Financial Crime World

Croatia’s Economy: Challenges and Recommendations

Challenges Facing Croatia’s Economy

Croatia’s economy is facing several challenges that hinder its growth and competitiveness. These include low productivity growth, a lag in digitalization compared to peers, and regulatory burdens that weigh on businesses.

Key Challenges

  • Low productivity growth: This hinders economic growth and makes it difficult for Croatia to achieve convergence with its peers.
  • Digitalization lagging behind peers: Croatia’s slow adoption of digital technologies limits its ability to compete in the global economy.
  • Regulatory burdens weighing on businesses: Unnecessary regulatory requirements and bureaucratic processes hinder business activity and investment.

OECD Recommendations

The OECD recommends several steps that Croatia can take to improve its business environment:

Improve Digitalization

  • Invest in cloud computing, online sales platforms, communications platforms, and workforce digital skills.
  • Accelerate firms’ adoption of digital technologies to enhance productivity and competitiveness.

Strengthen Framework Conditions for Business

  • Reduce regulatory burdens: Simplify or eliminate unnecessary regulations that hinder business activity.
  • Expand the role of Regulatory Impact Assessments (RIAs): Ensure that new regulations are thoroughly assessed before implementation.
  • Review and simplify administrative and regulatory processes: Streamline bureaucratic procedures to make them more efficient.

Croatia’s Recovery and Resilience Plan

The OECD suggests that Croatia’s Recovery and Resilience Plan will contribute to reducing regulatory burdens. The plan aims to:

  • Improve revenue administration
  • Simplify payment processes
  • Digitalise public services

However, the success of this plan is uncertain, and its on-the-ground implementation will be crucial in achieving its objectives.

Key Statistics

Some key statistics that highlight the challenges facing Croatia’s economy include:

  • 50% of businesses in Croatia lack confidence in effective investment protection due to unpredictable and non-transparent administrative conduct (European Commission, 2022).
  • It takes businesses on average 122 days to obtain a construction-related permit in Croatia, longer than in most OECD economies.
  • Regulatory quality is perceived to be lower, and burdens of government regulations are higher than in most OECD countries.

Conclusion

Croatia’s economy faces significant challenges that need to be addressed to achieve economic convergence with its peers. By implementing the OECD’s recommendations and addressing its regulatory environment, Croatia can enhance productivity growth, improve digitalization, and create a more business-friendly environment.