

region 
viability 

sector 
the 

reduced 

stocks 

fish 

(455) National  bureau  of  Statistics,  Tourism,  2024,  Statistical 
Reports  ISSN  1331-341X,  Zagreb,  2025.  In  2024  Croatia 
recorded  the  highest  seasonality  in  the  EU,  reflecting  heavy 
reliance  on  the  summer  season,  with  Jadranska  Hrvatska 
ranking third among EU regions with the highest seasonality. 

(456) WB report, Croatia: Environment-Friendly Transport Solutions 
(Maritime Industry), 2021. ; OECD Peer review of the Croatian 
shipbuilding industry (2024). 

Alongside 

islands. 
sustainable 
aquaculture, these sectors (457) could contribute to 
diversifying  tourism-oriented  economic  activity  in 
Jadranska Hrvatska.  

boosting 

in  Croatian 
Solid  waste  management 
municipalities  –  predominantly  reliant  on 
landfills  -  poses  particular  challenges  in  the 
capital  region  and  Jadranska  Hrvatska.  The 
rate  of  separate  collection  of  municipal  waste, 
although  improved  thanks  to  recent  reforms  and 
ongoing investments, was only 49% in 2024, with 
stark  differences  at  county  level  (see  Map  A18.3)  
(458). Correspondingly, Croatian regions remain at a 
very early stages of exploiting the potential of the 
circular  economy  (see  Annex  8).  The  lowest  rates 
for both waste recycling and recovery are found in 
Jadranska  Hrvatska  where  tourism  generates  a 
high  proportion  of  waste  ranging  from  12%  to 
33% in coastal counties, in stark contrast to below 
1% in continental counties. 

(457) World  Bank.  2024.  Charting  Croatia’s  Blue  Economy 

Pathways. Washington. 

(458) Ministry  of  Environment  and  Green  Transition,  National 

Municipal waste Report for 2024, Zagreb, 2025. 

136 

GDP per head (PPS, index)Real GDP growthEmployed with high educational attainmentEmployment in high-technology sectorsEmployment in knowledge-intensive servicesR&D expenditureR&D expenditure in business enterprise sector (BERD)Access to primary schools  - Rural areasEU27=100Average annual % change% of employed aged 25-64% of total employment% of total employment% of GDP% of GDPChildren under 15 within 15-minute walk to primary school (%)20242014-2024202520252025202320232023EU1001.641.55.141.72.241.5134Croatia783.336.15.439.01.370.7526Panonska Hrvatska532.526.23.436.00.490.2321Jadranska Hrvatska733.335.52.839.00.680.2334Grad Zagreb1313.355.912.250.22.170.94Sjeverna Hrvatska644.325.94.430.21.931.8417  
 
 
 
  
 
Map A18.4:  Estimated recycling rates of municipal 
waste by county in 2024. Croatia (NUTS 3 
regions) 

functional  decentralisation  (461),  drive  local  and 
focus  on  managing 
to 
regional  authorities 
individual  projects  rather  than  steering  longer-
term  development  trajectories.  This  limits  the 
development of coherent investment pipelines, the 
the 
mobilisation  of  private 
capacity of regions to support productivity growth 
and economic diversification.  

investment  and 

Significant  territorial  differences  in  living 
standards and service delivery persist across 
a highly fragmented administrative structure 
of  556  local  self-government  units.  While 
administrative and functional integration has been 
encouraged (in line with the 2025 Country Specific 
Recommendations  related  to  the  capacity  and 
effectiveness  of  local  level  administration),  high 
fragmentation: 
structural 
challenges;  (ii)  constrains  the  functioning  of  local 
administration;  and  (iii)  limits  the  efficiency  and 
quality  of  public  service  delivery  and  investment 
(462). Despite existing support measures (463), public 
services  delivery  remains  uneven,  particulary  in 
Panonska Hrvatska and the Dalmatian hinterland.  

exacerbates 

(i) 

Limited integration and cooperation between 
municipalities  prevents 
fiscally  weaker 
municipalities  (464)  from  achieving  the  scale 
and  professional  capacity  needed  to  deliver 
complex  investments.  As  a  result,  subnational 
governance  weaknesses  both 
the 
concentration of economic activity and investment 
in  a  limited  number  of  municipalities  and  hinder 
convergence in lagging territories. Experience with 
cohesion  policy  territorial  instruments,  including 
urban and island development, with enhanced role 
of regional coordinators, illustrates the potential of 
territorially 
to 
strengthen  local  competitiveness  and  to  boost 
cooperation between municipalities (465). 

differentiated 

interventions 

reinforce 

(461) Fiscal 

Decentralization 

in 

Croatia;  World 

Bank 

Group. 2025. Croatia Subnational Public Finance Review.  

