IMF Staff Country Reports

Croatia has continued to grow rapidly, still among the highest in
the euro area, but imbalances are emerging. Procyclical fiscal policy driven by rising
spending has exacerbated demand pressures, contributing to higher inflation and current
account deficit. Credit growth has been rapid and housing prices have risen strongly.
Against a weak external environment and elevated global uncertainty, staff projects
growth to moderate to a still solid pace of around 3 percent in 2025–26, with inflation
moving toward the ECB’s target in late 2026 or early 2027. The current account deficit is
expected to widen in the short run before improving over the medium term while the
fiscal deficit is projected to average marginally below 3 percent of GDP during 2025–30.
Risks to growth are broadly balanced while risks to inflation are tilted to the upside.