While GDP per capita is steadily converging to OECD levels, gaps remain. The employment rate remains below the OECD average, particularly among youth and older adults. Labour productivity growth is subdued, reflecting a slow catch-up in total factor productivity.

Accelerating economic convergence requires reforms to enhance skills, boost innovation capacity, and improve the business environment. Promoting healthier and longer working lives is crucial for raising employment. Strengthening carbon pricing and expanding renewables deployment will enhance energy security and support sustainable growth.

Croatia has been converging towards OECD average living standards. After a rapid post-pandemic recovery, economic growth is set to moderate in 2026 and 2027 amid high uncertainty and supply constraints. Fiscal policy should support the disinflationary process, continue to build buffers and prepare for medium- to long-term spending pressures, including by improving spending efficiency and broadening tax bases. Ensuring housing efficiency and affordability requires improved allocation of the housing stock, through further property tax reforms, expanding the long-term rental market and enhancing land use policy and construction processes to align housing supply and demand. To put the economy on a path to net-zero emissions requires a comprehensive policy package that phases out fossil fuel support, boosts renewables, improves energy efficiency of buildings, and reduces car dependency. To prepare for a rapidly shrinking and ageing population, pension, health and long-term care, as well as labour market reforms are needed to extend working lives, bring more people into the labour force, and improve health outcomes.

SPECIAL FEATURES: TACKLING DEMOGRAPHIC HEADWINDS; ADDRESSING HOUSING CHALLENGES; TOWARDS A CLIMATE RESILIENT NET ZERO ECONOMY

Key resources

• Press Release l English  l Croatian