Republic of Croatia: 2024 Article IV Consultation-Press Release; and Staff Report

International Monetary Fund

No 2024/246, IMF Staff Country Reports from International Monetary Fund

Abstract: The 2024 Article IV Consultation with the Republic of Croatia highlights that the economy has performed strongly despite consecutive external shocks. The impressive post-pandemic growth during 2021–2022 moderated to 3.1 percent in 2023, still among the highest in the euro area. Inflation has decelerated considerably since early 2023 but still persists above the euro area average, owing to elevated food and services inflation amid a tight labor market. The authorities should immediately withdraw broad-based cost-of-living measures and implement their plan to meaningfully reduce the deficit from 2025 and return to a structural primary balance by 2027. Prudence and decisive reforms are warranted to build buffers for future shocks and long-term spending needs. The financial sector has weathered well the recent monetary tightening, and systemic risks appear manageable. Close monitoring of potential build-up of risks in the real estate sector is warranted. The multidimensional nature of labor shortages requires coordinated policies to foster labor participation, reduce skills mismatch, facilitate labor mobility, and reduce net emigration.

Keywords: FX reserve management monetary policy instrument; authorities project; inflation expectation; green transition; EU integration process; Fiscal stance; Inflation; Loans; Labor markets; Global; Europe (search for similar items in EconPapers)
Pages: 74
Date: 2024-07-29
New Economics Papers: this item is included in nep-inv
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