Croatia - Global Development
HR
Croatia pivots toward nuclear power as EU cohesion fund absorption lags and climate investment needs reach 58% of GDP
Croatia has spent over a decade inside the EU, yet its economic convergence with Western Europe remains among the slowest of any newer member state. In 2025-26, that story sharpened: a new nationwide property tax, a genuine pivot toward nuclear power over renewables, and EU cohesion fund absorption running behind the bloc’s own average. This article covers aid, tax, climate, and trade, the same four threads RYB tracks across every country page.
EU Funds: Fast on Recovery, Slow on Cohesion
Croatia’s development financing runs almost entirely through the EU. Its National Recovery and Resilience Plan, worth over $10 billion, has moved relatively quickly by regional standards, aided by a dedicated implementation structure and sustained political backing. The broader 2021-2027 cohesion funds tell a different story: only 15.2% had been spent by October 2025, slightly below the EU average of 16%, with Croatia’s total EU funding package through 2030 reaching nearly $30 billion.
Croatia’s 2014-2020 absorption rate reached just 65% by the period’s end, among the lowest in the EU, a pattern the current period risks repeating unless investment execution accelerates significantly beyond its current back-loaded schedule. Separately, Croatia has made OECD accession a top foreign policy priority, hoping to complete the process in 2026, a genuine institutional milestone that would formally recognise Croatia’s convergence progress even as economic indicators lag.
Tax: A New Property Levy, and a Modest Consolidation Effort
Croatia introduced a nationwide property tax on January 1, 2025, replacing its narrower holiday-home levy, with municipal rates ranging from €0.60 to €8.00 per square metre, applied mainly to short-term rentals and vacant habitable homes while exempting primary residences. This is a genuinely significant structural reform for a country where property taxation has long remained politically underdeveloped as a local revenue source.
The OECD’s 2026 Economic Survey found Croatia faces a fiscal consolidation need of roughly 1.8% of GDP between 2025 and 2028, with recent tax reforms expected to contribute less than 0.1% annually, a modest dent given the scale of the challenge. The OECD explicitly called for broadening tax bases, better targeting support for vulnerable households, and improving state-owned enterprise governance. Croatia’s National Recovery Plan separately commits to selling 90 state-owned companies from its CERP privatisation list by the second half of 2026, a genuine test of whether the country can finally address the politically entrenched local utility monopolies RYB has long tracked as a governance weakness.
Climate: Choosing Nuclear Over Renewables, With a Massive Bill Ahead
Croatia’s energy policy took a decisive turn in 2025-26 toward nuclear power. The government established an inter-ministerial small modular reactor task force in February 2025, and Croatia’s parliament introduced draft nuclear energy legislation in March 2026, targeting at least 30% nuclear generation by 2040, up from roughly 16% today, drawn entirely through Croatia’s ownership stake in Slovenia’s Krško plant. Potential domestic reactor sites under consideration include Erdut, Ivanić Grad, and the Plomin power plant area.
This pivot has come at renewables’ expense. Croatia’s economy ministry is, in Clean Energy Wire’s assessment, “focused on gas and nuclear, rather than the development of renewables,” and the ruling coalition is simultaneously expanding LNG import infrastructure for US gas. Croatia’s own Social Climate Plan, a draft €1.68 billion package, and its Emissions Trading System allowance auctions, expected to generate €650 million through 2030, show real financing mechanisms in motion, even as the strategic direction shifts away from wind and solar.
The scale of what’s actually needed dwarfs current planning: the OECD estimates Croatia’s investment requirement to meet its 2030 climate mitigation and adaptation targets at 58% of 2023 GDP, financing that will have to come predominantly from private investment rather than the EU funds currently covering public investment. Despite Croatia’s clear vulnerability, nearly a quarter of its economy sits in climate-exposed sectors like tourism and agriculture, green transition issues were, by Clean Energy Wire’s own reporting, “almost entirely absent” from the country’s 2025 local election campaigns.
One genuine bright spot: Croatia recently brought online its first large-scale battery storage system, in Šibenik, EU-funded and the largest of its kind in Southeast Europe, a concrete example of the kind of infrastructure the country’s own climate targets will need much more of.
Trade: Tourism Dependency Meets Eroding Competitiveness
Tourism remains Croatia’s dominant economic sector, contributing roughly 20-25% of GDP directly, supported by continued Schengen and eurozone integration and expanding air connections. The OECD’s 2026 outlook flags a genuine risk to this model: trade restrictions and eroding price competitiveness in tourism are expected to weigh on exports through 2026-2027, even as foreign demand gradually recovers.
Croatia’s chronic goods trade deficit remains offset by tourism-driven services surpluses, leaving the broader economy structurally dependent on a single, seasonal, climate-exposed sector, precisely the vulnerability RYB’s climate section above identifies as inadequately addressed in current policy planning.