(462) Towards Balanced Regional Development in Croatia | OECD; 
The  Capacities  and  Sustainability  of  Croatian  Cities  in 
Performing Municipal Services. 

(463) Ministry of regional development and EU fonds, Programme 
for sustainable social and economic development of assisted 
areas. 

(464) Towards Balanced Regional Development in Croatia | OECD. 

(465) Ex  Post  Evaluation  of  the  ERDF  and  the  Cohesion  Fund 
(2014-2020),  2025,  WP13_Country_Fiches.pdf;  MRRFEU, 
Evaluation  of  small  ITI  supported  under  Cohesion  Policy  in 
2014-2020, 2025. 

Source: Croatian Municipality Waste report for 2024 

Administrative and regulatory barriers hinder 
the development of renewable energy in less 
developed  regions.  The  potential  of  the  clean 
energy  generation  for  economic  diversification, 
decarbonisation  and 
regional  competitiveness, 
especially in Jadranska and Panonska Hrvatska, is 
largely  untapped.  Despite  ongoing  investments 
and recently introduced reforms, the development 
of solar and wind generation along the coast (459), 
in  the 
as  well  as  of  geothermal  potential 
continental  counties,  is  hampered  by  delayed 
investments  and  administrative  and  regulatory 
barriers  (see  Annex  9),  including  constraints  on 
grid  connection  and  to  the  establishment  of 
energy communities.  

Uneven  administrative  capacity  across  the 
counties  and  municipalities  limit  investment 
long-term  planning,  while 
readiness  and 
increasing 
local 
transaction  costs 
businesses and investors. Coupled with various 
levels of public service digitalisation, it contributes 
to  uneven  application  of  spatial  planning  and 
permitting procedures across territories (460). Weak 
integration  between  planning  and  budgeting, 
combined  with  constraints  linked  to  fiscal  and 

for 

(459) JRC  (2024),  Renewable  Energy  production  and  potential  in 

EU Rural Areas. 

(460) Subnational B-READY Report Croatia, World Bank, 2024. 

137 

 
 
 
 
 
 
ANNEX 19: TRANSPORT 

This  Transport  Annex  presents  the  state  of  play, 
and  the  challenges  Croatia  is  facing  with  the 
implementation  of  the  trans-European  transport 
network  (TEN-T),  the  European  railway  traffic 
management system (ERTMS) and road safety. 

Three  European  transport  corridors  traverse 
Croatia (Mediterranean, Baltic – Adriatic and 
Western  Balkans  –  Eastern  Mediterranean). 
The  TEN-T  in  Croatia  comprises  2 048 km  of  rail 
(618  of  which  are  on  the  core  network)  and 
1 968 km of road (1 138 of which are on the core 
network). Croatia has seven airports (one core), 19 
ports  (five  core)  and  five  urban  nodes.  Croatia  is 
inland 
also 
waterways (466). 

traversed 

541 km 

by 

of 

The  main  capacity  bottlenecks  on  the 
Croatian  TEN-T  railway  network  involve  the 
connection  of  the  Port  of  Rijeka  with  its 
hinterland. The construction of a new railway line 
(lowland  alignment)  from  Rijeka  to  Zagreb  is  a 
priority.  Given  the  scale  of  investments  resulting 
from  Croatia’s  difficult 
topography,  various 
sections set to undergo modernisation will have to 
draw on different funding programmes. 

The  ERTMS  is  essential  to  digitalising  the 
railways  and  modernising  and  harmonising 
railway  operations  across  Europe.  The  ERTMS 
ensures the safety of rail networks by providing a 
unified signalling system that significantly reduces 
the 
It  also  provides 
interoperability  between  national  rail  systems, 
improving  cross-border  train  movements.  Finally, 
the  ERTMS  enhances  network  capacity  and 
operational 
the 
competitiveness of the rail sector. 

risk  of  accidents. 

efficiency, 

increasing 

2024 (467). To meet its national plan’s ERTMS roll-
out target by 2035, Croatia aims to deploy it along 
a further 356 km of track with estimated costs of 
EUR 85 million. 

