Croatia : A Strategy for Smart, Sustainable and Inclusive Growth

Croatia`s current economic challenges include sluggish growth, excessive public spending, high unemployment, and a deteriorating external environment. Croatian economy was making a fragile recovery and dealing with slow export growth, low investment, and persistent unemployment. At the end of 2011, Croatia gross domestic product (GDP) per capita (in purchasing power terms) declined to 61 percent average, a loss of 2 percentage points since 2008.The country incomplete structural reform agenda needs attention and action to promote greater competitiveness and a shift to productivity-based, private sector-led growth. It also faces the strategic challenge of maximizing the benefits of European Union (EU) membership, especially in terms of access to markets and the use of EU structural funds, requiring structural changes in the social sectors, education system, and business environment. Accelerating economic recovery requires Croatia to complete its currently unfinished structural reform agenda and shift to productivity-based, private sector-led growth. The government could also do more to: (i) reform product market regulation; (ii) remove administrative barriers to investments; (iii) reduce the logistics costs in trade; (iv) make the bankruptcy process more efficient; and (v) modernize contract enforcement and property rights.