Croatia

Despite notable recent gains, Croatia scores relatively poorly (rank 35) in international comparison in the area of economic policy. Its score on this measure has improved by 1.0 point since 2014.

After falling into recession, the country’s economy recovered from the COVID-19 induced slowdown well. The government took on considerable new debt to finance furlough schemes and new healthcare spending. This was aided by growing monetary and banking integration with the EU in preparation for adoption of the euro, which positively affected bond yields.

Unemployment has stabilized at a level slightly below the eurozone average. Labor scarcity is a problem, compounded by low employment rates. Average salaries have risen robustly in recent years. Income and corporate taxes fell in 2021, but tax revenues are high for the region. After soaring deficits in 2020, fiscal consolidation is back on the agenda.

A key issue will be how to productively spend massive EU transfers in coming years that will amount to 16% to 18% of budget revenues. Reform of state-owned enterprises remains a pressing concern. The high share of imported energy renders the country vulnerable, but could trigger a green transition.

With significant inclusion concerns, Croatia scores relatively poorly (rank 34) in the area of social policies. Its score on this measure has improved by 0.3 points relative to 2014.

The country’s healthcare system runs persistent financial deficits, creating a serious risk to future fiscal sustainability. It is broadly inclusive, but procedure waiting times are often long. Vaccination rates are low, and COVID-19 mortality figures have been quite high.

The pandemic-era online classes led to serious deterioration in pupils’ performance. A reform intended to restructure all levels of the education system was planned for 2022. Welfare benefits are low in cross-EU comparison, but a new anti-poverty plan is being developed.

A widespread lack of childcare facilities makes it difficult for young families to combine work and parenting. The gender pay gap is smaller than the EU’s average. The pension system is neither sustainable nor intergenerationally fair. There is neither a strategy to attract needed immigrants nor a policy to integrate migrants. Crime levels are low, but levels of family and sexual violence have risen.

With a number of new programs in the early phases of implementation, Croatia falls into the upper-middle ranks (rank 17) with regard to environmental policies. Its score in this area has improved by 0.2 points relative to 2014.

The country is starting from a relatively high point in terms of emissions reduction, with 28.5% of energy consumption coming from renewable sources. It plans to phase out coal use by 2033, and reduce methane emissions by 30% below 2020 levels by 2030. It derives 10% of its electricity from nuclear power, and plans to expand this.

Some improvements have been evident in the areas of water and waste management, but an ineffective bureaucracy and poor policy have undermined overall performance. While pollution has declined, air pollution remains occasionally problematic in cities.

The country has pledged to end deforestation by 2030. While most policies point in the direction of environmental gains, some inconsistencies remain, such as the financial incentives provided to farmers for intensive cattle farming.

While electoral procedures are largely fair, Croatia receives comparatively low scores (rank 34) with regard to the quality of democracy. Its overall score in this area is unchanged relative to 2014.

Recent campaign-finance laws have increased transparency, but have failed to close a number of loopholes. Political influence over the media is strong, with reporters who criticize the government subject to dismissal, and defamation suits are often used to intimidate or harass journalists. Media pluralism is quite limited.

Civil rights are formally protected, but not always respected in practice. Domestic violence is a serious problem. Protections for gay people and minority nationalities have improved. A recent court ruling approved adoption by a gay couple for the first time. Discrimination against Roma people remains a problem.

Regulations are sometimes inconsistent and subject to revision. Frequent changes in criminal laws have diminished legal certainty. Corruption is an ongoing concern. High-profile politicians and public figures have been indicted, but many prominent individuals have been acquitted after interference by powerful interests.

Lacking a smoothly functioning administration, Croatia falls into the bottom ranks internationally (rank 38) with respect to executive capacity. Its score in this area has declined by 0.3 points relative to its 2014 level.

Strategic decisions are often made on a pro forma basis, and lack follow-through. A recently passed long-term strategic plan lacks deadlines and benchmarks. A Prime Minister’s Office unit tasked with monitoring and analyzing policies has little independent sectoral expertise. Consultation between the line ministries and the PMO is thus rather formal, focusing on technical issues.

A relatively new RIA law and RIA strategy have improved the assessment framework, though only a small share of bills undergo the full RIA procedure, and the public has little interest in the process. Ex post evaluations are rare. Public sector trade unions have put increasing pressure on the government for salary increases, with little agreement in sight.

The public information campaign around COVID-19 vaccination was deemed a failure. Bureaucratic delays in the post-earthquake reconstruction of Zagreb and the Banija area have been catastrophic. A moderate decentralization campaign is underway, but a long-awaited territorial reform aimed at reducing municipal fragmentation has been shelved.

Despite some recent improvement, Croatia falls into the bottom ranks (rank 34) with regard to executive accountability. Its score on this measure has risen by 0.5 points relative to its 2014 level.

Citizens’ policy knowledge is on average comparatively limited, and voter turnout rates have been declining. While most media are focused on entertainment, a few newspapers do provide good coverage of political and economic affairs. The two leading commercial TV broadcasters enjoy significantly higher levels of trust than the public broadcaster.

Parliamentarians have limited resources. Oversight powers are formally sufficient, but are sometimes disregarded by ministers. The Audit Office is independent, with a wide-ranging scope of activity, but its recommendations are often ignored. The data-protection authority has been overwhelmed by GDPR-related administrative tasks, leaving little capacity for enforcement.

Political parties are dominated by their leadership ranks. While the Employers’ Association has increased the quality of its policy assessments, these have not yet played an influential role in government policymaking. A number of other interest organizations have sophisticated policy development capabilities.