State or government aid to firms is one of the ways to implement an interventionist policy. By signing the SAA, Croatia has taken on certain obligations concerning the allocation and control of government aid. The objective of this project was to estimate, in line with EU methodology, the size and structure of government aid in Croatia and to compare it with the aid that other Member States (and candidate countries as well) allocate to their firms. State aid in Croatia is much greater than what is found in the EU. At the same time, Croatia gives much more support to individual sectors of the economy than the EU, particularly to the transport, tourism and shipbuilding sectors. Incentives to research and development, to SMEs or to environmental protection, the fundamental forms of horizontal aid, i.e., the kind of aid that is used by all firms and all sectors, not only those in selected sectors, are much smaller. Accordingly, it is to be expected that, during the process of harmonisation with the EU, Croatia will have to reduce the size of government aid and gradually redirect it away from incentives given to selected sectors and towards the whole of the corporate sector via horizontal forms of government aid. At the same time, the transparency of the system for allocating and controlling government support needs enhancing.
The project is a continuation of the research started in 2003.