Analyst: Reform Programme to Get a Positive Response from Brussels

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Chief economist of Hypo Alpe-Adria Bank in Croatia comments on Croatia’s economy.

In the next several weeks, a response is to be expected from Brussels about the Croatian government’s reform programme. The reaction from EU will represent a clear signal to the investors whether the government’s plans to restrain the public debt and deficit are realistic, reports on May 16, 2016.

Hrvoje Stojić, the chief economist for Hypo Alpe-Adria Bank, says that he does not expects any objections. “Since Croatia has avoided the penalisation through the Procedure of Macroeconomic Imbalances, the ‘investor-friendly’ National Reform Programme and the focus on the stabilization of the public debt, I do not expect any serious objections, but only a motivation to map out some of the measures for strengthening the competitiveness and to implement them more quickly”, said Stojić.

Asked to comment on the state of the economy half way into 2016, he explained that the economy probably grew about 2 percent or slightly more during the first quarter of the year as a result of personal consumption, production, the Easter holiday that was celebrated early this year, early start of the tourist season, and the positive contribution of net exports, which supports the thesis that the recovery, at least for now, has spread widely.

Stojić pointed out that Hypo-Alpe Adria Bank has kept its growth forecast of one percent despite higher government’s projections because of expected slower growth in the Eurozone, as well as increased fluctuations on the financial markets, a series of geopolitical risks and a weaker effect of the lower oil prices. He said that they were also careful when it comes to investments. “The slowdown in exports means less investment, and when it comes to the EU funds, that is an area that still has a lot of bottlenecks and a small number of projects. In the meantime, another ‘better than expected tourist season’ could still result in a growth that is bigger than the one we are seeing now.”

Commenting on the announced privatization of public companies, Stojić said that the sense of urgency could be tested through the sale of minority shares in state companies for about 200,000 million euros. “Although these moves can encourage deflation, they will in the end improve the investment image of the economy and contribute to the increase of the potential growth rate, which currently stands under one percent and is not enough for new (net) employment.”


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