Inefficient state-owned enterprises compromise the productivity of the Croatian economy, the International Monetary Fund (IMF) said on May 2, after a team from the fund paid a visit to Zagreb between April 23 and 30.
“Decisive action is needed to divest non-essential state assets and strengthen the financial management of essential ones. Time is of the essence, as changes in these areas are highly sensitive to broader economic conditions, and are best carried out when times are good,” the IMF said.
The fund noted that macroeconomic conditions in Croatia have remained positive. Growth is gradually moderating, inflation has remained subdued, international reserves have increased, while public debt has been declining. In addition, fiscal performance has been strong despite the guarantee payments for the troubled Uljanik shipyards.
The IMF recommended Croatia to raise living standards durably and make the economy more dynamic through structural reforms. According to the IMF, Croatia should streamline the state, increase labour force participation, improve business conditions, preserve the sustainability of the pension system and make the healthcare system financially self-sufficient.
The fund noted that without an increase in retirement age, Croatia would incur sizable debts, for which the youth of today will have to pay. Alternatively, the elderly would be consigned to living on lower pensions.
“If the pension system is not aligned with today’s life expectancy, the range of the country’s choices will be limited between these two outcomes,” the IMF said.
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