A 
long  period  of  underinvestment  has 
resulted in a slow and outdated rail network 
in  Croatia. 
Infrastructure  modernisation  will 
require significant funding for the maintenance of 
existing lines and the development of new lines.  

lengthy 

reducing 

rules  with 

Tender  procedures  often  take  longer  than 
planned  due  to  the  lack  of  quality  of  the 
supporting  documentation.  Complaints  and 
appeals  often  lead  to  additional  delays  in  project 
implementation.  This  means 
that  addressing 
difficulties  in  preparing  and  processing  public 
procurement, 
permitting 
procedures,  and  developing  a  mature  project 
pipeline remains important. Moreover, harmonising 
technical  and  operational 
the 
minimisation  of  national  rules  in  line  with  the  EU 
interoperability  and  safety 
directives  on  rail 
remains  critical  to  ensure  seamless  cross-border 
rail  transport  A  fragmented  system  with different 
state  actors  and  strong  reliance  on  the  national 
budget  creates  few  incentives  to  increase  cost 
efficiency  and  service  quality.  The 
railway 
infrastructure manager has a shortage of qualified 
staff. Moreover, for Croatia, it is vital to provide to 
the  National  Safety.  Authority  with  the  powers  to 
fully  operate,  as  it  still  faces  challenges  to  its 
the  availability  of  competent 
independence, 
the  overall 
resources 
effectiveness of supervision. 

tasks,  and 

for  key 

The  ERTMS  was  operational  on  2.6%  of 
Croatia’s  TEN-T  rail  network  by  the  end  of 

Table A19.1:ERTMS deployment in Croatia. 

(466) TENtec Information System, according to Reg. 2024/1679. 

coordinator Matthias Ruete.  

Source: Based on ERTMS – Third work plan of the European Coordinator Matthias Ruete.  

(467) Based  on  ERTMS  –  Third  work  plan  of  the  European 

138 

 
 
 
 
 
 
 
 
 
 
Map A19.1:  TEN-T Cross-Border & National Priority Sections in Croatia. 

Road  crashes  impose  an  enormous  social, 
economic  and  health  burden  on  the  EU 
economy.  The  external  socio-economic  costs  of 
fatal,  serious  and  minor  injuries  have  remained 
persistently  high  despite  the  progress  made  in 
reducing  crash  frequency  and  severity.  These 
innovation, 
resources 
education,  healthcare  and  other  crucial  public 
investments (468). 

could  otherwise 

fuel 

In  2024,  Croatia  was  24th  of  the  27  EU 
countries, with 62 road fatalities per million 
inhabitants,  which  is  well  above  the  EU 
average  (45).  Compared  to  2019,  a decrease  of 
20% in road fatalities was achieved. 

In 2024, 3 238 people were seriously injured 
in  road  crashes,  which  is  30%  higher  than 
the  respective  figure  for  2019.  Compared  to 
the  EU  average,  the  distribution  of  fatalities  in 
Croatia  showed  a  relatively  high  proportion  of 

fatalities on urban roads, especially for passenger 
car occupants.   

Based on the latest available data for 2024, 
Croatia is close to being on track to meet the 
2030  target  of  halving  the  number  of  road 
fatalities.  However,  Croatia  still  has  one  of 
the highest fatality rates in the EU and more 
efforts  are  needed  to  reach  the  additional 
general  targets  set.  A  possible  way  to  address 
the  degree  of 
this  could  be 
implementation  of  the  various  actions  in  the 
national  road  safety  plan  and  consider  improving 
and  adapting  the  road  safety  measures.  It  could 
also  explore  any  other  relevant  activities  with 
emphasis on urban road infrastructure, vulnerable 
road users and post-crash care (469).  

review 

to 

(468) Report on the implementation of the EU Road Safety Policy 

framework at the Mid-Point, COM(2026) 77 final. 

(469) More details in Report on the implementation of the EU Road 
Safety  Policy  framework  at  the  Mid-Point  –  Croatia, 
SWD(2026) 36 final. 

139 

 
 
 
 
 
 
 
Graph A19.1: Croatia's road fatalities per million, 
2024 

Map A19.2:  Croatia's road safety map 

Source: Report at the Mid-Point - Croatia, SWD(2026) 36 
final. 

roads  where 
The  map  A19.2  presents 
infrastructure  safety  is  poor  and  where  urgent 
action is therefore required. 

the 

Source: TENtec Information System and TEN-T map library – 
European Commission 

140