Economists warns on Croatian economy.
According to the projections of the European Commission, Croatia will in 2016, 2017 and in the long term be a country with the highest level of budget deficit in the EU. The expenditures on interest will reach 4.2 percent of GDP next year, which is 14 billion kuna, while the annual growth of GDP is projected to be half of that amount – about 7.5 billion kuna. By the end of 2016, current period of “cheap money” will end and it is likely there will be problems with public debt servicing. This was said by Željko Lovrinčević, analyst at the Institute of Economics, during his speech at the 23rd Conference of Economists in Opatija, adding that “the Croatia’s economic parameters are getting a bit out of control”, reports Vecernji List on November 12, 2015.
“Radical reforms are needed, and some people in Croatia do not agree with even small scale reforms”, Lovrinčević said, noting the full range of challenges that Croatia will face in the next year, including the need to accelerate reforms, the impact of the refugee crisis on the economy, trade flows and tourism, the crisis of confidence in the political structures, emigration of young people, pressures on the new government and the adoption of the budget. Lovrinčević warned that the United States is moving away from the policy of monetary easing, which is spilling over to Europe as well, with the expected rise in interest rates which will hit Croatia in 2017.
“Most countries in the region have already fiscally consolidated their budgets; they do not have the deficit. Therefore, we have the highest risk premium of all countries except Greece. Croatia has lost two pillars of convergence with the EU, the Schengen and the possibility of introducing the euro, the only remaining pillar is free movement of capital”, Lovrinčević said and added that local financial institutions, banks and pension funds have in their portfolio government bonds rated with the best possible credit rating, which is not realistic.
During the opening of this year’s gathering of economists in Opatija, president of the Croatian Association of Economists Ljubo Jurčić pointed out that Croatia should make demographic investments and that the new government, due to the wave of migration that will last for years, should develop migration policy as well. He warned that Croatia did not come out of crisis like other countries, but that in relation to the EU it is “going down”. “With regard to the economic situation, there is a simple solution for Croatia: there must be a change in policy and I hope that these changes will occur very soon”, Jurčić said.
