The World Bank has revised its expectations that Croatia will achieve a zero economic growth rate this year to an estimate that Croatian GDP will realistically decline by one percent in 2010, it was stated at today’s presentation of the World Bank’s regular report for EU10 countries (new EU members) plus Croatia.
The recovery within the EU10 region is fragile and uneven, and in Croatia, it is not yet visible, noted Sanja Madžarević Šujster, a senior economist at the World Bank for the region. The trend of weak domestic demand and declining investments continues, and despite some improvement in credit activity in the corporate sector, the financial sector continues to protect itself from risks with increased interest rates.
Decisive implementation of the Government’s economic recovery program is necessary, whereby the potential arrival of the IMF would not be a bogeyman since the arrangement with the IMF would not be fundamentally different from the Government’s program, and it would send a message about the stability of Croatian public finances, believes Madžarević Šujster. However, if the Government remains consistent in implementing its program, an arrangement with the IMF will not be necessary, emphasizes the World Bank economist, noting that any delay in necessary measures only increases costs.
In the EU10 region, economic activity will only reach pre-crisis levels next year, and for a few countries, including Croatia, it will take longer. The most successful EU10 countries, such as Slovakia, Poland, Hungary, and the Czech Republic, are currently achieving solid growth, while in Croatia, a lack of confidence in recovery still prevails. If Croatia wants to ensure growth in the coming year, it must now implement structural changes in public finances, i.e., address the issue of an unsustainable primary deficit, which means that the Government must bring public debt under control.
