IMF Staff Country Reports

The 2003 Article IV Consultation discusses that Croatia posted another year of strong economic growth in 2022, among the highest in the Eurozone. Economic growth is expected to moderate to 2.4 percent in 2023. Weak external demand, tightening financial conditions and still high global uncertainty are expected to dampen growth, partially offset by a decline in global commodity prices, resilient tourism, and a buoyant labor market. Growth is projected to gradually recover from 2024 toward its potential. The financial system is currently stable; continued vigilance is needed given ongoing challenges. The banking system has remained profitable, well capitalized, and extremely liquid. Although household and corporate vulnerabilities have moderated since the pandemic, a deeper economic slowdown amidst higher interest rates could pose new challenges. Advancing structural reforms is key to reap the full benefits of euro adoption and sustaining income convergence. An economy-wide carbon pricing accompanied by sectoral policies and targeted support to the vulnerable can help promote cost-effective emissions reductions and ensure adherence to the EU-wide targets.