The Croatian National Bank (HNB) governor Zeljko Rohatinski has warned that there will be no recovery from the crisis without substantial reforms and that any further delays could produce far-reaching negative consequences.
"Next year, with moderate optimism, will be rather similar to 2011 in terms of economic performance. It is important, however, whether 2012 will see the beginning of the formation of sound grounds for further growth and development, as the current inertia has seriously delayed that process, and further delays can have far-reaching and long-term negative consequences. Therefore, the new government must act immediately," Rohatinski said at the Zagreb Stock Exchange conference in the northern coastal town of Rovinj on Friday.
The event brought together some 200 experts and pundits from the capital market.
Commenting on the current economic situation in the country, the HNB governor said that Croatia was stagnating, devoid of stronger impulses for economic growth and structural changes and burdened with heightened risks and strong social and political resistance to change.
"There is no exit from the crisis without substantial reforms against the backdrop of unrealistic expectations that continued global economic growth and the completion of (Croatia's) EU accession negotiations will constitute a driving engine to pull the Croatian economy without painful cuts," the governor said, adding that the reforms and political changes provided for in the Croatian Economic Recovery Programme were either prolonged or diluted.
According to him, the country's economic situation can be looked at from an affirmative and a cautious point of view.
From an affirmative point of view, negative trends in the Gross Domestic Product were halted this year after a 7.2-per cent decline on the aggregate in the previous two years and the current account deficit was reduced to a historic minimum. The halting of foreign debt growth also reflects the successful rescheduling of the debt, Rohatinski added.
A matter for caution is that the GDP growth and the current account gap's reduction were not achieved through development but through differentiated reduction of key components of supply and demand, he added.
Rohatinski also cautioned against a great rise in the fiscal deficit from 18 billion kuna in 2010 to 21 billion kuna this year and against the growing public debt from 47 per cent to 51 per cent of GDP on the year.
One of the favourable circumstances is that in 2012 the state's financial obligations abroad will be less by half than in 2011, he added.
