World Bank, EU Praise Croatia
Business - Dow Jones Business News
World Bank, EU Praise Croatia, But Insist On More Reform
Mon Sep 15,10:58 AM ET
BRUSSELS -(Dow Jones)- Croatia won plaudits for its strong economic performance Monday from the World Bank (news - web sites) and the European Union (news - web sites) Commission, though they said it must still cut public spending, improve property and creditor rights and loosen up its labor market.
The Brussels meeting coincided with the publication of the World Bank's inaugural report on the country.
Croatian gross domestic product growth reached an impressive 5.2% last year, a result of the government's market-oriented reform agenda and a tourism boom.
"The enormous real output decline of (Croatia's) first wartorn years of independence has been virtually recuperated," said Arnant K. Seth, the World Bank's country director for south central Europe.
The Bank praised the government for opening up to the global economy, joining the World Trade Organization (news - web sites), and applying in February to join the E.U. The government also increased tax collection, cut public spending and kept the exchange rate stable, while overhauling the banking sector and loosening the job market.
But the Bank stressed the need for further change in order to attract more foreign investment. In particular, Croatia must revamp its public finances and public corporate sector. The government must cut its deficit by at least 2% of GDP (news - web sites) and stop propping up unprofitable public enterprises. More than half of publicly owned firms are making losses, and the Bank noted that radical privatization program is required.
Even after sizable budget cuts, "Croatia has one of the largest public sectors in the world," the Bank said in its report.
Croatia's Vice Prime Minister Slavko Linic, present for the Bank report launch, agreed with most of the policy prescriptions. He said Zagreb will concentrate on passing a new privatization law and privatization in the transport and energy sectors.
But he warned against haste. Croatia now suffers from an unemployment rate of 15.2%, and that already high figure could soar because of restructuring.
"We have a difficult job ahead of us," Linic cautioned. "The list of high- priority goals is a very ambitious list, but it is attainable."
By William Echikson and Karolina Rucinska, Dow Jones Newswires; 32 2 285 0134;william.echikson@dowjones.com
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