On 22 June 2026, the Council of the European Union published a recommendation outlining the economic, social, employment, structural and budgetary policies Croatia should pursue. The document, dated 24 June 2026, sets recommended maximum growth rates for net expenditure at 4.9% in 2026, 4.1% in 2027, and 3.7% in 2028, and calls for reforms to address identified challenges.
The recommendation is part of the European Semester cycle, the EU's framework for coordinating economic policies. It notes that Croatia's net expenditure growth is projected to deviate by 0.3% of GDP in 2026 and 1.0% cumulatively over 2024-2026, after accounting for defence flexibility under the national escape clause activated for 2025-2028. The Council urges Croatia to ensure compliance with the expenditure path.
On the revenue side, the Council recommends a comprehensive review of tax expenditures, which amounted to over 4% of GDP in 2023, to redesign ineffective ones, and strengthening property taxation by introducing a market value-based component. To improve spending quality, Croatia should expand spending reviews in health and education and optimise public administration workforce management.
The recommendation also calls for accelerating implementation of the Just Transition Fund, with resources due by end-2026, and deploying new investments from the cohesion policy mid-term review. Structural reforms should address fragmentation in the public research and innovation sector, reduce regulatory burdens, and tackle labour shortages, poverty, and housing affordability.
Croatian taxpayers could face higher property taxes if the market value-based component is introduced, while businesses may benefit from reduced regulatory burdens and improved innovation support. Public sector employees may see workforce optimisation measures affecting job security. Social inclusion efforts aim to benefit low-income households and those facing housing affordability issues.
The Council's recommendation is non-binding but carries political weight. Croatia is expected to report on progress in its next National Reform Programme. The European Commission will monitor compliance and may issue further recommendations in subsequent European Semester cycles.