Croatia yet to see signs of a sustained economic recovery - IMF.

By bne IntelliNews May 23, 2011
While the worst of the recession is over, Croatia is yet to see signs of a sustained economic recovery, the IMF said in a concluding statement, made available on the central bank website. Financial market conditions have stabilised since the peak of the crisis, but domestic demand continued to contract throughout 2010, with no pickup in production indicators, a deep slump in labor markets, and low confidence. Due to a narrow export base and weak competitiveness, Croatia was not able to take full advantage of the growth rebound in its trading partner countries, and GDP declined in 2010. Long-standing challenges are weighing down Croatias economic outlook. Medium-term growth prospects are weak due to deep-rooted structural rigidities and competitiveness problems. Meanwhile, vulnerabilities are high. Fiscal deficits and public debt have been rising. High external indebtedness is particularly worrisome given the narrow export base. Large balance sheet exposures to foreign currency risks reinforce the authorities preference for a stable exchange rate. At the same time, limited policy space is compromising Croatias ability to withstand shocks. The IMF advised the implementation of a consistent set of macroeconomic, structural, and financial sector policies to ensure sustained growth. To address competitiveness problems, priority needs to be given to structural policies and fiscal consolidation.

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