Croatia

   

Policy Performance

#37

Economic Policies

#40
Struggling to find its economic footing, Croatia’s overall score for economic policies places it in the bottom ranks (rank 40) in international comparison. Its score on this measure has declined by 0.3 points since 2014.

After six years of recession, economic growth has returned, but macroeconomic imbalances remain a serious concern. External debt is extremely high. Substantial reforms are needed to create an attractive business environment.

Unemployment rates are falling from a very high level. Labor-market policy has become increasingly active, but wage dynamics do not match macroeconomic conditions. Deficit-reduction targets have been delayed, with current budgetary forecasts remaining overly optimistic.

The VAT rate is extremely high, with tax evasion common. Income taxes have been cut, increasing disposable income but undercutting local-government budgets. The business sector relies on the government to fund R&D. Though mostly foreign owned, the banking sector’s exposure to government debt is a concern.

Social Policies

#33
With significant inclusion concerns, Croatia scores relatively poorly overall (rank 33) in the area of social policies. Its score on this measure has improved by 0.3 points relative to 2014.

Education quality lags behind EU standards, with vocational education decoupled from market demands. Poverty and social exclusion are major problems. Some war-affected areas have not yet recovered.

The health care system is inclusive, but quality varies widely by region, and the system runs deficits. Co-payments are increasingly common. Maternity benefits are generous, but child-care coverage is limited. Labor-market discrimination against younger women and women with children is widespread.

Recent reforms have improved pension-system sustainability, but pensioner poverty rates are high. Reintegration of ethnic-Serbian returnees remains a problem. The influx of hundreds of thousands of refugees in 2015, most of whom planned to pass through Croatia, did not lead to racist incidents.

Environmental Policies

#20
With new programs in the early phases of implementation, Croatia receives middling overall scores (rank 20) with regard to environmental policies. Its score in this area has declined by 0.1 point relative to 2014.

The country’s environmental policy has been strongly shaped by EU accession. Waste management, water management and air quality are the most important issues, though program implementation has been slow. Efforts to limit development in order to protect the environment have been significantly strengthened.

The country supports the Kyoto Protocol and other U.N. environmental programs, and works closely with the European Union on related issues, but does not actively shape global regimes.

Democracy

#33

Quality of Democracy

#33
While electoral procedures are largely fair, Croatia receives comparatively low scores (rank 33) with regard to quality of democracy. Its overall score in this area has improved by 0.3 points relative to 2014.

New media-access laws remove private broadcasters’ obligation to cover campaigns, and allow public broadcasters to cover candidates more selectively. Recent campaign-finance laws have increased transparency, although monitoring remains weak. Referenda have become more popular. Media reporting is influenced by political pressure and by organizations’ private-sector owners.

A new information commissioner has improved information access, but the post is underfunded. Civil rights are formally protected, but Roma and ethnic-Serbian citizens face discrimination. Domestic war-crimes prosecutions remain biased.

A judicial reform reduced the number of courts, but structural problems persist, and caseloads are too high. Anti-corruption efforts lost ground with the annulment of verdicts against major political figures, and the return to politics of indicted actors.

Governance

#37

Executive Capacity

#38
Despite increasing orientation toward EU norms, Croatia falls into the bottom ranks internationally (rank 38) with respect to executive capacity. After a marginal decline last year, its score in this area has returned to its 2014 level.

Strategic-planning capacities have increased substantially since EU accession. A new unit in the Prime Minister’s Office carries out policy coordination and monitoring, but has limited analytical capacities. Line ministries possess considerable autonomy in drafting proposals, while cabinet committees help address interministerial conflicts.

EU accession has spurred RIA development, though assessment obligations are often disregarded. Consultation with outside stakeholders has been limited. Institutional arrangements are not regularly monitored.

The reduction of the income tax has deeply undercut local-government budgets, and many municipalities have severe difficulties in providing public services. The Milanović government largely failed to set clear goals, and did not carry out several major promised reforms.

Executive Accountability

#35
With several notable weaknesses, Croatia scores relatively poorly (rank 35) with regard to executive accountability. After a marginal decline last year, its score on this measure has recovered to its 2014 level.

Citizens’ policy knowledge is on average comparatively limited. While most media are focused on entertainment, a few newspapers do provide good coverage of political and economic affairs.

Parliamentarians have limited resources. Formal oversight powers are sufficient, though in some cases infrequently used. The Audit Office is independent and effective, but the government tends to react slowly to Ombudsman requests.

Political parties are dominated by their leadership ranks. Economic-interest organizations are influential, but most have lacked the will or capacity to develop their own proposals. A number of other interest organizations have sophisticated policy-development capabilities.
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