The fact is that at the end of the year, which we assessed as the majority of the world’s economies having emerged from the recession, began his lecture at the 20th Conference of the Zagreb Stock Exchange in Šibenik, the governor of the HNB, Željko Rohatinski.
– The forecasts for 2011 should not differ in 2012 either, but there is a great caution prevailing in strategic circles and there is no assessment that the crisis is over nor that it cannot recur. The recovery so far has been very fragile, with low private sector investments and no significant changes in the labor market – says Rohatinski, who believes that fiscal policy plays a key role and that its high credibility is necessary. Regarding monetary policy, a return to a neutral policy is expected in the eurozone in 2011, and he pointed out that the question is whether Croatia can exit the crisis in the same way as the world economies. – Our crisis was caused by the collapse of the entire economic growth model that was based on inflows of foreign accumulation that we did not use to create a foreign, competitive, and capable economy – said Rohatinski, adding that during that period the share of public debt in GDP increased from 53 percent to 83 percent, and the deficit grew from two to nine percent of GDP.
We entered the crisis later than others, he continued, so the assumption is that we will exit later as well, but that is not true. At the end of the first quarter of 2008, GDP began to decline and that decline has lasted a full eight quarters. Cumulatively, it amounts to more than 12 percent, and in GDP more than nine percent. It is not an exaggeration to say, he continued, that the danger of a moratorium on external obligations also threatened. – Both I and the Government believed that it was not necessary to turn to the IMF, and if I were in a similar situation today, I would do the same, but I believe that it is a mistake – admitted the head of the HNB. Furthermore, the long-term effects of the global crisis have led to a 12 percent drop in exports, foreign investments have halved, and there has been a decline in economic activities and all major components of GDP.
– Exports have decreased by a quarter, which has affected all parts of the Croatian economy. Only government consumption has not decreased – says Rohatinski. Such a period lasted until the end of the third quarter of 2009, and according to HNB estimates, in the second half of this year the economy will enter a phase of stagnation. The decline in GDP will be around 1.9 percent, according to HNB estimates, and a smaller decline is also possible by the end of the year. – Employment has decreased by five percent, wages by six percent, and foreign investments by 12 percent. Looking together at 2009 and 2010, we paid for the crisis with a GDP decline of 7.5 percent. On the other hand, the eurozone had a decline three times smaller than Croatia – says Rohatinski.
He also mentioned the share of foreign savings, which fell from 9.5 percent to 2.2 percent of GDP, the current account deficit decreased from nine percent in 2008 to 2.8 percent in 2010, and the country’s debt increased from 83 to 102 percent of GDP, while private sector debt is decreasing. Furthermore, gross loan placements increased from 2008 to 2010, as did the share of bad loans, primarily in the entrepreneurship sector. This, says Rohatinski, is reflected in the profitability of banks, which has halved, and it is difficult to expect a reduction in interest rates. How then to look at 2011, asked Rohatinski. The HNB’s forecast is similar to the Government’s projections. A GDP growth of 1.5 percent is possible in 2011, says Rohatinski, but that will not significantly change the situation. An increase in the balance of payments deficit of four percent of GDP and foreign debt to 103 percent of GDP is expected, while the fiscal deficit will remain above six percent.
