As Adriano Milovan/Novac writes on the 8th of April, 2020, rather surprisingly, the Republic of Croatia is among the more resilient countries and economies in terms of risks and shocks, the research of insurance company FM Global shows. Could Croatian EU membership also help it to emerge from various forms of crisis more easily?
According to the survey, which included 130 countries worldwide, the Croatian economy ranked 37th in the world in terms of resistance to shocks. According to the calculations of FM Global experts, Croatia is even better ranked than Slovenia, which is ranked 42nd in terms of economic resilience, and is slightly lower than Hungary, which ranked 35th. The Croatian economy, according to the research, is more resistant to shocks than the economy of neighbouring Serbia, which is ranked 63rd, or the economy of another neighbour – Bosnia and Herzegovina, which is ranked a concerning 70th. Croatia also ranked better than Bulgaria, which ranked 45th, and Romania, which has been ranked 36th, is slightly better than us in this survey.
FM Global’s research refers more specifically to last year, and it analyses various forms of risk for individual national economies – from political, to economic to natural risks. This insurance company, they say, is primarily a tool that should help the management of companies in making business decisions, including investments.
The study, therefore, doesn’t directly address the resilience of world economies to the impact of the current unprecedented coronavirus pandemic. However, as the international media and Croatian analysts point out, the report could also look into the recovery dynamics of the Croatian economy once the coronavirus crisis has ended.
Of course, there are a lot of question marks throughout the story, given that this is a shock that the world, and one that even the historically unlucky Croatia has not yet encountered. Questions have been raised as to how long the coronavirus-induced crisis will last, as well as what its consequences could be. But, the economists Novac spoke with hope that Croatia will still emerge from the coronavirus recession more quickly than it did during last recession, in which the country spent six very long years. The reason is simple: Croatian EU membership, a badge which gives it the opportunity to make greater use of money from European Union funds, and makes it subject to the rules of conduct of the Union.
”Today, Croatia is in a different situation than it was in back in 2008 and 2009. The EU has forced the government to stabilise public finances, and much has been done in this regard, with interest rates lower today than at the beginning of the last crisis. In addition, this time, the government reacted swiftly and adopted packages of measures for businesses. Therefore, the chances of a faster recovery today are certainly higher than they were during the last crisism” says Damir Novotny, a reputable economic analyst.
He added that Croatian EU membership is particularly important here, which certainly strengthens the overall resilience of the Croatian economy. Because of all this, Novotny believes, the prospects for the recovery of the Croatian economy are much better today than they were when the last recession hit the country.
This does not mean, however, that once the coronavirus crisis is over, that recovery will go smoothly and quickly. For starters, Croatia depends very much on tourism, and this year’s tourist season can already be considered lost. This means that tourism recovery, which generates a fifth of Croatia’s gross domestic product (GDP), can only be expected next year. Furthermore, Novotny warned, Croatia has also entered a new crisis with the same problem as in the last recession – the country’s infamous, draconian, cumbersome, inefficient and ubiquitous public sector.
He therefore proposes that Croatia does what the Baltic countries did at the beginning of last recession, and embark on rapid public sector reform. This, he noted, would open up space for the private sector, which would make it easier to get access to the money needed and speed up the recovery of the Croatian economy.
Macroeconomist Goran Šaravanja also believes that Croatia’s recovery from the crisis could be much quicker than it was in the last recession. He sees the biggest asset to that precisely in Croatian EU membership.
”Croatia’s risk perception is lower today. You can see that when we compare ourselves with countries not yet in the EU, like Serbia and Bosnia and Herzegovina: they’re not yet under the EU umbrella and don’t have access to such large EU funds as we do, nor are they part of the common market, so, they’re riskier,” explained Šaravanja.
In addition, he added, both the Croatian state, companies, and the population have been quite dilapidated in recent years, making the situation a little easier. In addition, in the past crisis, Croatia entered a double deficit – in the current account of the balance of payments and in the state budget, and this situation has changed in recent years.
“All this will make it easier for Croatia to recover, which, without these mechanisms, would be much harder and much slower,” concluded Šaravanja, adding that despite that, the country’s recovery will not go either quickly or easily.
Otherwise, according to the Resilience Index, Norway, which is not an EU member state but does hold membership of the EEA has the highest resistance to risks and shocks, and Denmark is the strongest among EU member states. On the other hand, the least resilience among the countries covered by the survey was demonstrated by Haiti, coming in an unimpressive 130th place. Compared to 2018, Rwanda has experienced the biggest leap on the ladder, and Northern Macedonia has seen the biggest drop, a survey shows.
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