Political Tension at the Top
Croatia’s April 2024 legislative elections kept HDZ’s Andrej Plenković in power for a third term, in coalition with the far-right Homeland Movement. President Zoran Milanović, holding populist, EU- and NATO-critical positions from the opposing Social Democratic Party, won re-election in January 2025 with 75% of the vote, an emphatic result that has entrenched a genuinely tense cohabitation between the country’s pro-European government and its more nationalist presidency. Local elections in May and June 2025 reaffirmed HDZ’s dominance at the municipal level.
Demographic and Governance Challenges Persist
Croatia’s population has fallen from 4.8 million in 1991 to roughly 4.15 million today, driven by both low birth rates and EU-accession-era emigration, with an estimated 300,000 people leaving between 2013 and 2021 alone. Corruption remains a persistent concern, with Croatia ranking 63rd globally on Transparency International’s Corruption Perceptions Index, among the lowest scores in the EU, and commercial court cases still averaging roughly 650 days to resolve.
What Croatia Still Contributes
Croatia’s rapid RRF implementation, aided by dedicated coordination structures, offers a genuinely useful model for smaller EU economies managing large, complex recovery programmes. Its pursuit of OECD membership reflects real institutional ambition, and the Šibenik battery storage project demonstrates Croatia can deliver genuinely significant clean energy infrastructure when EU financing and political will align.
How This Connects to the SDGs
Croatia’s lagging cohesion fund absorption threatens SDG 17, global partnerships, at the practical level of whether allocated EU financing translates into delivered projects. The nuclear-over-renewables pivot complicates SDG 7, affordable clean energy, and SDG 13, climate action, given the OECD’s own finding that Croatia’s climate investment need equals 58% of GDP, a gap current planning does not come close to closing.
The new property tax and CERP privatisation push connect to SDG 16, strong institutions, offering a genuine, if incremental, test of whether Croatia can convert stated reform commitments into implemented policy. Population decline and emigration undermine long-term progress on nearly every SDG simultaneously, by shrinking the tax base and workforce needed to fund the rest.
Looking Forward
Croatia’s OECD accession bid, targeted for completion in 2026, offers the clearest near-term marker of institutional progress to watch. Whether the government’s nuclear ambitions produce an actual construction timeline, or remain at the task-force and draft-legislation stage indefinitely, will show whether Croatia’s climate strategy amounts to a genuine pivot or a political placeholder.
The 90-company CERP privatisation commitment, due by the second half of 2026, is a concrete, measurable test of whether Croatia can finally address the state-owned enterprise governance weaknesses that have persisted since the post-independence transition. RYB will track Croatia’s EU funds absorption rate, its nuclear versus renewables trajectory, and whether tourism dependency narrows or deepens as a share of the economy. This page will be updated as new data and developments emerge.
How we build this page
This page is part of the RYB five-page country profile for Croatia, covering Global Development, SDGs, Culture Women’s Day, Gender Gap, and VAWG. Our country pages methodology explains the sources, reports, and research approach behind every page in this series.
Sources and References
- European Commission, Croatia — Reforms and Investments, Technical Support Instrument — reforms-investments.ec.europa.eu
- OECD, “Ensuring resilient growth and fiscal sustainability,” OECD Economic Surveys: Croatia 2026 — oecd.org
- Coface, “Croatia: Country File, Economic Risk Analysis” — coface.com
- US Department of State, 2025 Investment Climate Statements: Croatia — state.gov
- Clean Energy Wire, “CLEW Guide – Croatia caught between LNG ambitions and abundant untapped renewable energy potential” — cleanenergywire.org
- Clean Energy Wire, “Special Dispatch Europe | Preview 2026” — cleanenergywire.org
- Clean Energy Wire, “Dispatch from Croatia | June 2025” — cleanenergywire.org
- Balkan Green Energy News, “Croatia drafts EUR 1.68 billion Social Climate Plan” — balkangreenenergynews.com
- RYB, Official Development Assistance (ODA) — redyellowblue.org/finance/oda/
Croatia
Republic of Croatia
Hrvatska
Population
4,150,116 (2024 est.)
4,208,973 (2021)
4,292,095 (2017)
Capital: Zagreb
Internet country code: .hr
Government
Official website: mvep.gov.hr
Ministry of Economy: mingo.gov.hr
Ministry of Tourism: mint.gov.hr
Statistics Croatia: dzs.hr
Background
The lands that today comprise Croatia were part of the Austro-Hungarian Empire until the close of World War I. In 1918, the Croats, Serbs, and Slovenes formed a kingdom known after 1929 as Yugoslavia. Following World War II, Yugoslavia became a federal independent communist state under the strong hand of Marshal Tito. Although Croatia declared its independence from Yugoslavia in 1991, it took four years of sporadic, but often bitter, fighting before occupying Serb armies were mostly cleared from Croatian lands. Under UN supervision, the last Serb-held enclave in eastern Slavonia was returned to Croatia in 1998. The country joined NATO in April 2009 and the EU in July 2013.
That EU accession, thirteen years on, has delivered eurozone and Schengen membership and a steady, if slower than hoped, stream of structural funding, but not yet the economic convergence with Western Europe that accession was meant to accelerate, a gap now shaping Croatia’s approach to everything from property taxation to nuclear power.