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Next Generation EU in Croatia: The Curse of Low Absorption Capacity

Croatia represents the youngest EU member state that was hit hard by the COVID-19 pandemic-induced recession in 2020, but it has bounced back swiftly. Nothwithstanding this short-run robust performance, Croatia faces the long-run risk to its economic performance arising from weak absorption capacity of available EU funds. The latter issue has been put on full display over the course of the still ongoing Multiannual Financial Framework (MFF) 2014-2020. Therefore, in spite of Next Generation EU (NGEU) abundant funding, the first tranche of which was made available in the fourth quarter of 2021, as well as relatively favourable country’s economic and political context, there is an apparent possibility that the NGEU funds will not be spent effectively. Therefore, the structure of this chapter is the following. In the first section we extensively deal with the current political and economic context of Croatia spanning last two years. The second section will elucidate basic features of the Croatian National Recovery and Resilience Plan (NRRP), which is a formal requirement for tapping into NGEU funds. The third section will wrap around the main obstacles to effective implementation of the NRRP in Croatia. It explains the problem of low absorption capacity and represents the most important section of the chapter. Finally, the fourth section concludes and ponders over key challenges to NGEU implementation, based on our analysis of the Croatian experience.

Croatia, absorption capacity, National Recovery and Resilience Plan, Next Generation EU, EU funds, Multiannual Financial Framework, public administration, private businesses

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