More Money, Mixed Results: Rethinking Education and Healthcare Spending in Croatia

Croatia spends heavily on education and healthcare, but weak learning outcomes, skills mismatches, and poor health indicators show that this spending is inefficient rather than insufficient. By reforming school organization, curricula, hospital-centered care, and prevention policies, Croatia could improve human capital while easing long-term fiscal pressure.

Produced by the International Monetary Fund and drawing on evidence from the World Bank, OECD, Eurostat, and the European Commission, this study asks a direct question: why does Croatia spend so much on education and healthcare while achieving only average, or sometimes weak, results? The issue is especially important as Croatia moves from years of expansionary fiscal policy into a period where budget consolidation is unavoidable. The paper argues that the solution is not to cut spending on schools and hospitals, but to spend existing resources more efficiently so that outcomes improve while fiscal pressure eases.

Education: High Spending, Uneven Results

Croatia spends more public money on education than most European peers, even after accounting for income levels. However, student performance does not fully reflect this investment. Children perform well in reading, especially in primary school, but results in mathematics are persistently weak. By age fifteen, a large share of students fail to reach basic numeracy skills, and the number of top-performing students is among the lowest in the EU. These problems are particularly severe among students in vocational education.

When international comparisons are made, Croatia appears inefficient. Countries such as Poland and Hungary achieve better learning outcomes with less public spending, while the EU average delivers similar results at lower cost. This gap suggests that Croatia could either save money or significantly improve learning outcomes by reforming how education funds are used.

Too Many Small Schools, Not Enough Skills

A major reason for high education costs is staffing. Teacher wages are relatively high, but the bigger problem is the number of teachers. Even as the student population has fallen sharply, employment in education has continued to rise. This has led to extremely low student-to-teacher ratios, mainly because Croatia has a large number of very small schools, especially in rural areas.

These small schools are expensive to operate and often rely on part-time teachers, while shortages persist in key subjects such as mathematics and physics. Evidence shows that smaller class sizes in Croatia do not lead to better results. The paper argues that carefully consolidating schools, while protecting access through transport and support for remote areas, could reduce costs without harming educational quality.

Beyond cost issues, the education system struggles to prepare students for the labor market. Croatia places students into vocational tracks earlier and more frequently than most EU countries. Many vocational students lack basic skills and later work outside their field of training. The IMF recommends strengthening general education, increasing instructional hours through the “whole-day school” reform, improving math teaching, delaying vocational tracking, and expanding access to tertiary education, where returns in wages and employment are high.

Healthcare: Generous Coverage, Weak Outcomes

Croatia devotes a larger share of its economy to healthcare than most EU countries, with public funding covering nearly the entire population. This generosity keeps out-of-pocket payments low and ensures that few people skip care because of cost. Yet health outcomes remain poor. Life expectancy and healthy life years are below the EU average, while deaths from cancer and cardiovascular disease are high.

International benchmarks show that Croatia could achieve similar or better health outcomes with much lower spending if its system were as efficient as those of top-performing EU countries. This points to structural inefficiencies rather than a lack of funding.

Hospitals, Prevention, and the Way Forward

One major issue is the central role of hospitals. Hospitals absorb more than half of all healthcare spending and provide many services that could be delivered more cheaply through primary care or outpatient facilities. At the same time, access to healthcare varies sharply across regions. Rural and island areas face long travel times and shortages of doctors, making distance the main reason for unmet medical needs.

The IMF argues for shifting resources toward primary care outside hospitals, expanding telemedicine, and better distributing health professionals across regions. Population aging makes reform urgent. Croatia has many hospital beds with relatively low occupancy, yet demand for geriatric and long-term care will rise sharply in the coming decades.

Prevention is highlighted as the most cost-effective solution. Smoking rates are among the highest in Europe, obesity is widespread, diets are poor, and adolescent risk behaviors remain common. Strengthening anti-smoking policies, improving nutrition, expanding cancer screening, and promoting physical activity could significantly improve health outcomes while reducing future healthcare costs.

The paper finds that Croatia’s problem is not too little spending, but spending that is poorly targeted. By reforming education and healthcare systems, Croatia could build stronger human capital, support economic growth, and achieve fiscal sustainability at the same time.