Why Is Croatia Lagging Behind?

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ZAGREB, October 23, 2018 – Conducting an economic policy dictated by the European Commission without taking account of the country’s specific features, the absence of reforms, a low employment rate and a weak manufacturing sector are just some of the reasons why Croatia is lagging behind other post-transition countries of the European Union, a conference was told in Zagreb on Tuesday.

“We are lagging behind not just the western countries but also the peripheral countries of the EU. The situation is worrying and we must ask ourselves what is going on,” the leader of the Association of Croatian Trade Unions, Vilim Ribić, told the conference entitled “Why Croatia is lagging behind?”, organised by the Independent Union of Research and Higher Education Employees and the Friedrich Ebert Foundation.

“Fifteen years ago we were at the top of the transition countries and today we are at the bottom,” Ribić said, citing the mass-scale emigration of skilled labour, low wages and weak GDP growth.

Speaking of the causes of Croatia’s lagging behind, he cited deficiencies of the institutional framework, irresponsibility, apathy, economic regression and the absence of necessary reforms.

Ribić was in particular critical of the government blindly following recommendations from Brussels and focusing on reducing the public debt and deficit. “That’s one of the reasons why Croatia is lagging behind, unlike the successful Poland which during the crisis made decisions that were not necessarily in line with the European Commission’s recommendations,” he said.

Poland successfully survived the crisis because apart from austerity measures it also took other measures such as labour market flexibilisation, social policy measures, transferring money from private pension funds into the public fund, cutting taxes on investors and so on, said Michal Sutowski of Krytyka Polityczna magazine.

Professor Josip Tica of the Zagreb School of Economics compared GDP data for 1995 and 2017, concluding that Croatia had entered the transition process as the third most developed transition country in GDP per capita terms, while today it was the third most undeveloped country, with only Romania and Bulgaria trailing behind.

“We are permanently lagging behind, and that is not because of the situation before or after the crisis or because of the Homeland War but it’s something intrinsic. There is something deep in the structure of this economy that doesn’t allow it to grow,” Tica said.

He said that among the main reasons for this was a continually low employment rate and a poorly developed manufacturing sector. “No progress has been made in motivating people to join the labour market,” he added.

Tica also mentioned the issue of investment, notably prevalent investment in real estate, which is closely connected with tourism and has a devastating effect on the manufacturing sector. “Between 2000 and 2014, about 300 billion kuna (40 billion euro) was invested in material assets, of which two-thirds in the real estate business. Had investment been made in something else other than real estate, I believe the situation would be much different,” he said.

Dalija Orešković, former chair of the Commission on Conflict of Interest Prevention, spoke of the role of institutions in economic development and ways in which institutions protect legal security in Croatia, while political analyst Žarko Puhovski focused on the rule of law, drawing attention to absurdities in laws and the Constitution because of which people had lost trust in the institutions of the state.


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