Croatia

Croatia, located at the crossroads of Central and Southeast Europe, is known for its rich cultural heritage, stunning Adriatic coastline, and dynamic history. Since gaining independence in 1991, Croatia has made significant strides in its political, economic, and social development. As the newest member of the European Union (joining in 2013), the Schengen Area, and the Eurozone, Croatia has firmly established itself as an integral part of the European community.

Croatia’s economy is characterized by openness and resilience. Over the last three years, average GDP growth reached 4.8%, consistently outpacing average growth in the EU and the euro area. This growth has been driven by strong domestic demand, favorable labor market conditions, and significant public investment, much of it supported by EU funds. The services sector, particularly tourism, plays a pivotal role, while manufacturing and agriculture remain important contributors.

Despite these achievements, Croatia faces ongoing challenges. Demographic trends, such as an aging population, outmigration, and labor shortages pose risks to long-term growth and social cohesion. The country is also working to address regional disparities and ensure that the benefits of development reach all citizens. Croatia’s public finances have improved, with a downward trajectory in public debt and a resilient banking sector, but continued reforms are needed to enhance competitiveness, foster inclusive growth, and create jobs.

The World Bank Group has been a longstanding partner, supporting Croatia’s journey toward greater prosperity, resilience, and inclusion. As Croatia looks to the future, it is focused on leveraging its human capital, digital transformation, and job creation to build a more innovative and equitable society for all.

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Croatia's economy has made significant strides over the last decade despite facing major challenges. Between 2003 and 2024, the country's GDP grew at an average annual rate of 2.2%, with GDP per capita rising from $8,190 to $23,967. However, growth has been uneven due to several shocks, including the 2008 global financial crisis, which led to a six-year recession, two earthquakes and the COVID-19 pandemic in 2020, which caused the steepest recession in Croatia's history due to its reliance on tourism. The recovery was swift, aided by fiscal and monetary support and EU funds.

Since joining the EU in 2013, Croatia has benefited from access to the single market, boosting exports and integrating with European partners. EU funds have supported domestic demand and investment, with expectations of continued benefits from the Multiannual Financial Framework and NextGenerationEU program, providing access to €20 billion.

Recent GDP growth has been strong, averaging 4.8% over the last three years, accelerating income convergence with the EU. However, growth is increasingly driven by consumption and public investment, with tourism showing signs of reaching capacity limits. Labor market conditions are tight, with strong wage growth amid stagnant productivity, potentially affecting competitiveness.

While Croatia's economic performance is robust, sustaining income convergence long-term is uncertain. The outlook remains positive in the medium term and growth is projected to average around 3%, supported by EU funds and tourism, but financing from the EU is expected to decline after 2029. Structural challenges, including demographic issues and low productivity, could hinder growth post-2030.

Expansionary fiscal policy has supported growth in recent years, but is gradually being reversed through consolidation  to create fiscal space for future investments, particularly in digital and clean technologies. Public debt remains vulnerable to shocks, necessitating fiscal buffers to build resilience, especially as EU funds decline.

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The World Bank Group has been a partner to Croatia for over 30 years. Since its first loan in 1994 for emergency reconstruction of war-damaged infrastructure, the World Bank has supported more than 50 projects, totaling almost $5 billion, and provided knowledge and technical assistance to help strengthen institutions and support policymaking through more than 330 reports and studies.

The World Bank has finalized the Croatia Systematic Country Diagnostic Update (SCD), a country engagement document, identifying key binding constraints and priority actions for Croatia to achieve inclusive, resilient, and sustainable growth. The SCD served as the analytical basis for the design and development of the next joint strategy between the World Bank Group and the Republic of Croatia—the Croatia Country Partnership Framework 2025-2030 (CPF)—which was launched on May 13, 2025.

The new CPF’s overall aim is to foster sustainable and inclusive economic growth in Croatia while addressing Croatia’s most acute development challenges. The CPF focuses on supporting the achievement of two main outcomes: increased investment and more productive jobs and increased environmental resilience. Strengthening of institutions for efficiency and better service delivery will be embedded across the whole program.

The World Bank currently provides knowledge, technical assistance, and financing in the areas of digital transformation and the green transition of the economy, justice service delivery, education, business environment, land administration, science and technology, post-earthquake reconstruction of key health and education facilities, social policy, long-term care, and public administration.

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The five-year Croatia Country Partnership Framework (CPF) focuses on job creation as a driver of sustainable, resilient, and inclusive economic growth. The strategy aims to support Croatia’s efforts to boost investment, foster innovation, and enhance environmental resilience while strengthening institutions for better service delivery to businesses and citizens.

The CPF will center on helping Croatia achieve two broad outcomes.

First, the CPF aims to help Croatia increase investment and create more productive jobs. This involves nurturing innovation, building skills for tomorrow’s economy, and creating an environment where the private sector can grow and people can thrive. To achieve this outcome, this CPF will aim to spur investment in more innovative and higher value-added sectors reliant on higher-skilled labor, through an improved business environment and services, proactive mobilization of foreign and domestic direct investment, deeper diffusion of existing technologies, and better alignment of skills and labor with market needs. Activities will focus on modernizing public service delivery, strengthening private sector innovation and scaling up innovative investment, and better aligning skills and labor market needs.

Second, the strategy embraces Croatia’s natural assets and focuses on protecting them for generations to come by strengthening Croatia’s environmental resilience and sustainability. The CPF will support the transition to a greener economy by helping to make the energy and transport sectors more sustainable, cost efficient, and accessible for both people and businesses. It will also enhance Croatia’s resilience to climate by strengthening disaster response capacities.

Aligned with national strategies, the CPF is informed by extensive diagnostics and consultations with stakeholders, including the government, private sector, civil society, think tanks, academia, media, and development partners.

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