Croatia's strong and resilient growth has driven its convergence towards OECD average incomes and living standards. Continued economic progress can be achieved by ensuring long-term fiscal sustainability, preparing for population ageing through pension, labour and health care sector reforms, and addressing housing challenges, according to a new OECD report.
The latest OECD Economic Survey of Croatia projects robust GDP growth at 2.7 % this year and 2.4% in 2027, after 3.2% in 2025, as domestic demand moderates. Headline inflation is projected to ease to 3.3% on average in 2026 and 2.5% in 2027.
"Prudent fiscal policy will help slow inflation and rebuild fiscal buffers. This can be achieved by measures like the phasing out of untargeted cost-of-living support and more generally by improving public spending efficiency," OECD Secretary-General Mathias Cormann said, presenting the Survey in Zagreb alongside Croatia's Prime Minister Andrej Plenković. "Addressing the economic and fiscal impacts of population ageing requires reform to extend working lives, by reducing incentives to retire early, increasing the retirement age and by focusing on measures to improve public health outcomes for the ageing population."
Tighter fiscal policy is needed to help reduce inflation, rebuild fiscal buffers and prepare for medium- to long-term spending pressure. Reforms to broaden tax bases, better target social benefits, and enhance public sector efficiency, including by building capacity to regularly conduct comprehensive spending reviews, can help ensure fiscal sustainability. The divestment of state-owned firms should continue while ongoing improvements in governance can improve their performance and service quality.
Croatia's population is shrinking and ageing rapidly with adverse impacts on potential growth and public expenditure. Tightening early retirement options and raising the retirement age would prolong working lives and improve pension adequacy in a sustainable way. Improving health outcomes, by strengthening prevention and providing high-quality primary and hospital care, is also important for extending working lives.
Raising labour market participation is necessary to offset a decreasing workforce. Strengthening work-based learning would help vocational education graduates match skills to job market needs. For persons with disabilities, early intervention and wider access to professional rehabilitation would improve employability. Access to affordable, high-quality early childhood education and care would support employment of women with young children.
A high number of vacancies and short-term holiday rentals limit housing supply for residential purposes and reduce affordability. Further tax reforms, such as shifting from an area-based to a value-based recurrent property tax, would reduce distortions and improve fairness. Developing the private rental market through more balanced tenant-landlord regulations could stimulate residential and labour mobility. Improving land use policy and administrative procedures can also help align housing supply with demand.
Comprehensive policy packages are needed to transition to a net-zero emissions economy. Renewable solar and wind energy deployment can be boosted by accelerating permitting procedures and continuing investments in grid capacity. To spur housing renovation, a combination of measures, such as phasing out fossil fuel subsides in the residential sector and targeting financial assistance to households most in need, would play a central role.
