Population: 4.4 million Population per sq. km: 78.5 Population growth: -0.9% Life expectancy: 73 years Population below national poverty line:10%(estimate) GDP per capita(current US$): 4,566 GDP(current US$): 20,261 million GDP Growth: 4.1% Sources: National Statistical Offices, IMF, IFS, WDI 2002 and Staff estimates.
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However, structural reforms indispensable for sustainable growth are yet to be tackled. Unemployment remains high at 16.3 percent largely due to an uncompetitive private sector, lack of investments, and rigidities in the labor market. While imports of capital goods and increased lending to enterprises indicate growth of private sector investments, insufficient competitiveness still limits sustainable growth in Small and Medium Enterprises (SMEs).
In order to enhance opportunities for growth and development, Croatia faces key challenges in reform of the education sector and the judiciary, reduction in public expenditures, public administration reform, removal of barriers to investment, and introduction of a flexible labor market. Focus of World Bank Assistance The World Bank has played an important role in providing financial support, technical assistance, policy advice and analytical services to Croatia since the country joined the Bank in 1993. It has supported 19 projects totaling some US$1 billion and a number of grants surpassing US$20 million. Initially, lending was mainly focused on investment in infrastructure as the country had to address the substantial needs of post-war reconstruction. Since then, the Bank’s assistance has expanded further to include health, agriculture and forestry sectors, enterprise and financial sector reform, capital market development, as well as judicial and pension system reform. The Bank continues to support the Government of Croatia in addressing its specific development objectives. Key areas of support include: Strengthening the social safety net through improved targeting and monitoring of social welfare programs, empowering civil society in the provision of social services, decentralization of some social services, improving the targeting of social assistance, and better design of employment policy measures. Improving health care services, while reducing costs by introducing daily surgeries and group practice in primary health care, categorization and rehabilitation of hospitals, introducing positive incentives for reducing over-consumption of drugs, and making emergency health care more accessible and prompt. Creating a sustainable pension system through adjusting the parameters of the existing pay-as-you-go system, the gradual introduction of the second fully-funded mandatory individual-account based pension pillar, and inducing development of the voluntary fully-funded third pension pillar. Supporting the implementation of the Stabilization and Association Agreement through: strengthening market institutions, eliminating non-payment by public enterprises and the government, supporting SME development, eliminating barriers to investment, strengthening the capacity of commercial courts, facilitating the development of a real estate market, and analytical work to help identify key areas of adjustment cost. Facilitating sturdy job creation through increasing flexibility of the labor market, reducing costs for new employment and dismissals, allowing private provision of employment intermediation, and adopting a framework for micro-financing. Providing support for post-conflict reconstruction by increasing social inclusion and opportunities for sustainable economic development. Providing support for sustainable development through better environmental protection and management, energy saving and use of renewable resources, and improved transport infrastructure, especially as Croatia is a transit country. For further details please see the World Bank's Country Assistance Strategy for Croatia for 2000-2002, and the Country Assistance Strategy Progress Report of 2001. Impact on the Ground The Bank’s activities in the country, along with other partners’ assistance, have resulted in considerable impact on the ground: Infrastructure damaged by the war has been repaired, reconstructed and rehabilitated. Some 130 km of roads, 30 road bridges, 45 km of railway tracks, 100 km of dykes have been rebuilt, the port of Ploce reconstructed, high priority areas, mainly roads, railways and canals, have been cleared of landmines and numerous water supply and sewerage systems, pumping stations, and power transformers have been repaired. In addition, building material has been supplied for houses, schools and health facilities in war-torn areas, as well as materials and spare parts for railway tracks, locomotives and rolling stock, power distribution networks, flood control systems, waste water treatment plants, trucks, tractors and cultivators. Some 12,000 km of the road network, neglected during and after the war, has been rehabilitated, and local capacity for proper maintenance has been established. With Bank's assistance, some 25 percent of all mines have been cleared throughout the country during the 1997-2001 post-war period. Investments in health care are benefiting the people. Diagnostic equipment for primary health care, equipment for emergency medical services and intensive care units, as well as equipment for perinatal care has been delivered. Public health promotion campaigns and practical training of health professionals have been conducted. As a result, neonatal, perinatal, and maternal mortality rates have been significantly reduced (maternal mortality decreased from 11.96 percent to 6.37 percent). Critical reforms needed to advance from stabilization to growth have been successfully introduced. The banking sector has been restructured and some 85 percent of the banks have been rehabilitated and privatized. Some 80 percent of former socially-owned enterprises have been privatized and the process will be completed within a year. Big public enterprises have been restructured and a framework for regulation of utilities has been introduced. Many important legislative changes have been initiated, among other interventions, to create an environment conducive to development and growth. Environmental protection and management have improved. A National Environmental Action Plan identifying priority areas and measures, such as an environmental protection strategy, has been adopted and are being implemented. Programs have been implemented to control pollution in the Adriatic Sea, which is a major resource for tourism--the most important sector for generating income and employment. For details of World Bank projects in Croatia, please click here. Challenges Ahead ž Alleviating unemployment and reducing poverty. Unemployment remains high at 16.3 percent and some 10 percent of the population lives below the poverty line. ž Reducing the fiscal deficit. Macroeconomic stability is threatened by high fiscal deficits and stagnant exports. ž Increasing competitiveness. To promote sustainable growth, Croatia has to strengthen its exports and improve competitiveness. A rigid labor market and an outdated education system remain as key constraints. ž Increasing public sector efficiency. Croatia needs a smaller but more efficient public sector that facilitates the functioning of a competitive market. Improved public administration, fiscal decentralization, and reform of the judiciary are key priorities. ž Ensuring the coherence of reforms and their efficient implementation. The country needs to develop an efficient mechanism for designing and implementing reforms that combines the restructuring of enterprises with the creation of market institutions and regulatory frameworks. World Bank Partners in Croatia
At present, the Bank has twelve active projects including the recently approved US$27.3 million Pension System Investment Project. Eight projects have been completed and five projects are in the pipeline. Total IBRD / IDA Commitments from FY91 to FY02: US$ 984 million (by fiscal year,in nearest US$ millions)