Croatian President Criticises Lack of Reforms

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ZAGREB, December 3, 2018 – Croatian President Kolinda Grabar-Kitarović warned on Monday that despite reforms, Croatia was the least competitive of all countries of the so-called New Europe, and called for amalgamating economic and demographic policies to curb emigration.

Speaking at an event at which awards were presented to the best business people and business events of 2018, the president said that there was no doubt that the numerous positive economic indicators, recorded this years and in previous years, were owing to economic policies that had successfully launched positive trends, visible in public finance sustainability, macroeconomic and fiscal stability and the growth of export, consumption and employment.

“Given the estimates that 2019 will also be a year of growth, we have reason to be moderately optimistic,” she said, but warned that there was no room for complacency because “not all citizens have felt the economic growth nor have we successfully responded to the challenges that lie ahead.”

She said the first challenge was insufficient intensity of work on reforms designed to step up productivity growth and create a favourable business environment. “Even though work on reforms has been ongoing, we are still lagging behind comparable peers in the EU and in Central and Eastern Europe,” she said, noting that the World Bank and the World Economic Forum “consider Croatia the least competitive country, with worst business conditions in the so-called New Europe club,” said Grabar-Kitarović.

She called for stepping up reforms that can secure long-term, higher rates of growth and the growth of living standards. “We all want a growth rate of more than 2.8%,” she said.

Grabar-Kitarović said the second challenge was the unfavourable structure of the national economy, relying mostly on tourism, and added that the third challenge was the lack of a clear vision and strategy of economic development.

She reiterated that Croatia had to start developing those economic sectors in which it had a comparative advantage and decide where it wanted to be in 5, 10 or 20 years.

She identified as the fourth challenge external negative risks, such as an increasingly insecure environment caused by tensions in international trade, oil price oscillations, possible interest growth, uncertainties related to Brexit, migrations, etc.

The president particularly underlined the challenge of a growing labour shortage caused by increased emigration and depopulation.

If the current disastrous demographic trends are not reversed, by 2051 Croatia will lose more than 1.1 million inhabitants in relation to the 2011 census. The working contingent will shrink to 1.8 million, the number of young people under the age of 14 will drop by 49.1%, the number of working-age people will shrink by 36.5% while the number of elderly people will grow by 24.4%, Grabar-Kitarović said, calling for focusing on the implementation of population-boosting measures.

She noted that depopulation trends were economically motivated to a significant extent and called for amalgamating economic and demographic policies to stop emigration and reverse the extremely unfavourable internal migration trends.

Addressing the event, Economy Minister Darko Horvat said that investments, innovations and digitisation were crucial for enabling economic growth.

Investments this year are expected to amount to two billion euro, which will make 2018 the most successful year in terms of investment in Croatia’s history, the minister said.

Investments mean investing into economic security, Horvat said, adding that 2019 should be a year of digital transformation.

At the ceremony, awards were presented to the companies Geni-i, Solvis, Agrimatco and Zagreb’s international airport.

For more on the Croatian economy, click here.


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