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IMF Country Report No. 24/247
REPUBLIC OF CROATIA
SELECTED ISSUES
July 2024
This paper on Republic of Croatia was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on June 26, 2024.
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Title Page
REPUBLIC OF CROATIA
SELECTED ISSUES
June 26, 2024
Approved By
European Department
Prepared By David Bartolini, Irina Bunda, and Wei Shi
Contents
CORPORATE SECTOR BALANCE SHEET VULNERABILITIES IN CROATIA
A. Introduction
B. Evolution of NFC Balance Sheet Strength
C. Sensitivity Analysis to Gauge NFC Resilience
D. Conclusions
FIGURES
1. Aggregate Trends in the Corporate Sector
2. Liabilities of the Non-Financial Corporate Sector
3. Historical Performance by Firm Size, Group Median, 2008–21
4. Evolution of Low-ICR Firms
5. Simulated New Corporate Defaults
6. Impact on Banks’ Tier 1 Capital
TABLES
1. Data Comparison: Orbis vs. Structural Business Statistics, 2021
2. Summary Statistics of Orbis Firms, 2021
3. Corporate Sector Sensitivity Analysis
4. Mapping to Probabilities of Default
References
APPENDIX
I. Data and Stylized Facts by Sector
ADDRESSING LABOR SHORTAGE IN CROATIA
A. Introduction
B. Croatia’s Labor Market
C. Beyond Aggregate Numbers
D. Policy Responses
References
ADDRESSING HOUSING AFFORDABILITY IN CROATIA
A. Introduction
B. Housing Affordability Assessment
C. Drivers of House Affordability: Assessing the Demand-Supply Gap
D. Policy Options and Recommendations
BOX
1. Introducing a Modern Recurrent Property Tax in Croatia
FIGURES
1. Construction Sector
2. Housing Affordability: Housing Cost Indicators
3. Housing Affordability Measures
4. Supply and Demand Factors
5. Taxation of Housing in Croatia
TABLE
1. Housing Taxation Over the Life of Investment
References