Hrvoje Stojić: We are still in the camp of countries that slowly implement reforms and fiscal consolidation

The Economic Research Department of Hypo Alpe-Adria-Bank presented analyses of economic trends in Croatia at the ‘Macroeconomic Outlook’ conference, including short-term macroeconomic trends.

They raised the GDP growth forecast for 2015 from 0.5% to 1%, while for 2016 they predict unchanged growth of 0.5%, primarily due to uncertainty surrounding the conversion of loans in Swiss francs.

Hrvoje Stojić, director of the Economic Research Department, in his vividly titled lecture ‘Salto mortale’, elaborated on some key economic indicators. Naturally, he began with the topic that most ‘itches’ bankers, the conversion of loans in Swiss francs, stating that there is no room for panic, but it is necessary to warn about the consequences of such a ‘jump into the unknown’, which will primarily depend on the preparation for its implementation.

He emphasized that the growth of exports and, by all accounts, a record tourist season provided a fundamental contribution to growth in 2015.

– The tourist season will, by all accounts, be record-breaking, with around 8 billion euros in revenue, and this is of great importance for our economy, given that tourism accounts for 15% of GDP, which is more than in Greece. We have modest growth, but its structure is positive; the engine is exports, or rather their increase – Stojić emphasized, adding that we are still in the camp of countries that relatively slowly implement reforms and fiscal consolidation, which is why we have high public debt.

– Public debt will undoubtedly continue to grow; by 2017 it could reach 100% of GDP, which puts us in a dangerous situation – he said, noting that the same year is expected to see the beginning of interest rate normalization, which will be an additional test for Croatia.

– We have two years for resolute fiscal adjustment – Stojić warned, emphasizing that our interest rates on public debt range from 3% to 4%, making us among the worst in the EU. He also touched on the often-mentioned relationship between the kuna exchange rate and exports, explaining that countries with weaker depreciation had more success in exports, which shows that price competitiveness is not the decisive factor for export success.