Croatian economy on the path of recovery?

Croatian economy on the path of recovery?


By Marija Avramovic – Zagreb

In its latest analysis of the situation in the context of the recent summit in Dubrovnik, the distinguished british weekly “The Economist” called Croatia an ailing country, of which the government is a big mess.

“The Economist” warns that Milanovic’s government, just like any other since the ninties, didn’t solve the problem of bulky state administration and too many cities and municipalities. The government lacks the will to break powerful interest groups, such as unions, which are resisting any change.

The article also warns of the burning issues – stagnating economy which recovery is not in sight, a huge bureaucracy that further complicates recovery, and a solvency problem so it’s not a surprise that more and more young and educated people leave Croatia.

“Mr Milanovic has a reputation for intelligence but not for his political skills or communication. He commiserated with victims of the disastrous floods in May by telling them about a burst pipe he once had”, noticed the author of “Ailing Croatia: A mighty mess” about Croatian Prime Minister Zoran Milanovic.

Last week’s report by Standard & Poorwhich confirmed the current long-term credit rating Croatian “BB / B”, as well as short-term rating of ‘B’, with a stable outlook retained confirmes the allegations of its ill economy.

“The economic recession in Croatia will continue this year, which means that the public debt will continue to grow, and this supports our view that short-term benefits of joining the European Union remained limited”, reported S&P.

The agency predicts that the croatian economy this year is to sink for another 0.9%, which will mean a six-year recession – the longest in Europe since the beginning of the crisis in 2008.

S&Pprojected that the croatian economy will grow by 0.6% in 2015 and by 2% by 2017, based on the recovery of investment.

“During this period, domestic expenditure will recover for the first time since 2008 and trends in employment will improve so the deleveraging of the private sector will dwindle in early 2015”, according to the S&P report.

Business and Trade Minister Gordan Maras yesterday at a press conference promised an economic growth in 2015 and said that growth next year could be about 2%.

To support this, Maras enumerated activities of various ministries that will generate lots of investment.

As far as credit rating, Maras said that Croatia is facing further consolidation and control of the deficit and the budget review, probably in September. He pointed out that the relevant agencies, in spite of the generally poor sovereign ratings, considered Croatian prospects to be positive.

On the other hand, an economist Adela Poprzenovic, who was born in Croatia but has lived in Sweden since 12, claims that Croatian emigrants send home more money than the total amounts of foreign direct investment.

In 2012 the have reached one billion euro and last year only slightly more than half a billion euro.

Cash transfers from Croatian diaspora was the topic of her masters thesis at the prestigious Swedish School of Economics and Management at the University of Lund.

Of course, she could investigate only the money that comes through official channels. The second part, the one that emigrants send by relatives or leave while on vacation, remains a gray area.

“I’m sorry that no one seriously engaged in this topic. This is big money with great potential”, said Poprzenovic to Vecernji daily.