ZAGREB, 14 July, 2021 - Women work one month for free due to lower wages and their total income, and consequently their pension, is lower because they care for children and the elderly, Croatian MEP Sunčana Glavak (EPP) said on Wednesday.

She was speaking at an event at Plitvice Lakes which discussed how to strengthen the position of women in Croatia and Europe, held as part of the Conference on the Future of Europe.

Glavak said a division into men's and women's departments was not felt in the EP because the persons there were competent, but added that a balance had not been achieved anywhere in Europe.

She called on citizens to engage in a debate on that and other European topics via the Commission's platform “futureu.europa.eu.”

Prime Minister Andrej Plenković said four women ministers in Croatia's 18 government departments was not enough, but added that they "run important departments and make a big contribution to this government."

He boasted that Croatian women hold high positions in European institutions - Dubravka Šuica is a Commission vice president, Marija Pejčinović Burić the Council of Europe secretary-general, Ivana Maletić a judge at the European Court of Auditors, and Maja Markovčić Kostelac the head of the European Maritime Safety Agency.

"As a government, we will continue to make an effort towards empowering and protecting women, towards equality and women's participation at a higher level and a high representation percentage," he said.

Present at the Plitvice conference were Tourism and Sport Minister Nikolina Brnjac, Culture and Media Minister Nina Obuljen Koržinek, Regional Development and EU Funds Minister Nataša Tramišak and Agriculture Minister Marija Vučković, while Šuica and EPP Women President Doris Pack participated virtually.

For more about politics in Croatia, follow TCN's dedicated page.

ZAGREB, 13 July, 2021 - The Europe Direct Rijeka information centre which will provide information about opportunities and advantages available to citizens in European Union member states, was officially opened on Tuesday in the premises of the Porin - Rijeka Development Agency (RRA).

Europe Direct Rijeka will be a direct link between citizens and EU institutions, or rather, an extended arm of the European Commission (EC) and it will provide support through a direct flow of information regarding opportunities and advantages that are available to EU citizens, and that means local residents in Rijeka and Primorje-Gorski Kotar County.

The centre aims at bringing Europe closer to the people in the field through various activities and to motivate the people to get involved in the debate on the future of the EU. The activities will include visits to schools, presentations, panel discussions about the EU and publishing various official publications.

 The centre also plans a partnership with local media outlets, cooperation with other EU networks, raising awareness about sensitive issues for the EU, and the like.

The project was approved by the European Commission - Europe Direct for the period 2021 - 2025.

The centre began operating on 1 May as part of the Europe Direct network in Croatia and the New Generation Europe Direct information centres in the EU, and are managed by the EC.

All of the centre's services will be free of charge for all citizens but it is not intended to interpret or provide legal advice on EU legislation.

The head of the European Commission Representation in Croatia, Ognian Zlatev, said that the Rijeka centre has increased the European network of centres which comprise more than 420 such centres and it will bring EU citizens closer, inform them and enable them to make their own assessments.

He underscored that the network is important so that citizens throughout the EU can experience the EU in their own cities and counties. We want to hear citizens' opinions about the EU. How they see the future and to be better informed of its policies and initiatives, said Zlatev.

Croatia has shown that it can be a leader in certain segments, he said and concluded that the objective is a common one - a clean and more beautiful Croatia and Europe for future generations.

For more about politics in Croatia, follow TCN's dedicated page.

July 9, 2021 - The REPLACE Project was presented at the JOINT SECAP workshop in Rijeka on June 23. There is no better way to end a year and a half-long Interreg project for Croatia, which was one more ecosystem-concerned cooperation between Italy and Croatia.

When it comes to energy efficiency in Croatia, there is no doubt anybody cares about it more than the scientific community working and associating with Energy Institute Hrvoje Požar (EIHP).

Not only is the EIHP building on its way to becoming the first nearly zero energy building in the whole of the country, but EIHP's expertise also plays a big role in REPLACE Project from Horizon Europe. As TCN previously covered, the project aims to make Primorje Gorski Kotar County energy-renewable territory, and the ongoing meetings about the project (in collaboration with the University of Rijeka) see slow but steady progress in those respects.

