World Bank Supports Croatia’s Firms to Cope with Effects of COVID-19 Pandemic

WASHINGTON, May 14, 2021 - The World Bank Board of Directors today approved a loan to the Croatian Bank for Reconstruction and Development (HBOR) in the amount of EUR200 million ($242 million equivalent) for the HEAL Croatia Project (Helping Enterprises Access Liquidity in Croatia). The loan will provide liquidity and financial restructuring to firms that have been hit by the COVID-19 pandemic and by the two devastating earthquakes of 2020. Such Loans will support an inclusive and resilient recovery.

The COVID-19 crisis has caused a sharp decline in the economic activity of Croatian businesses and has had a profound effect on jobs and livelihoods. The pandemic disrupted firms' production and reduced the demand for their goods and services, while the financial sector tightened lending to companies, due to rising credit risk. The crisis also exacerbated Croatia's regional disparities, including reduced credit access for young firms and for firms owned and managed by women.

To mitigate the multiple effects of the pandemic, the Project will support firms focused on export, both small and medium enterprises (firms employing fewer than 250 people) and mid-caps firms (employing from 250 to 3000 people). The Project will increase access to finance for firms from less developed regions of Croatia, women-owned or managed firms, and young enterprises (operating less than five years). The Project will also support HBOR's continued development through improved business processes, strengthens sustainability and climate change resilience, and use of EU funds.

'The approval of this Project is very important as it provides support to companies affected by the crisis caused by COVID-19 pandemic, thus ensuring the preservation of jobs and providing an incentive for economic recovery. The additional benefit is that it will attract commercial banks to finance the private sector and facilitate financing from other international financial and contribute to increasing the operational efficiency of HBOR. It is important to emphasize that the World Bank provides this Project under very favorable conditions,' said Zdravko Marić, Deputy Prime Minister and Minister of Finance of the Republic of Croatia.

'During the last year, HBOR approved 43 percent of all loans to enterprises covered by COVID measures, which best illustrates our significance in providing support to Croatian entrepreneurs in the COVID crisis. Favorable terms and conditions granted by the World Bank will provide us an additional source of finance for further favorable loans to our entrepreneurs. In addition, the World Bank, as the leader in the field of environmental and social management, will support HBOR in enhancing its own Environmental and Social Management System. This will be important as HBOR's activities in the coming period will be particularly committed to building more capacity for supporting sustainable projects and inclusive growth,' stated Tamara Perko, President of the Management Board of HBOR.

'The HEAL Croatia project will contribute to a resilient, inclusive and sustainable recovery of Croatia, which has been hard hit by the global pandemic, the economic recession, and the devastating earthquakes of March and December 2020,' said Elisabetta Capannelli, the World Bank Country Manager for Croatia. 'We expect the HEAL project to help preserve jobs and support household livelihoods through direct support to approximately 150 firms employing around 25,000 people. It will also help firms led by women, young firms and firms that operate in less developed regions to address issues related to longer-term access to financing.'

The HEAL Croatia project complements two other World Bank crisis operations approved last year, the Croatia Crisis Response and Recovery Program and Earthquake Recovery and Public Health Preparedness Project - worth together $500 million, to help mitigate the effects of the economic shock, advance recovery, facilitate earthquake reconstruction and strengthen national systems for public health preparedness for pandemic outbreaks.

The World Bank has been a partner to Croatia for over 27 years. During this period, the Bank has supported more than 50 projects, worth almost $5 billion, produced numerous studies, and provided technical assistance to help strengthen institutions and support the design of policies and strategies. The Bank's current program focuses on mitigating the economic and social impact of COVID-19, post-earthquake reconstruction, transport, justice, innovation, business environment, land administration, science and technology, and economic development of the Pannonian region.