European Commission has published its analysis of Croatia’s economy.
Croatia remains in the group of EU countries which have excessive macroeconomic imbalances, due to high levels of public, private and foreign debt, which is largely denominated in foreign currency, and due to the low economic growth potential, announced the European Commission on Wednesday, reports Poslovni.hr on February 22, 2017.
Commission published the results of in-depth analysis of macroeconomic imbalances in 13 member states of the European Union, which are believed to be in danger of imbalances. Of these 13 countries, six have excessive macroeconomic imbalances, six have macroeconomic imbalances (presumably not excessive), while Finland has managed to solve its problems and is no longer considered to have any macroeconomic imbalances.
Croatia is in the group of six EU member states, along with Bulgaria, France, Italy, Portugal and Cyprus, which have excessive macroeconomic imbalances. Six countries with macroeconomic imbalances are Germany, Ireland, Spain, the Netherlands, Slovenia and Sweden. These twelve countries will be under special monitoring of the European Commission, and the monitoring will be adjusted relative to the degree and nature of the imbalances.
“Croatia has excessive macroeconomic imbalances. The weaknesses are associated with high levels of public, private and foreign debt, which is largely denominated in foreign currency, particularly in the context of low growth potential”, said the European Commission.
The surplus in the current account balance of payments has begun to reduce foreign debt, which still remains high, noted the Commission. Acceleration of economic recovery has contributed to a further reduction of private debt in relation to GDP, and this year the public debt is also on a downward trend in relation to GDP. As for the financial sector, despite recent losses, it remains relatively well capitalized and the profits are recovering. The share of bad loans has begun to fall, said the Commission, but added that their share remained high.
In recent years, Croatia has adopted a series of measures aimed at resolving insolvency and increasing labour market flexibility. Public finances have been significantly improved, but progress on structural reforms has stagnated since the mid-2015, said the Commission in its analysis.
The Commission pointed out that there are still shortcomings in public finance management, modernization of public administration system, improving business climate and tackling the problem of low levels of economic activity.
The day before the publication of the report, Croatian Finance Minister Zdravko Marić visited Brussels and said that it was “realistic to expect that the report would emphasize that Croatia, given objective circumstances which existed last year, was not able to implement some of the measures that it had set out in its reform programme”. He added that in April the government would submit to the European Commission an ambitious reform programme for the next three years.