The IMF Country Reports Series covers economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with officials of the country, is published at the option of the member.
This Selected Issues paper highlights key policy challenges for accelerating growth on a sustainable basis and reducing external and financial vulnerabilities in the Republic of Croatia. A significant reduction in public expenditure would be needed to simultaneously provide room for cutting taxes, boost growth, and lower the budget deficit to help narrow the current account deficit. The analysis finds that Croatian banks are not necessarily passing on the higher risk of foreign exchange-linked loans to unhedged clients by charging higher interest rates.