Croatian National Bank
Zagreb, Croatia

On March 7th , 2018, the European Investment Bank (EIB) and the Croatian National Bank (HNB) co-organized the conference "Investments – Moving productivity frontier" at the premises of the HNB in Zagreb. The Deputy Prime Minister and Minister of Economy, Entrepreneurship and Crafts, Republic of Croatia, Martina Dalić, the Governor of the Croatian National Bank, Boris Vujčić, and EIB Vice President Dario Scannapieco opened the conference, whilst providing an overview of Croatia’s macroeconomic situation, the most recent financial sector developments, the government’s main focus areas and the EIB’s engagement in the country respectively.

Dario Scannapieco, Vice-President of the EIB, emphasised that the business environment is crucial to enhance firms’ competitiveness. He noted that Croatia should take advantage of the years of growth following the EU accession to create conditions for long-term competitiveness and sustainable development. In order to move up the value chain, the Croatian economy would benefit from further investment in skills and education, improving the overall business environment, financing the support of innovative SMEs, as well as boosting ICT infrastructure.

Vice-President Scannapieco concluded: “The EIBIS survey, which takes place across Europe including Croatia, provides the EU Bank with a powerful policy tool for understanding firms' investment plans and needs and outlines how the EIB can bring real value added for companies in Europe. The EIB stands ready to address these needs.”

Well and efficiently allocated investments could spur productivity, enhance competitiveness, create new jobs and discourage emigration, noted the Croatian National Bank Governor Boris Vujčić.

Martina Dalić, Deputy Prime Minister and Minister of Economy, Entrepreneurship and Crafts of the Republic of Croatia, pointed out three priorities of the Government associated with stronger investment growth – faster and better absorption of EU funds, measures to boost the investment environment and reforms to improve the functioning of public institutions.

Elaborating on the EIB's survey results, Debora Revoltella, Director of the European Investment Bank,  underlined that investments have been recovering steadily, but remained well below pre-crisis levels, while the lack of adequately skilled staff, uncertainty and rigid business and labour regulations hamper further investment growth.  Moreover, although access to finance is not anymore the major obstacle to investment, about thirteen percent of firms face finance constraints, which is above EU average, and reliance on internal financing sources remains high. Access to finance is a more stringent issue in Croatia compared to other EU countries and small and innovative firms face even greater difficulties to successfully tap into external financing as they lack the requested collaterals or they find the borrowing costs too expansive. 

Vedran Šošić, Vicegovernor of the Croatian National Bank, stressed a large debt overhang in the private sector that hinders investment. According to the CNB survey on access to finance of SMEs, it has been reconfirmed that regulatory framework and the lack of adequately skilled staff turns out to be the greatest obstacle to doing business in Croatia. Vicegovernor Šošić stressed also the importance of the economy’s ability to reallocate resources to more productive firms.

While Croatian GDP has come close to the pre-crisis level, investments have been rising and employment has been trending up for five years in a row, real and potential growth continue to lag behind that of peer countries, said Servaas Deroose, Deputy Director-General of the European Commission. Deroose argued that obstacles to investment should be removed, in particular those in the public administration and business environment. Croatia has yet to embark on key reforms, pointed out Deroose, with their implementation also being essential in deciding on euro adoption.

Panelists of the panel on investment dynamics in Croatia, moderated by Gordi Sušić, Director of the CNB's Economic Analysis Department, were Debora Revoltella, Vedran Šošić and Servaas Deroose, who were joined by Paloma Lòpez-Garcia, Senior Economist at the European Central Bank, and Dubravko Mihaljek, Head of Macroeconomic Analysis at the Bank for International Settlements.

Investments in real life were the topic of the second panel at which the panelists were as follows: Miguel Morgado, Director, European Investment Bank, Marija Tufekčić, Executive Director, Plavi partner d.o.o., Jasmina Dovgan, Board Member, Signalinea d.o.o., Darko Ranogajec, President, OMCO Croatia and Jacques Feron, President, Međunarodna zračna luka Zagreb. The panel moderator was Anton Kovačev, Head of the EIB's Office in Croatia. 

The conference was closed by Zdravko Marić, Minister, Ministry of Finance, Republic of Croatia, reiterating that better EU absorption is a “must” and that priorities should include market functionality, business climate, legal system, investment in education and intangibles. Moreover, the negative demographic development, that has been one of the key topics followed by the government, should be addressed through the economic development that assures the creation of jobs and the increase of living standards.

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