As EIHP reports on its website, June 23 saw REPLACE Project presented in the congress hall of Rijeka's Jadran Hotel as part of the final workshop of the JOINT SECAP project.

„On behalf of EIHP, Antonia Tomas Stanković presented REPLACE in the second half of the event. The goal is to support European energetic, climate, environmental, economic, and social goals by 2030 and 2050 by encouraging the gradual replacement of inefficient and outdated cooling and heating systems with new, energy-efficient systems based on renewable energy sources“, informed EIHP.

JOINT SECAP, part of Interreg Italy-Croatia strategic program (much like the CASCADE Project TCN previously wrote about) aims to improve the climate change monitoring and planning of adaptation measures tackling specific effects in the cooperation area.

„The project idea reflects the necessity to operate at a wider district level and better define strategies and actions for climate change adaptation, especially for those weather and climate changes and hydrogeological risks affecting coastal areas. The first phase is developed to build the common methodology for Joint Actions definition and implementation and to share the basic knowledge about issues concerning climate change adaptation strategies and energy efficiency measures. The second phase starts upon the analysis uploaded in the web platform, acting as a useful tool for the development of scenarios for the Joint Actions to be implemented in the Joint SECAP plans, those last constituting the main project deliverable“, explained JOINT SECAP on its website. The workshop in Rijeka was the conclusion of the project as JOINT SECAP ended on June 30 after it began on January 1, 2012, with a budget of € 2,094,857.

The workshop in Rijeka, writes the EIHP website, was organized by Primorje Gorski Kotar County Office for Regional Development Infrastructure and Project Management and by Kvarner Regional Energetic Agency. Representatives of local authorities of Primorsko-Goranska county that were enrolled in creating an Energetic and Climate Sustainable Development Action Plan. These local authorities include towns such as Opatija and Kastav and the districts of Čavle, Matulji, and Viškovo.

„Joint SECAP analyzed energy spending for the included towns and districts, their risks and vulnerability regarding climate change, yearly emissions of CO2 in sectors of building construction industry, public lighting, and traffic. Concrete measures with the goal of adjusting to the effects of climate change and CO2 emissions down to at least 55% by 2030 were suggested“, stated EIHP.

With measures identified, the race with time begins as these measures should be in place as fast as possible to tackle one of the biggest challenges humanity is facing, and Croatia isn't able to be isolated from the threat.

Learn more about Rijeka on our TC page.

For more about science in Croatia, follow TCN's dedicated page.

ZAGREB, 6 July, 2021 - President Zoran Milanović on Tuesday received Igor Simčić, head of the Esimit Europa project, which has been promoting for 26 years the European idea of unity by connecting sports, diplomacy, business and culture, the President's Office said in a press release.

The project has gained global recognition thanks to the many successes of the Esimit Europa 2 sailing yacht, which took part in competitions under the European flag and with an international European crew, spreading the message about the successes of the united Europe.

Simčić acquainted the President with the previous activities and successes as well as with the plan to develop a new yacht, Esimit Europa 3, to serve as an ambassador of peace with the support of the United Nations.

Milanović joined other European leaders in supporting the Esimit Europa project.

For more about politics in Croatia, follow TCN's dedicated page.

July 5th, 2021 - At a presentation of the European Climate Pact, a new European Commission initiative, experts warned earlier this week that the Mediterranean Sea was still the area in the world under the greatest threat from plastic waste and that the enormous consumption of bottled water was an increasing problem.

According to the World Wildlife Fund, 55% of the world's plastic waste is accumulated in the Mediterranean Sea. With poor waste management and mass tourism without adequate infrastructure, high consumption of plastic packaging, especially bottled water, is an increasing problem.

The Mediterranean is the region in the world under the greatest threat from plastic waste. We are literally suffocating in plastics. In Croatia, huge quantities of bottled water are bought. Don't buy water in plastic packaging. Croatia is a country rich in water sources, said Nataša Kalauz of WWF Adria at the online presentation of the European Climate Pact in Zagreb.

