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International Monetary Fund. Fiscal Affairs Dept.

Countries have committed, through the Paris Agreement and the Sustainable Development Goals (SDGs), to pursue climate targets and policies that would limit global temperature rise to well below 2 degrees Celsius, compared to pre-industrial levels. A shift toward green public investment will help to mitigate greenhouse gas (GHG) emissions. In addition, substantial public investment will be necessary to build public infrastructure that makes economies more resilient to climate change and related natural disasters. Climate change mitigation and adaptation challenges thus compound preexisting needs for public investment to foster the economic recovery from the pandemic and to meet the SDGs in a broader range of areas, often in a context of limited fiscal space. Against this backdrop, a priority for all countries is to manage their public investment efficiently and effectively. To help countries improve the institutions and processes for infrastructure governance (the planning, allocation, and implementation of public investment), the IMF developed in 2015 the Public Investment Management Assessment (PIMA), which has already been applied in over 70 countries. However, the current PIMA does not provide a sufficiently tailored assessment of how public investment management can support climate change mitigation and adaptation. To fill this gap, this paper introduces a new module to the to the current Public Investment Management Assessment (PIMA) framework, the “Climate-PIMA” (C-PIMA), whose goal is to help governments identify potential improvements in public investment institutions and processes to build low-carbon and climate-resilient infrastructure.

International Monetary Fund. European Dept.
This 2017 Article IV Consultation highlights that Croatia continued its third year of positive economic growth in 2017. Growth is expected to stay at similar levels in the near future but to decelerate over the medium term. Consumer prices increased at a moderate pace and wage growth was also moderate as unemployment remained high. The external current account is expected to record another strong surplus, underpinned by robust performance of exports and tourism and lower repatriation of profits as banks absorbed losses from Agrokor. The balance of risks has improved but vulnerabilities remain sizable as public and external debt levels are still high, and the full impact of the Agrokor restructuring is yet unknown.
International Monetary Fund. European Dept.

2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Croatia

International Monetary Fund. European Dept.
This paper discusses the economic developments, outlook, risk, and policies of Croatia. This East European country has begun since the last quarter of 2014 to gradually recover from a six-year recession. In 2015 real GDP grew by 1.6 percent, driven by strong exports and tourism, a revival of private consumption, and higher public investment. Consumer prices have largely been declining over the past two years, mainly due to lower energy and food prices. Unemployment declined only slightly since 2014 and remains very high. However, absent concrete measures to underpin some of the planned reforms, slightly higher deficit in 2016 and a slower pace of consolidation over the medium term are projected.
International Monetary Fund. European Dept.

This paper discusses the economic developments, outlook, risk, and policies of Croatia. This East European country has begun since the last quarter of 2014 to gradually recover from a six-year recession. In 2015 real GDP grew by 1.6 percent, driven by strong exports and tourism, a revival of private consumption, and higher public investment. Consumer prices have largely been declining over the past two years, mainly due to lower energy and food prices. Unemployment declined only slightly since 2014 and remains very high. However, absent concrete measures to underpin some of the planned reforms, slightly higher deficit in 2016 and a slower pace of consolidation over the medium term are projected.

International Monetary Fund. European Dept.

KEY ISSUES Removing structural obstacles to growth. After six years of persistent contraction, Croatia’s economy is showing signs of a tentative recovery, supported by a favorable environment—the last economy in emerging Europe to exit the post-Lehman recession of 2008/09. Deep-seated structural factors have impeded the economy’s capacity to adjust, many of them relating to incomplete transition of Croatia’s corporate sector toward market orientation. While the authorities have made progress with some structural reforms in previous years, others remain incomplete—notably reform of the bloated, inefficient state- owned enterprise sector and of Croatia’s opaque governance system, characterized by much overlap between different layers of government. Unless addressed, these factors are bound to weigh on activity going forward. Restoring Fiscal Sustainability. Large fiscal vulnerabilities have built up in the wake of the recession. In the face of high fiscal deficits and public debt, policy has started to move in the right direction under the auspices of the European Commission’s Excessive Deficit Procedure. However, it requires more of a long-term orientation: a comprehensive consolidation plan should aim not only at reducing the deficit, but also at restructuring the budget to render it more growth and employment friendly. Safeguarding Monetary and Financial Stability. The kuna-euro exchange rate anchor remains without viable alternative for the time being, given the high degree of loan euroization. The banking system has remained resilient despite the drawn-out recession. Continued supervisory vigilance is needed to preserve this record. Previous Staff Advice. No major additional progress has been made on structural reforms since the 2014 Article IV consultation. Fiscal consolidation has advanced gradually, although efforts to reduce the headline deficit have been frustrated by revenue underperformance in a deflationary environment.

International Monetary Fund. European Dept.

This 2014 Article IV Consultation highlights that Croatia remains stuck in an unusually drawn out recession. In 2013, real GDP contracted for the 5th consecutive year, and stands now at less than 90 percent of the end-2008 level. Unemployment has risen to 17 percent. Domestic demand remains depressed as corporations and households focus on reducing excessive debts accumulated in the 2000s. Exports and foreign direct investment are also feeble. The outlook is for an additional contraction in 2014 of almost 1 percent. Real domestic demand would remain feeble, reflecting both weak private sector demand and fiscal consolidation.