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Books and Analytical Papers > IMF Staff Country Reports

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  • Type: Journal Issue x
  • Croatia, Republic of x
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Cover IMF Staff Country Reports
Euro Area Policies: 2024 Annual Consultation-Press Release; Staff Report; and Statement by the Executive Director for Member Countries
International Monetary Fund. European Dept.
The 2024 Article IV Consultation explains that the euro area is recovering gradually, with a modest acceleration of growth projected for 2024, gathering further speed in 2025. Increasing real wages together with some drawdown of household savings are contributing to consumption, while the projected easing of financing conditions is supporting a recovery in investment. A modest pickup in growth is projected for 2024, strengthening further in 2025. This primarily reflects expected stronger consumption on the back of rising real wages and higher investment supported by easing financing conditions. Inflation is projected to return to target in the second half of 2025. The economy is confronting important new challenges, layered on existing ones. Beyond returning inflation to target and ensuring credible fiscal consolidation in high-debt countries, the euro area must urgently focus on enhancing innovation and productivity. Higher growth is essential for creating policy space to tackle the fiscal challenges of aging, the green transition, energy security, and defense.
Keywords:
EU institution; EU industrial; headline inflation; EU climate; two-sided inflation risk; Inflation; Labor markets; Fiscal consolidation; Europe; Global
Cover IMF Staff Country Reports
Republic of Croatia: 2024 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. European Dept.
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
Cover IMF Staff Country Reports
Republic of Croatia: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper explains corporate sector balance sheet vulnerabilities in Croatia. It serves as a background analysis to the systemic risk assessment presented in the staff report and follows established approaches to stress-test the corporate sector. Croatian firms have significantly improved their balance sheets since the prolonged recession after the Global Financial Crisis, helped by deleveraging and narrowing country risk premium as Croatia advanced its euro adoption agenda. The calibration of shocks follows the macro-financial scenarios of the 2023 EU-wide banking sector stress tests by the European Banking Authority. Micro-level simulations confirm the resilience of the corporate sector against adverse shocks to profitability and financing costs. The well-capitalized banking sector overall is also found to have buffers to absorb negative spillovers from the corporate sector. The simulated results suggest that shocks to nonfinancial corporations (NFC) could significantly raise banks’ nonperforming loans. The declining borrowing costs and improving financial strength of NFCs in Croatia point to the need to examine both financing and nonfinancing related obstacles.
Keywords:
B. housing affordability assessment; housing cost indicator; policy option; taxation of housing; NFC balance sheet strength; Housing; Labor shortages; Corporate sector; Housing prices; Labor markets; Global; Eastern Europe; Europe
Cover IMF Staff Country Reports
Euro Area Policies: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper highlights quantitative tightening (QT) by the European Central Bank (ECB). It uses evidence from the literature on the impact of central bank bond purchases and sales on bond yields, and the monetary policy stance, to outline a roadmap for reducing the Euro system’s bond holdings. The current tightening cycle provides an opportunity to revisit the ECB’s balance sheet policy. With inflation running above target, the monetary accommodation provided by the ECB’s bond holding is no longer necessary. The current tightening cycle provides an opportunity to revisit the ECB’s balance sheet policy. With inflation running above target, the monetary accommodation provided by the ECB’s bond holding is no longer necessary. The paper concludes that the ECB’s short term policy rates should be the main choice for adapting the monetary policy stance to changing circumstances and QT should proceed in a gradual, predictable manner as outlined by the ECB.
Keywords:
ECB Policy rate; ECB balance sheet; app portfolio; C. Policy consideration; bond supply net of ECB; Financial statements; Unconventional monetary policies; Central bank policy rate; Monetary stance; Securities