The European Climate Pact is an initiative launched by the European Commission in 27 EU member states to raise awareness of the problem of climate change and encourage joint action. WWF Adria is the project coordinator for Croatia and Slovenia.

Julije Domac, the Croatian president's special advisor on energy and climate and European Climate Pact ambassador, said that "unless the future is green, we wouldn't have it."

He also said that Croatia, as a country rich in renewable resources, could recognize an opportunity in that, not only for the production of energy for its own needs but also for export.

Perhaps a fifth of energy production comes from renewable resources globally, and in about twenty years, it should reach four-fifths. That is an opportunity for Croatia, said Domac.

The director of the Croatian Business Council for Sustainable Development, Mirjana Matešić, cited the unsustainability of the current tourism model as one of the major problems Croatia is facing at the moment, referring to the devastation and degradation of space for tourism as well as corruption in spatial planning in mass tourism.

Dunja Mazzocco Drvar, head of the Directorate for Climate Activities at the Ministry of Economy and Sustainable Development, said that on 2 June, the Ministry adopted a new low-carbon strategy.

We are waiting for new European laws announced for mid-July, so in about two weeks, we will have new laws that will reflect the latest European ambition to reduce greenhouse gas emissions by 55% by 2030, said Mazzocco Drvar.

The results of a study recently conducted among young people in the EU were also mentioned at the panel discussion, and they show that even though 78% of young people are concerned about climate change, most of them, 90%, are not ready to give up various amenities to reduce their harmful impact on the environment.

Mazzocco Drvar stressed that all citizens had to be educated about sustainable living and energy use.

The CountUsIn platform (https://www.count-us-in.org/en-gb/) was also presented, and citizens can use it to choose a way to reduce their harmful impact on the environment or to have a positive effect on the climate crisis.

The online panel discussion was the first event within the European Climate Pact project, and WWF has announced that new panels, forums, and other forms of education and interaction with citizens will take place soon to raise awareness of the climate change problem and support citizens in their attempts to contribute to positive change.

For more follow TCN's dedicated page. 

June 25th, 2021 -  The leading Bosniak party, SDA, and two members of the Bosnian Presidency, Šefik Džaferović and Željko Komšić, said on Thursday that Croatia and the concept of ethnic divisions were defeated in the EP with the rejection of an amendment on constituent peoples to a Bosnia and Herzegovina progress report.

At a plenary on Thursday, the European Parliament adopted a report on BiH, rejecting amendments by Croatian MEPs on the rights of constituent peoples, which the European People's Party supported but not the Liberals, the Left, and the Greens.

"The rejection of the amendment by the parliamentarians from Croatia and ultra-right European parties, which asked of BiH to additionally deepen discrimination in the election process... is a clear message as to which direction future reforms of the Constitution and electoral legislation in BiH should take," the SDA said in a press release.

Komšić called the result of the vote in Brussels a clear message to Zagreb.

"That was as expected given the fact that the allegedly legitimate representation of the constituent peoples has no basis in European Court of Human Rights rulings. That's a message Zagreb should take note of well because it's clear now that the ethnic concept they are forcing in Bosnia and Herzegovina is not acceptable to the EU," he said.

Džaferović said Croatia's idea to introduce "the rhetoric of ethnic divisions" in the EP resolution was rejected.

"After NATO's refusal at the past summit to include similar formulations in its declaration, this is the second important message after which Zagreb should... start changing its policy on Bosnia and Herzegovina. Any attempt by Zagreb to impose solutions on Bosnia and Herzegovina will fail and an unnecessary decline of Croatia's reputation," he said.

Džaferović said BiH should reform its Constitution and electoral legislation based on ECHR rulings and European Commission recommendations to eliminate discrimination and ensure equality for all its citizens across the country.

For more about politics in Croatia, follow TCN's dedicated page.

