EU Warns About Excessive Economic Imbalances in Croatia

Total Croatia News

Despite improved economic situation, the danger is still there.

The European Commission published on Wednesday its annual growth survey for the European Union, a report on warning mechanism and the joint employment report. Croatia is again in the group of countries for which the European Commission is of the opinion that a thorough analysis is needed to check whether there is a risk of excessive macroeconomic imbalances, the Commission announced, reports on November 23, 2017.

The publication of these documents will begin a new cycle of the European semester, a mechanism for coordinating economic policies within the EU to avoid repetition of the financial and debt crisis. The warning mechanism report is an integral component of the European semester, which seeks to prevent or overcome the imbalances which hamper the normal functioning of the economies of member states, the eurozone, and the EU as a whole.

Based on the analysis, it has been proposed that 12 member states should be subjected to a detailed review in 2018. These are the same countries which have been found to have imbalances in the previous cycle – Bulgaria, Cyprus, France, Croatia, Ireland, Italy, the Netherlands, Germany, Portugal, Slovenia, Spain and Sweden.

The Commission will present the results of a detailed review for each member state in February 2018. It will then assess whether a mechanism for correcting macroeconomic imbalances should be initiated, based on the assessment of whether the government reform programmes are ambitious enough to fix the imbalances.

This is the fifth time that Croatia is in the group of countries for which a thorough analysis is needed. In the previous cycle of the European semester, Croatia has been found to have excessive macroeconomic imbalances. “In February 2017, the European Commission concluded that Croatia had excessive macroeconomic imbalances, especially because of the risks associated with high levels of public, corporate and external debt, mostly denominated in foreign currency, in the context of low growth potential,” the Commission stated.

The Commission added that, given the latest figures, there was a number of indicators in which Croatia was above the threshold, in particular, the net international investment position, the public debt and the unemployment rate.

The net international investment position is the difference between the amount invested in a country from abroad, and the amount invested abroad by the country in question, which is expressed as a percentage of GDP. “The international net investment position is declining, but remains high, with persistent currency risks. The current account shows a significant surplus and has been positive since 2013. This surplus originally came from a decline in domestic demand, but is now increasingly based on the strong growth of exports, fuelled by improved price competitiveness,” said the European Commission.

The Commission said that, although it is decreasing, there remains a significant share of non-performing loans, adding that the unemployment rate is expected to decline further, but in no small extent due to a reduction in the workforce. “The risks to the economic outlook are also linked to the restructuring of the Agrokor Group,” the Commission concluded.

Translated from


Subscribe to our newsletter

the fields marked with * are required
Email: *
First name:
Last name:
Gender: Male Female
Please don't insert text in the box below!

Leave a Comment