Croatia in Dire Need of Bold Reforms

Croatia must press on with reforms to change the structure of its economy and avoid the risk of low growth and lagging behind other new European Union member states, a World Bank official said late Friday.

Elisabetta Capannelli, the World Bank country manager for Croatia, also welcomed Croatia’s ambition to adopt the euro, but warned that the way ahead would be demanding, Reuters reported.

“Croatia is a heavily euroised country and being part of the eurozone would be beneficial, but not before the country’s economy becomes resilient by implementing the bold reforms,” Capannelli told Reuters.

Croatia’s Prime Minister Andrej Plenkovic announced in late October the goal of adopting the euro within 7-8 years in a country where a majority of loans and deposits are denominated in the single currency.

Capannelli said Croatia’s reformist drive had subsided since the country joined the EU in 2013. “The momentum has pretty much been lost. Croatia is heavily reliant on tourism and has a very large and inefficient public sector. The private sector is small and insufficiently dynamic. Reforms are also needed for better growth prospects,” she said.

The World Bank is a key international player in Croatia providing assistance to make the economy more robust.

On a visit to southern Croatia on Friday, Plenkovic acknowledged it was necessary to work more on boosting productivity and structural reforms. “It is important to make a major move forward in 2018,” he said.