June 25th, 2021 - The European Parliament on Thursday adopted a report by Croatian MEP Mislav Kolakušić, which underlines that it is necessary to oversee better the principles of subsidiarity and proportionality in the adoption of EU policies and to introduce the EP's right to legislative initiative.

Presenting the "European Union regulatory fitness and subsidiarity and proportionality report on Better Law-Making covering the years 2017, 2018 and 2019," Kolakušić said the expansion of EU powers harmed the EU's democracy and functioning, and that it was necessary to protect better member states' possibility to make decisions and act without European institutions interfering whenever possible.

620 votes adopted the report in favor, 20 against, and 51 abstentions.

The EP stresses that acting at the EU level must be justified concerning possibilities available at a national, regional, or local level while respecting retroactive assessment, impact assessment, and consultation with stakeholders.

MEPs call for reviewing the Treaty on the Functioning of the European Union and introducing the EP's right to legislative initiative, given that it directly represents European citizens.

Kolakušić said the report contained an important call on MEPs, all member states, and EU citizens that the EU must change and that the power to move bills must be given to citizens and their representatives in the EP.

The resolution presents solutions to the weakened regulation of compliance with subsidiarity and proportionality principles.

MEPs push for better participation by national parliaments in legislative procedures at the EU level.

The EP calls for more open access to the drafting of legislative texts and enabling the independent moving of bills.

To have better regulations, it is essential that the European Parliament, Council, and Commission be included in more structured cooperation to assess the application and effectiveness of EU law to improve legislation, the resolution says.

For more about politics in Croatia, follow TCN's dedicated page.

ZAGREB, 24 June (Hina) - Every EU member state should make its own decisions on measures for curbing the pandemic based on its own assessments, Croatian Prime Minister Andrej Plenković said in Brussels on Thursday ahead of a two-day summit.

"So far we have been in favor of a situation where every state and every public health system is able to make decisions based on its own assessments. We have been functioning that way all this time," Plenković said.

One of the topics of the summit is a debate on a coordinated response to the COVID-19 pandemic. Also, there will be a discussion on economic recovery, migration and external relations, including those with Turkey and Russia.

Some member states, including Germany, are pushing for the EU to agree on stricter and more consistent restrictions on travel from areas affected by new strains of coronavirus. German Chancellor Angela Merkel criticized Portugal for its decision to allow British tourists to enter the country despite the fact that the Indian/Delta variant of coronavirus is prevalent there.

On the other hand, member states more dependent on tourism are advocating a more liberal approach.

"At the moment, Croatia has a fairly good epidemiological situation, a low number of new infections, fewer patients in hospitals, fewer deaths. The number of persons vaccinated with either the first dose or with both doses is gradually rising," Plenković said.

He added that freedom of movement was a fundamental value of the EU and that it had to be re-established.

"Freedom of movement enables a normal life, normal circulation of people, capital, trade, and ultimately tourism. Tourism is very important to us, we expect this tourist season under the slogan 'Safe Stay in Croatia' to be more successful and better," Plenković said.

EU's twin-track approach to relations with Russia

Relations with Russia will also be discussed at the summit. Ahead of the summit, Germany and France proposed that Europe adopt an approach to Russia where it would on the one hand threaten it with the possibility of new economic sanctions and on the other hold a summit with Russian President Vladimir Putin.

The EU is already following a twin-track approach. Last week EU High Representative for Foreign Affairs and Security Policy Josep Borrell issued a report warning that the EU should prepare for a further downturn in its relations with Russia and proposed that the Union simultaneously reject Russia's behavior, exert pressure and engage in dialogue with Russia.

Croatia against discrimination against any minority

One of the topics not on the agenda but which cannot be avoided is the issue of Hungarian law which has been condemned by most leaders due to discrimination against the LGBTIQ community.

Prime Minister Plenković said that Croatia's position was clear against discrimination.

"We are against any kind of discrimination, against any minority, anyone's human rights, and we are very clear about that," Plenković said, adding that the European Commission, as the guardian of the EU treaties, has the task of checking whether certain national laws are in line with EU values and the acquis. "We are against any form of discrimination and see no need to additionally join some positions or declarations."

