Poverty & Equity Brief Europe & Central Asia Croatia April 2021 Croatia's poverty rates have closely tracked overall economic growth over the past decade. Following weak economic growth in the aftermath of the global crisis in 2008, the share of the Croatian population living on less than $5.5 a day at the revised 2011 Purchasing Power Parity increased from 4.5 percent in 2009 to 6.8 percent in 2013. However, higher economic growth in the period 2012-2017 translated into significant progress in poverty reduction. By 2016, poverty rates reached pre-crisis levels. In addition, the poorest 40 percent of the population experienced faster income growth than the national average thanks to higher labor earnings, low unemployment rate, and pension income. Croatia falls in the middle range of EU countries based on the level of income inequality (i.e. the Gini index). Relative poverty has remained stable over the past years, although it is higher than the EU average. In 2018, the most recent year of published figures, 18.3 percent of the population lived in at- risk-of-poverty, a rate that is higher than the EU average of 16.8 percent. The most vulnerable group is single-person households with an at-risk-of-poverty rate of 45 percent. Moreover, if these households include of an elderly (65 years of age or older), the at-risk-of-poverty rate reached 50 percent, nearly triple the national average. Physical damages from the two earthquakes in March and December 2020, compounded by the effects of the ongoing COVID- 19 pandemic on economic activities and delivery of basic services, are likely to disproportionally affect the poor and increase the risk of falling into poverty for those belonging to the vulnerable groups. Findings from the Rapid Assessment Survey conducted in December 2020 by the World Bank show that low-wage earners continued to be more affected by the crisis than those in the top income brackets. By December 2020, one in three low-income workers stopped working, compared to one in four among their higher-income peers. Although the coverage of the government's unemployment benefits and employment supports was high, nearly 30 percent of Croatian households reported a decline in overall income in 2020 compared to 2019. A more worrisome sign is the low rate of savings: approximately 80 percent of Croatians had inadequate savings to weather the prolonged impacts of the crisis. The situation is more challenging for poor and rural households. Poverty is estimated to have increased to 2.6 percent in 2020. Nevertheless, the projected rebound of the economy in 2021 is expected to bring poverty to the pre-crisis level of 2.2 percent. Number of Poor Rate POVERTY (thousand) (%) Period National Poverty Line 748.1 18.3 2018 International Poverty Line 18.9 0.5 2018 8.6 in Croatian kuna (2018) or US$1.90 (2011 PPP) per day per capita Lower Middle Income Class Poverty Line 31.7 0.8 2018 14.4 in Croatian kuna (2018) or US$3.20 (2011 PPP) per day per capita Upper Middle Income Class Poverty Line 97.2 2.4 2018 24.8 in Croatian kuna (2018) or US$5.50 (2011 PPP) per day per capita Multidimensional Poverty Measure 0.7 2018 SHARED PROSPERITY Annualized Income Growth per capita of the bottom 40 percent 7.63 2013-2018 INEQUALITY Gini Index 29.8 2018 Shared Prosperity Premium = Growth of the bottom 40 - Average Growth 1.54 2013-2018 GROWTH Annualized GDP per capita growth 3.18 2013-2018 Annualized Income Growth per capita from Household Survey 6.10 2013-2018 MEDIAN INCOME Growth of the annual median income/consumption per capita 6.37 2013-2018 Sources: WDI for GDP, National Statistical Offices for national poverty rates, POVCALNET as of Feburary 2021, and Global Monitoring Database for the rest. Poverty Economist: Nga Thi Viet Nguyen POVERTY HEADCOUNT RATE, 2009-2018 INEQUALITY TRENDS, 2009-2018 Gini Index 35.0 25 35 30.0 30 20 25 25.0 15 20.0 20 15 15.0 10 10 10.0 5 5 5.0 0 0 0.0 2009 2011 2013 2015 2017 2009 2011 2013 2015 2017 Poverty International Poverty Line Lower Middle IC Line GDP per capita, rate Upper Middle IC Line National Poverty Line $ 2017 PPP (%) GDP (Thousand) Source: World Bank using EU-SILC/ECAPOV/GMD Source: World Bank using EU-SILC/ECAPOV/GMD KEY INDICATORS Lower Middle Income line(%) Relative group (%) Distribution among groups: 2018 Multidimensional Poverty Measures: 2018 (% of population) Non-Poor Poor Bottom 40 Top 60 Urban population 100 0 34 66 Monetary poverty (Income) Rural population 99 1 50 50 Daily income less than US$1.90 per person 0.5 Males 99 1 40 60 Females 99 1 40 60 Education 0 to 14 years old 99 N/A* 52 48 At least one school-aged child is not enrolled in school N/A 15 to 64 years old 99 1 37 63 No adult has completed primary education 0.3 65 and older 100 N/A* 42 58 Without education (16+) 98 N/A* 68 32 Access to basic infrastructure Primary education (16+) 99 N/A* 64 36 No access to limited-standard drinking water 0.9 Secondary education (16+) 99 1 42 58 No access to limited-standard sanitation 1.1 Tertiary/post-secondary education (16+) 100 N/A* 14 86 No access to electricity 0.0 Source: World Bank using EU-SILC/ECAPOV/GMD Source: World Bank using EU-SILC/ECAPOV/GMD Notes: N/A missing value, N/A* value removed due to less than 30 observations POVERTY DATA AND METHODOLOGY The national poverty line in Croatia follows the European Union standard which sets at 60 percent of adult equivalized median disposable income after social transfers. The World Bank's international poverty rates are based on an absolute threshold that reflects how the world's poorest countries define a minimum threshold of living standards, adjusted for purchasing power parity (PPP) and for national inflation. In 2020, the 2011 PPP was revised to take into account the effects of (i) national accounts rebasing, (ii) improvement of the underlying price data, (iii) regression of non-participating countries, and (iv) the national accounts expenditure shares and relative prices between all of the countries in each comparison region. The revised 2011 PPP for Croatia is 3.1 percent lower than one based on the original PPP. The quality of data for monitoring welfare in Croatia is high and surveys are run on a yearly basis. Access to microdata is granted by EUROSTAT after approval of an accredited organization's research proposal by all individual member states. HARMONIZATION The numbers presented in this brief are based on the ECAPOV database. The ECAPOV micro database was established in 1998 to support a regional poverty report. The database is managed and harmonized by the Europe and Central Asia Team for Statistical Development (ECATSD). ECAPOV includes 29 countries, with an average of 8 surveys per country. Recently, EU-SILC data for EU countries, received from Eurostat, have been added to the collection. Each survey in ECAPOV is organized into 6 modules following the Global Monitoring Database (GMD) harmonization guidelines, including the construction of the welfare aggregate which is used for Global Poverty Monitoring. Terms of use of the data adhere to agreements with the original data producers. Europe & Central Asia povertydata.worldbank.org Croatia www.worldbank.org/poverty