This is the fourth time that Croatia will be subjected to in-depth analysis.
Croatia is in a group of 13 EU member states for which the European Commission has found it necessary to conduct an in-depth analysis in order to check whether there is a risk of excessive macroeconomic imbalances, reports Večernji List on November 17, 2016.
The Commission has published its annual growth survey. This marked the start of a new cycle of the European Semester, which is a mechanism for coordination of economic policies within the EU in order to avoid financial and debt crisis.
The Commission’s report found that in 2017 in-depth analyses of macroeconomic imbalances will be carried out in 13 member countries – Bulgaria, Croatia, Cyprus, Finland, France, Germany, Ireland, Italy, the Netherlands, Portugal, Slovenia, Spain and Sweden . The Commission will publish the results of the analysis at the end of February next year.
This is the fourth time that Croatia will be subjected to an in-depth analysis. In March this year, the Commission found that Croatia had excessive macroeconomic imbalances, particularly due to the risks associated with high levels of public, corporate and external debt in the context of high unemployment. The Commission then also concluded that corrective measures against Croatia should not be launched, adding that the government’s programme was ambitious enough to correct the imbalances. The updated data show improvement in most areas.
The Commission states that the level of public and private debt is still very high, especially with regards to corporate debt. After five years of rapid growth, public debt has stabilized at a very high level and now its share in GDP is expected to fall. Private debt has also started to decline, but it is still high compared to other countries. In addition, a large portion of the domestic debt is denominated in euros, which increases the exchange rate risk due to high external indebtedness. While it is well capitalized, the financial sector still has a large part of loans which are not being repaid.
The acceleration of write-offs and sales of debt in recent years has led to a decline in loans which are not being repaid, which signals the easing of credit conditions. High unemployment rate is also falling, which is partly a result of the reduction of the workforce. With low employment rate and activity, a relatively large portion of the population is still at risk of poverty and social exclusion, said the Commission.
“Therefore, the Commission considers it useful, taking also into account excessive macroeconomic imbalances identified in March, to once again analyze the existence of macroeconomic risks and monitor progress in correcting excessive imbalances”, the Commission concluded.