For more about politics in Croatia, follow TCN's dedicated page.

ZAGREB, 24 June 2021 - The standard of living in Croatia in the pandemic year 2020 was a third lower than the European Union average, despite the fact that consumer price levels were a third lower, according to data from the EU statistical office Eurostat.

Eurostat measures the standard of living by actual individual consumption per capita, which shows how many goods and services individuals consumed, regardless of whether they paid for them by themselves or the costs were borne by their governments or non-governmental organizations. Actual individual consumption per capita is expressed in purchasing power standards, which enables the elimination of the differences in price levels between countries.

Last year, the highest standard, as expressed by actual individual consumption per capita, was registered in Luxembourg and was 31% higher than the EU average.

Italy, Cyprus, and Lithuania closest to average

Luxembourg was followed by Germany and Denmark, where the standard was 23% and 21% higher than the average respectively. Cyprus, Italy, and Lithuania were closest to the average, where actual individual consumption per capita was up to 4% lower than the EU average.

Spain, the Czech Republic, Portugal, Malta, Poland, and Slovenia registered actual individual consumption per capita of between 10% and 20% below the EU average.

Croatia alongside Bulgaria

In Romania, Estonia, Greece, Slovakia, Latvia, and Hungary, actual individual consumption was between 20% and 30% lower than the EU average, while Croatia and Bulgaria had the lowest standards. Actual individual consumption per capita in Croatia in 2020 was 33% below the EU average, compared with 34% in 2019, while Bulgaria was 39% below the EU average.

Highest consumer prices in Luxembourg

Eurostat also showed differences in consumer prices between EU member states, using purchasing power standards.

Luxembourg had the highest price level index for actual individual consumption in 2020, half as high as the EU average. It was followed by Denmark, Sweden; Ireland, and Finland with price levels more than 20% higher than the average.

Consumer prices in Belgium, France, Germany, and Italy were slightly above the EU average, while those in Spain and Cyprus were up to 10% lower. Price levels in Latvia and the Czech Republic were about 30% below the average.

Croatia placed alongside Latvia, with price levels 35% lower than the EU average.

Prices in Hungary, Poland, and Bulgaria were between 40% and 50% below the EU average. 

GDP per capita

Luxembourg remained in the top spot as the country with the highest GDP per capita in the European Union. Expressed in purchasing power standards, it was two and a half times higher than the EU average.

Luxembourg was followed by Ireland, with GDP per capita slightly more than twice as high as the EU average, and Denmark, the Netherlands, Austria, Sweden, and Germany with GDPs roughly a fifth higher than the average.

France's GDP per capita was slightly above the average and Malta's slightly below, while Italy and the Czech Republic had a GDP per capita of less than 10% below the average.

The countries with GDPs per capita of between 10% and 20% below the EU average included Slovenia, Lithuania, Cyprus, Estonia, and Spain. Portugal, Poland, Hungary, Latvia, Slovakia, and Romania had GDPs per capita of between 20% and 30% lower than the average.

Croatia placed alongside Greece, with a GDP per capita of 36% below the EU average, up from 35% in 2019. Bulgaria was at the bottom of the ranking with a GDP per capita of 45% below the EU average.

For more, follow our lifestyle section.

ZAGREB, 23 June, 2021 - Despite the considerable setback dealt by the pandemic, Croatia has a rare opportunity in the next five years to restore its economy to health and to ramp up the public investments necessary for appreciably higher growth rates with the help of EU funds, an IMF mission says in a Concluding Statement.

"Following a painful contraction of 8 percent in 2020, the economy looks set for growth between 5 and 6 percent in 2021 driven by a rebound in the services sector and investment - provided the pandemic does not provide further unwelcome surprises," the mission says the statement published on Wednesday after visiting Croatia as part of regular consultations with member states.

"With sufficient luck regarding tourism outcomes, and a successful vaccination drive within the next months, growth could even exceed 6 percent this year. Assuming the pandemic fades by the end of this year, growth could remain high over the next few years, if the country makes full and timely use of the potentially sizable forthcoming inflow of EU funds," according to the statement.

