Croatian Public Investments at a Record Level: Can Growth Be Sustainable?

In the latest issue of the Institute of Public Finance’s Review, Matea Cvjetković analyzes the European Commission’s report ‘The Planning of Public Investments in EU Member States: Long-Term Strategy, Selection and Budgeting Issues’ which explores the management of public investments in EU member states. The report is based on data collected through a survey conducted in 2022, including Croatia, as well as practical examples, interviews, and expert exchanges of experiences.

Public investments in the EU have been largely stable in recent years, with an average share of 3 – 3.5 percent of GDP. Croatia has distinguished itself in this context by increasing its share from 3.8 percent of GDP in 2010 to 5.7 percent in 2024, primarily thanks to European funds. However, as the report warns,’with increasing needs for public investments, the importance of their strategic planning is also growing.’

Challenges of Implementation

In 2021, Croatia adopted the ‘National Development Strategy until 2030’ in the Parliament, with four development directions and 13 strategic goals. According to reports on the implementation of the strategy for 2021 and 2022, public investments were key to economic recovery after the pandemic, with a positive impact on industrial production, tourism, construction, and trade.

– Through strategic planning, along with monitoring implementation and performance, public investments can enable strong economic development and contribute to the creation of long-term social value, both at the local and regional, and at the national level – concludes Cvjetković.

Dependence on EU Funds and What After 2027

Under the current ‘Multiannual Financial Framework 2021 – 2027’, Croatia has access to more than 25 billion euros from the EU budget. This has also reflected on public investments, which exceeded 4 percent of GDP in 2021 and 2022, while in 2023 and 2024 they reached above 5.5 percent, and forecasts suggest further growth to nearly 5.9 percent of GDP in 2025.

However, after 2027, there could be a reduction in the availability of European funds, raising questions about the financial sustainability of Croatian public investments. For long-term stability, it will be crucial to increase domestic investments, accelerate climate and digital transitions, and strengthen administrative capacities at the local level. Experiences gained from the previous use of European funds can serve as a foundation for creating a more independent system for managing public investments in Croatia.