"Croatian output, after declining by 5.8 percent in 2009, is projected to recover by 0.5 percent in 2010 and 3 percent in 2011," the World Bank said on its website.

The Bank's senior economist for Europe and Central Asia and lead author of the report, Kaspar Richter, was quoted as saying that "while the recovery in the global economy is under way, the outlook for the EU10 region and Croatia remains uncertain. Unemployment is still rising and is expected to decline only in 2011."

"In view of the weak recovery, companies are likely to postpone hiring of new workers until growth expectations are firmer, especially since many businesses reduced the average per worker work hours during the crisis," Richter said.

The EU10 countries and Croatia are advised "to secure their recovery through fiscal consolidation that makes governments slimmer and more efficient, and a better investment climate that raises productivity and creates jobs.

The World Bank's senior economist in Croatia, Sanja Madzarevic Sujster, said that signs of a mild recovery were visible in Croatia and that the continuation of positive trends, which would be made conditional on the recovery in exports to the EU and on funds from the EU, was expected.

During February, the number of the announced vacancies on the labour market increased, but it remained to be seen whether those were long-term and high-quality jobs, she said.

She added that the government's spending rationalisation protected the population with the lowest income and that those measures should continue.

In her opinion, the reduction of public spending is important not only for easier servicing of the debts but also for enhancing the country's competitiveness.

Reducing the spending opens debates on reducing tax burdens which consequently increases the competitiveness, she said.