The Croatian economy is becoming increasingly uncompetitive. The crown evidence is the increase in the deficit of the Croatian balance of payments since 2004, which could reach a record nine percent of GDP by the end of 2007.
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Written by: Miodrag Šajatović |
The national economy and society as a whole are competitive to the extent that the ratio of exports to imports of goods and services shows. |
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Due to the All Saints’ holiday, this week in the Lider editorial office we have shortened deadlines. The paper will be on kiosks and with subscribers by Wednesday, so we are unable to include the first comments on the Global Competitiveness Report 2007 – 2008 in this issue, which will be presented on Wednesday at the meeting of the National Competitiveness Council (NVK). It is thankless to predict how Croatia has fared this year in the competition of 131 countries, but if we add and subtract what has happened in the segments by which competitiveness is measured over the past year, it is hard to expect significant progress. However, in similar rankings, there are sometimes inexplicable shifts, both positive and negative. In macroeconomics, innovation, education, market efficiency, business sophistication, infrastructure, quality of institutions, etc., no significant progress has been made. It must be acknowledged that the National Competitiveness Council has introduced the concept of competitiveness into economic and political discussions in its five years of existence, under which, as stated in the NVK’s previous report, is understood as ‘the ability of a country to achieve success in the global market that enables a better standard of living for all.’ Politicians have begun to speak about the components of competitiveness, and many proposals from the former ’55 NVK recommendations’ have found their way into the formal Government strategy… However, there are no major changes. In five years, the NVK has managed to introduce the concept of competitiveness into the political lexicon. There has been no hearing for more in the Government. The new competitiveness report will bring a multitude of criteria that will ultimately be summed up into a comprehensive assessment and then into a specific place for Croatia in the world. And it will be a certain signal. However, these assessments are at least partly the result of subjective evaluation. But there is a criterion of all criteria. Simply, cruelly, and coldly: the national economy and society as a whole are competitive to the extent that the ratio of exports to imports of goods and services shows. And in this regard, Croatia is faring worse and worse. There will immediately be those who will say that all components of the balance of payments must be taken into account, primarily investments. It is claimed that the growth of foreign investments is an indicator of a country’s competitiveness. If this is true, these investments will either reduce the import of less competitive products in a few years, thus improving the balance of exports and imports due to lower imports, or new factories will export products, and the foreign trade balance will again decrease. Or, such investment will reduce imports and increase exports, thus providing a double benefit. The increase in the Croatian balance of payments deficit since 2004, which could reach a record nine percent of GDP by the end of 2007, is proof that Croatia is becoming increasingly uncompetitive. Competitiveness that is not proven in the domestic and global market in a ruthless market competition – is not competitiveness. Most of the Government’s measures so far have been mere facades behind which there was no real world. The Government boasts of a GDP growth rate that almost reaches the desired seven percent. But this growth has been inflated by the sale of state companies. At last week’s forum of Croatian exporters, it was heard where the payment of debts to pensioners has ended. Many pensioners, quite understandably from a human perspective but irrational for the national economy, donated the money received to their children or grandchildren to gather a share for – buying a car on credit! Since the cars were imported, it was a nice contribution to strengthening competitiveness. But not of Croatia, but of Germany and France. They improved a key indicator of competitiveness – the ratio of imports to exports. In the judiciary, which is an inevitable part of the competitiveness assessment, almost nothing has happened in a year. Only a month before the elections did Justice Minister Ana Lovrin encourage judges of commercial courts to prepare an Open Door Day for ordinary citizens. And she had many months to make significant progress in the judiciary. The story of the independence of the judiciary can be told to small children because, if the situation is alarming somewhere, and it is in the judiciary, the disease is not treated with mild remedies, but with sharp cuts. Insufficient Croatian competitiveness may not turn into an open financial and economic crisis for a few more years, but it is quite likely that a creeping slowdown will occur. With all the dramatic consequences. |
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