Country Forecast Croatia September 2017

Country Forecast Croatia September 2017

  • September 2017 •
  • Report ID: 1698247 •
  • Format: PDF

Policy towards private enterprise and competition


2017-18: Marginal progress in easing regulatory burden on businesses, which is comparatively high, via administrative relief action plan. New public procurement law takes effect. Divestment of large stock of state-owned assets likely to be modest.


2019-21: Possible restructuring of the state-owned railway cargo unit and the national airline to increase efficiency with a view to their eventual privatisation. State maintains a comparatively large portfolio of underperforming public enterprises.


Policy towards foreign investment


2017-18: Government focuses on simplifying procedures and enhancing legal protection for foreign investors.


2019-21: Increased availability of EU funds could spur investment in the energy and transport sectors, although concerns persist about absorption capacity. Modest reforms to target corruption and improve efficiency and consistency of legal system.


Foreign trade and exchange controls


2017-18: EU trade agreement with Canada comes into force provisionally.


2019-21: Government maintains long-term intention to join economic and monetary union (EMU). Elements of EU trade agreement with Japan gradually begin to be implemented. EU likely to strike further bilateral trade deals.


Taxes


2017-18: Tax reform and simplification, including an increase in the personal tax allowance and new personal income tax brackets. Headline corporate tax rate cut from 20% to 18%, with new reduced rate of 12% for small firms and farmers.


2019-21: Possible introduction of delayed property tax on second residences. "Fiscalisation" and fraud action plan aim to reduce tax evasion, but non-compliance still widespread.


Financing


2017-18: Households continue to deleverage at a slow pace. Bank profitability gradually recovers following hit by conversion process of Swiss franc-denominated household loans to euro loans. Credit availability constrained amid weak demand.


2019-21: Croatian National Bank (CNB, the central bank) maintains passive role, given its commitment to maintaining exchange-rate stability and entering the EMU as soon as requirements are met.


The labour market


2017-18: Low participation rates and high youth unemployment persist. Fall in unemployment rate driven by emigration.


2019-21: Limited efforts to address high levels of early retirement, labour market inactivity and youth emigration.


Infrastructure


2017-18: Public spending on EU projects picks up as EU funds absorption improves. Possible liberalisation of gas market.


2019-21: Modest improvements in rail and energy networks, albeit dependent on increased absorption of EU funds and progress in the government's privatisation agenda. Possible construction of liquefied natural gas terminal in the Adriatic.



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