President of the Republic of Croatia Kolinda Grabar-Kitarović stated on Friday that she is concerned about the fact that Croatia is stagnating and emphasized that a wide range of reforms is needed to stimulate the Croatian economy, while also welcoming the appointment of a new extraordinary administration in Agrokor.
“I must say that I am deeply concerned about the fact that Croatia is stagnating. We have seen this from the published data on GDP growth. GDP is slowing down. It is truly worrying, I will not say that Croatia is regressing, but it is clearly standing still, treading water, while others are advancing,” said the president in the Croatian Radio show “With the President Out of Protocol”.
Worrying Data
She supported this with data showing that Croatian GDP grew by 2 percent in the last quarter of last year compared to the same period the year before, while Romania had a growth of 7 percent, Slovenia 6.2 percent, Bulgaria 3.6 percent, and Croatian growth is even below the EU-28 average, with growth in Austria at 3.6 percent and Germany at 2.9 percent.
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‘I think it takes courage, that we need to cut through the situation and make brave and decisive decisions to go into those reforms that may seem painful to some at first but need to alleviate the existing pain in society.’
“These are worrying data because they show that at this moment when the EU has emerged from the crisis, when so many opportunities have opened up, we are simply unable to take advantage of them. This indicates that partial, isolated reforms are not enough, that we all need to get involved together to implement a wide range of reforms to stimulate the Croatian economy,” said Grabar-Kitarović.
The GDP data, she adds, also indicate two worrying facts – that the growth of the Croatian economy primarily depends on tourism and that it heavily relies on personal consumption.
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Tourism is an industry that is too dependent on other factors, such as weather and security conditions. However, the fact is that tourism must only be an added value to our economy, which must be restructured and focused on exports, explains the president.
‘Exports must be the foundation on which further development of the Croatian economy will be based, and that is the export of value-added products.’
Exports as the Foundation of the Economy
GDP heavily depends on personal consumption, which has begun to stagnate and slowly decline, and Grabar-Kitarović reminds that, for example, the import of cars, which shows that the standard of Croatian citizens is rising, simultaneously indicates that increased consumption also leads to an increase in imports and that in the structure of GDP, imports still outpace exports.
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“Exports must be the foundation on which further development of the Croatian economy will be based, and that is the export of value-added products,” the president emphasized.
She also believes that this year is “absolutely the year in which reforms must be implemented” and that everyone should provide constructive support to the government and all economic entities.
The president welcomed the efforts made last year on tax reform but also noted that they have yielded results and that these positive effects are no longer felt. “We must absolutely continue the reform of the tax system,” she highlighted.
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A series of other measures is also needed to stimulate those activities that will lead to greater investments, both domestic and foreign, to open new jobs, and thus stop the outflow of residents, which has already led us to a contradiction that despite the official unemployment rate, we have a number of professions where we lack labor and where we have to import it.
She adds that lowering taxes leads to greater economic activity, higher investments, and greater exchange, but also that predictability is important for investors, as they will not come if they do not know what to expect in the next five, ten, or fifteen years.
Resistance to Change
One of the biggest problems is, she emphasizes, the lack of capacity to implement reforms, which relates to state administration and governance. “Resistance to change is a major problem in Croatia. This is not only noticed by me and foreign investors, but the Economic Institute and all other institutes that deal with public opinion and market research will tell you this,” said the president, warning about the problem of slow decision-making.
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She considers reforms of the judiciary, state administration necessary, and the labor market reform should also continue. Workers must have greater security, but they must also have the opportunity for dual, lifelong education and retraining, says Grabar-Kitarović.
In response to questions, the president emphasized that her intention is not to criticize the government. I follow their work and at times when I need to be critical of certain moves, I must be critical, she said.
She adds that not all problems arose overnight, in the last year or year and a half of this government, but are the result of years and decades of wrong work and actions. “Unfortunately, we missed that big wave of investment in transition countries that neighboring and surrounding countries took advantage of. But now there is no reason not to take advantage of new investments and new funding, especially EU funds,” she emphasized.
‘Resistance to change is a major problem in Croatia. This is not only noticed by me and foreign investors, but the Economic Institute and all other institutes that deal with public opinion and market research will tell you this.’
Constructive Council
She also reminded that her Economic Council has provided constructive, concrete proposals that the government has listened to, but little has happened in the meantime and they have not been operationally implemented. “I think it takes courage, that we need to cut through the situation and make brave and decisive decisions to go into those reforms that may seem painful to some at first but need to alleviate the existing pain in society,” she stated.
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She mentioned that the situation with Agrokor may be a complicating factor in everything. “Along with what I was critical of in one part due to the appearance of corruption that needs to be proven, but due to those truly immoral high salaries that went to consultants, I acknowledge the government for tackling this problem, for managing to preserve the stability of the Croatian economy and most jobs,” she emphasized.
However, she notes that we also need to deal with other elements necessary to stimulate the Croatian economy and that we need to be much more ambitious. “I think that the projections we heard from the government and the European Commission about growth of 3.2 percent were a bit below our capabilities and ambitions, because a growth of 3 percent is only enough for us to cover debts, and to open new jobs we need to climb to 4 and 5 percent,” she emphasized.
“I cannot judge”
The president welcomed the appointment of a new extraordinary administration of Agrokor (tag).
At the government’s proposal, the Commercial Court this week revoked Ante Ramljak from the position of extraordinary commissioner and appointed Fabrizio Peruško as the new commissioner and Irena Weber as his deputy.
“I must say that I do not personally know the new extraordinary commissioner or his deputy. I do not know their work, I cannot judge how quality that decision is, but I welcome that decision that changes have occurred,” she said.
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She wished them all the best in their work and that the restructuring of Agrokor continues in an open, transparent, non-corrupt manner, with the aim of protecting jobs, stabilizing the economy, but also that we turn to other issues in our economy.