"Since the first quarter, the recovery has picked up noticeably with areas like construction and manufacturing already reaching activity levels higher than in 2019. Overall, the number of registered unemployed persons has fallen by nearly 13 percent since a year ago. However, tourism and directly related sectors are yet to fully recover. This process is likely to take another year or two."

Swift measures by the authorities

"Between the pandemic and two large earthquakes, Croatia has been severely tested, and the country’s resilience has come through. The economic contraction in 2020 - painful as it has been -was not as severe as those experienced by many other economies with a strong tourism component. This is mainly due to the swift measures enacted by the authorities," the IMF staff said.

"Support measures must remain in place until the health of the population and the economy have been fully restored. As conditions improve, support measures need to rotate toward preparing the workforce for the post-pandemic world, and facilitating balance sheet repair of viable businesses. Thereafter, the challenge of once again reducing deficits and the public debt whilst shifting growth into a new high gear must be taken on. The generous funding from the EU represents a historic opportunity, to help meet these challenges successfully - an opportunity that must be fully utilized, in a timely fashion," the IMF mission said.

Not the right time to further cut taxes

Noting the government's support measures, the mission said, "Just as these support measures were essential during the worst of the crisis, they must now be better targeted to lagging sectors of the economy - and they must remain in place till the economy has more fully recovered."

"It is paramount that a vaccination drive be as successful and widespread as possible, that extra healthcare costs are fully met and arrears in the healthcare system are reduced to the maximum possible extent," according to the statement.

"Complementing the use of funds such as the European Social Fund, fiscal resources saved this year due to improving conditions can also be usefully redeployed to train more workers in sectors like greening and digitalization."

"In sum, in the view of IMF staff, the most important fiscal goal in 2021 is to focus on spending available resources wisely to restore the economy to health. If this is successfully accomplished this year, it will more firmly ground the efforts to reduce the deficit and debt over the next few years," said staff said in the Concluding Statement.

"Regarding revenues, the authorities need to conserve all available resources to meet any unexpected expenditures into 2022, and well beyond. This is one clear lesson from this completely unforeseen shock the world has suffered. We hold that this is not the right time for any further tax cuts or weakening of the tax base. Current conditions are still far too fragile for the country to afford them," they said. 

Recovery and Resilience Fund provides unique opportunity for economic development

They said that there were few doubts that a post-pandemic "will be more digitalized in the most basic aspects of our lives, and that it should be greener. In these two areas, Croatia has great strides to take, from which there will be a sizable return on investment, for decades to come."

The IMF reiterated that "our most important recommendation was to raise public investment, for the sake of future growth. Now, that conviction has only deepened, as it is important to acknowledge a singular aspect in which Croatia is actually better off than it was before the pandemic."

That is "the generous allocation of EU Funds, including from the Recovery and Resilience Fund (RRF). The RRF resources amount to 10.6 percent of GDP in grants to be utilized by 2026."

"These funds reflect a truly unique opportunity along the path of economic development, which many countries in the world are not fortunate enough to have. It is important for all stakeholders in Croatia to fully understand the significance of this opportunity. These funds are available, but they need to be absorbed efficiently, and in a timely manner. They must also be accompanied by needed reforms," the IMF said.

"Thanks to the influx of these EU funds beginning towards the end of this year, Croatia can significantly upgrade its public capital stock, decarbonize its economy, catch up with digitalization, and improve its maritime and rail transport systems. If the projected investments go according to plan, we currently assess that the funds from the RRF alone could add as much as 2.9 percentage points to real GDP over the next twenty years."

Opportunity to reduce income gap in relation to EU

"When the effects of the planned reforms, as well as the other EU structural funds are put together, Croatia now has its best chance since independence to significantly narrow the current 35% gap in per capita income with respect to the EU average," the mission said.

