National Development Strategy Croatia 2030: Roadmap for a Better Future

Fragmentation of public research organizations
unnecessarily increases the costs of conducting re-
search in the public sector by increasing overheads, decreases synergies and often duplicates research ef-
forts - including public investments in research infrastructure. 

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Croatia 2030: Roadmap for a Better Future
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50.
Despite the availability of significant resources for R&D from EU funds, their utilization is still 
low. 
This is mainly due to the inability of state administration to ensure the timely contracting of projects 
and processing of payment claims. Delays increase the level of uncertainty regarding investment planning, 
which in turn creates problems for the private and public sector to use funds effectively. 
A.2.
Physical capital and connectivity 
51.
Private and public investment are recovering from the strong decline recorded during the reces-
sion but remain significantly below pre-crisis levels. 
Rapid capital accumulation made the largest con-
tribution to growth in the pre-crisis period, also reflecting strong capital inflows from abroad, large public 
infrastructure projects and a housing boom. With the onset of the crisis, both public and private investment 
plummeted. While investment started to recover in 2015, the pace of capital accumulation is still much 
lower compared to the pre-crisis period. However, the composition of investment has been improving, as 
the share of tradable sectors has increased. Going forward, the contribution of investment to potential 
growth will depend on Croatia’s ability to create an investment-friendly environment for domestic and 
foreign entrepreneurs, as well as on the recovery in public investment and on the effective utilization of 
EU funds. 
52.
Private investment has been recovering while its composition and financing sources have been 
improving. 
During the pre-crisis period, private investment was one of the main drivers of GDP growth, 
with an average share in GDP of almost 20 percent and average annual growth of around 10 percent. Most 
of it, however, was debt-financed and directed towards non-tradable sectors. Following a sharp contraction 
during the crisis, private investment is now growing on a more solid footing and is largely directed to 
manufacturing and tourism. Investment growth to a significant extent relies on companies’ own resources 
supported also with EU funds. On the other hand, investment in research and development remain well 
below the EU average. This is closely related to the fact that Croatia has not been successful in the past in 
attracting new investments in the manufacturing sector and, particularly, in more knowledge-based activi-
ties.
53.