The World Bank said it is lending €200mn to the Croatian Bank for Reconstruction and Development (HBOR) to support the HEAL project in the country that aims to secure liquidity to local companies.

Croatia’s economy was severely hit by the coronavirus (COVID-19) pandemic, posting a contraction of more than 8% in 2020.

“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 World Bank said in a statement.

The coronacrisis has led to a sharp decline in the economic activity of Croatian companies, disrupting their production and reducing the demand for goods and services. Meanwhile, banks have tightened lending to companies, due to rising credit risk.

The HEAL project aims to back SMEs and mid-caps focused on exports. It should secure access to finance for firms from less developed regions of Croatia, women-owned or managed firms, and young enterprises.

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