On 16 January 2018 the International Monetary Fund (IMF) published a report following the conclusion of consultations with Croatia under article IV of the IMF’s articles of agreement.
Croatia experienced its third year of positive economic growth in 2017 with the help of strong tourism and private consumption combined with positive effects from the economic growth of its trading partners and improved confidence. Economic growth is projected to remain at similar levels in the short term but to slow down in the medium term.
The favourable position in the economy cycle offers a chance for growth-friendly fiscal consolidation and reduction of the public debt. The IMF report urges Croatia to improve the structure of revenue and expenditure. This would include a streamlining of value added tax (VAT) rates and the introduction of a modern tax on real estate. The report also emphasised the need for reforms to raise the efficiency of public services and reforms of the pension and healthcare systems. Remaining gaps in corporate governance should be closed, following on from the recent improvements to the bankruptcy legislation.
The IMF report recommends structural reforms to remove obstacles to sustained growth. The business environment should be improved by streamlining public administration and improving the legal process and property rights. The report also urged the government to ease regulations on temporary employment and hiring labour.