It added that "the prospect of living in a vibrant society with prosperity rapidly converging to EU levels could cause the young to fundamentally re-evaluate their future, thereby further stemming the tide of outward migration. That, in turn, would have the positive effect of reducing risks to the sustainability of the healthcare and pensions systems. It is very much possible now, and unlike ever before, to start a virtuous cycle - and to definitively escape past vicious circles."

The authorities have requested a Public Investment Management Assessment from the IMF, to take place in August 2021, the statement noted. "This assessment will help prepare an action plan to help make sure investment spending is effective, is sensitive to climate change related considerations and supports sustainable long-term growth."

The authorities’ National Recovery and Resilience Plan "has laid out major complementary reform commitments across five components: green and digital economy, public administration and judiciary, education, science and research, labor market and social protection, and healthcare. These are essential for the flexibility Croatia needs to operate its economy smoothly, once inside the eurozone."

Reforms needed for stronger public finance

Within the reform areas where the strength of public finances is the focus, IMF staff re-emphasizes the importance of support, from all stakeholders, for civil service and administrative reforms, "including a modernization of the public salary system, as well as improving the territorial organization of sub-national governments."

Support is also called for ending "stop-gap measures to take care of healthcare arrears, through an overhaul of its cost structure" and "exploring a more sustainable revenue base, to preserve healthcare quality standards."

The IMF also recommends the development and implementation of a full-fledged strategy for state-owned enterprises (SOEs), "including the separation of core from non-core businesses, and a strengthened oversight system for the former to ensure that they contribute their fair share to the budget by remaining financially durable after their public service obligations are met. The authorities’ commitments to sell some non-core SOEs over the next few years is a promising start." 

Also recommended is ensuring the long-term sustainability of the pension system, given population aging.

In addition to these areas, constantly improving the competitiveness of the Croatian economy through active dialogue with the private sector, remains essential.

"For the forthcoming increase in public investment to have maximum effect on the economy’s growth rate, it must be complemented by increases in private investment, as well. Reforms to the framework of debt restructuring, insolvency, and efforts to further improve predictability and efficiency in legal procedures remain central to unlocking more resources from investors, as it allows them to invest with greater confidence."

Banking system liquid and sufficiently capitalized

"Monetary policy remains highly expansionary, within the exchange rate anchor in place since 1993. This stance is appropriate given the need to nurse the economy fully back to health," the IMF staff said.

The recent pick-up in inflation is more likely than not to be transitory in nature, but should inflationary pressures prove more persistent than in the euro area, the central bank "may consider reducing excess liquidity in the banking system, while maintaining exchange rate stability."

"The banking system has remained liquid and is on average well capitalized," the mission said, adding that there was more than enough money to meet the demand for corporate loans.

Housing lending remains strong, while uninsured household cash loans have decreased, which the IMF said was positive.

Although the ratio of non-performing loans to total loans has remained stable, the so-called stage II loans, a forward-looking indicator of future asset quality problems, has risen - particularly for non-financial corporations. This development warrants continued close monitoring."

"The pandemic has not affected the upward trend in house prices in Zagreb and coastal areas. To the extent that housing purchases are not driven by excessive household borrowing, they do not constitute an immediate financial stability risk," the IMF said.

However, this also requires continued monitoring by the central bank, If circumstances require it, the central bank "might wish to consider putting in place more formal macro-prudential measures (than the current implicit debt-service-to-income ratio included in the Foreclosure Act)."

"Despite the considerable setback dealt by the pandemic, Croatia has a rare opportunity, over the next five years, to restore its people and economy to health. It can ramp up the public investments necessary for appreciably higher growth rates, with the help of EU funds. Such opportunities should not be taken for granted. The onus of efforts is not exclusively on the authorities. All stakeholders in society must offer them the support for vital reforms, while doing their parts to re-energize private investment, and innovation. Adopting the euro will help remove some existing economic frictions by removing exchange rate risk. Yet, reaping the full benefits of the currency union requires strong focus and preparation. A brighter future is very much within reach. The time to act is now," according to the Concluding Statement.

For more about business in Croatia, follow TCN's dedicated page.