World Bank Presents Partnership Strategy Proposal for Croatia

The World Bank in Croatia will focus on three main areas of cooperation from 2014 to 2017, namely support for macroeconomic sustainability, implementation of structural reforms, and maximizing the benefits of EU membership.

This was announced by the head of the World Bank Office for Croatia, Hongjoo Hahm, who presented the World Bank’s partnership strategy proposal with Croatia for the period from 2014 to 2017 to the members of the Parliamentary Committees for Finance and State Budget and the Committee for Economy.

In the area of macroeconomic sustainability, Croatia needs expenditure rationalization, better revenue management, and more efficient public debt management, says Hahm.

In the area of structural reforms, the World Bank offers assistance in establishing a sustainable social protection system and improving competitiveness through greater private sector participation in economic activity.

The assistance that the World Bank offers in maximizing the benefits of EU membership includes support for building institutional capacities for the absorption of EU funds and encouraging government participation in regional initiatives sponsored by the EU.

Explaining why the World Bank chose these three key areas of cooperation with Croatia, Hahm warned that Croatia has been in recession for the fourth year with uncertain recovery and that it now needs intensive fiscal adjustment, which, however, is not provided for in the 2013 budget.

Describing the current macroeconomic situation, Hahm stated that external debt remains high even though the current account deficit has decreased, with a high need for financing or servicing public debt, bank debt, non-bank debt, and the current account deficit.

At the same time, unemployment is rising, the activity rate of the population is decreasing, and the competitiveness of the economy and the entire country is falling, says Hahm.

He emphasizes that Croatia must create an environment conducive to the opening of new jobs, primarily by improving the efficiency of public bureaucracy, reducing corruption, improving access to financing, and relaxing restrictive labor regulations.

Croatia, in his words, desperately needs economic growth that should come from the private sector, whose importance is not sufficiently recognized.

Hahm concludes that the World Bank remains committed to cooperation with Croatia, planning no large loans as significant funds will be available to Croatia from EU funds, and it is crucial to assist it in accepting those funds.

The chairman of the Committee for Finance and State Budget, Srđan Gjurković, emphasized that fiscal consolidation is being implemented in Croatia and that there is macroeconomic stability, while the government is taking measures to improve administrative efficiency and reduce non-tax levies, as well as that restructuring of the public sector is expected to be completed by 2013.

Parliamentary representative of HDZ, Domagoj Ivan Milošević, states that his party agrees that economic growth must be achieved, but considers it completely misguided to attempt to do so by raising taxes. He believes that Croatia has enormous potential for foreign investments but lacks a strategy to attract them.

The chairman of the Committee for Economy, Igor Rađenović, responds to Milošević that the government policy is not about raising taxes and that structural reforms have been lacking because the previous government did not have the political will to implement them.

SDP representative Mirela Holy warned that many Croatian companies, due to insufficient size and financial incapacity, will not be able to participate in the realization of projects co-financed from EU funds and seeks assistance from the World Bank.