A slight adjustment of the primary fiscal balance was recorded in 2011 for the first time since the outbreak of the crisis, and the new government has increased the adjustment and charted its course until 2014 when, thanks to the Fiscal Responsibility Act, it expects the primary fiscal balance to get close to zero, the HUB said.

"Although the fiscal direction is good, the step is too short," HUB director Zoran Bohacek said at a press conference, stressing the need for greater fiscal adjustment than that provided in the budget projections for 2012-2014. Otherwise, the public debt would continue to grow uncontrollably and might lead the country into a fiscal danger zone at the end of the present government's term in office, he added.

Bohacek said it was essential that a foundation be laid for the long-term reduction of public debt.

At the end of 2011, Croatia's public debt totalled 62.5% of GDB, as against 58.7% at the end of 2010.

The HUB's analysis shows that in order for the public debt to begin falling, a primary fiscal surplus of 1.2% of GDP should be achieved, and that Croatia has a chance to stay on the right track in 2013 and 2014 and balance its primary fiscal budget.

The analysis reveals that the budget execution in the first five months of the year was better than expected, but the budget components projected for reduction -- government transfer payments and remunerations for employees -- have not been lowered yet. However, other budget components have been reduced.

When asked about GDP, Bohacek said that the HUB stuck to its projections given at the start of the year, which he said agreed with the central bank's forecasts. He said that GDP was expected to contract by between 1% and 1.5%, adding that the contraction could be smaller provided some of the planned investment projects were carried out.