Books on Croatia
% of GDP
Update No: 114 - (28/11/06)
Croatian economy surges into new era
With the end of the current agreement with the IMF, Croatia will take the reins
of its fiscal, economic and monetary policy. The Fund will assume an advisory
capacity to help the country along.
Croatia's current arrangement with the IMF came to a close in November. With all
of the goals met under the stand-by arrangement, the country has decided to
begin handling its economic, fiscal and monetary policy independently. Prime
Minister Ivo Sanader announced the decision in October, saying that the new
policy confirms the country's economic maturity and demonstrates that the
European Commission backs the IMF opinion.
In 2004, the IMF Executive Board approved a 20-month stand-by arrangement to the
tune of 120m million euros to support Croatia's economic programme. The IMF said
then that Croatia's economic growth and inflation performance since the
mid-1990s was comparable to Central and Eastern European countries. But the
positive performance was marred by the worsening of Croatia's external current
account deficit and rising external debt.
These trends -- which have accelerated since 2000 -- made Croatia vulnerable to
external shocks. Authorities recognised this and called on the IMF to assist in
designing a set of policies for fiscal consolidation and supporting structural
The 2004 arrangement focused on two major issues: the high national deficit and
rampant external debt. The deficit is at 3% this year, down from 6.3% in 2003.
External debt has been cut by 911m euros over the past two and a half years, and
has slowed in growth -- to 12% this year, down from 36% in 2003.
The post-IMF epoch
In light of these trends, Zagreb now wants to try to boost economic performance
on its own, relying on the Fund's occasional advice, but not on concrete and
practical financial arrangements.
Starting this month, when the current stand by arrangement with the IMF is
complete, Croatia will not sign a new one. From now on, the Fund will serve as
advisers, not as creditors. IMF representatives will visit Croatia once a year
to review the actions and policies of the government.
The IMF has said it welcomes the country's readiness to take charge of its
economy, praising Croatia for the results achieved since 2004.
According to the Fund, continuation of privatisation and restructuring of the
shipbuilding industry are two vital areas requiring attention. Sanader agreed
that these areas remain the highest priorities.
Croatia remains optimistic over its EU bid - PM
Croatia's buoyant economy boosts its chances of joining the EU. It opened
membership talks with the EU last year and is hoping to join by the end of the
decade. Prime Minister Sanader said he believed there would be no obstacles to
his country's membership in the European Union once it meets all criteria,
despite a warning from the union's executive arm that the enlargement process
should slow down.
Sanader labelled a report on European Union enlargement strategy and its
challenges, unveiled in mid-November in Brussels, as a "good basis for
further enlargement. We support that document ... we see from it that there
would be no problems for Croatia's membership once we meet all criteria and
conclude negotiations," with the EU, Sanader said.
The European Commission warned the EU not to let more nations join until it can
integrate them and has the institutional tools to function properly. It said
that the constitutional impasse which arose last year must be overcome before
the bloc expands beyond 27 members.
"Institutional reform is needed to improve the effectiveness and efficiency
of decision-making of an enlarged Union," Enlargement Commissioner Olli
Rehn told reporters in Brussels.
The constitution was meant to streamline the EU's institutions after it took on
board 10 mainly ex-Soviet satellite states in May 2004, and with Bulgaria and
Romania also invited to join in January. But voters in France and the
Netherlands rejected it in referendums last year -- some concerned that large,
relatively poor and mainly Muslim country Turkey was also in line -- throwing
the EU into crisis.
However, Sanader said that regardless of discussions on the European
constitution and all other institutional problems an important principle,
according to which "agreements must be honoured," remained. "It
means that Croatia has a clear goal -- a fully-fledged (EU) membership at the
end of talks," he emphasized.
EU pushes Croatia and other former Yugoslav republics to reform
Former Yugoslav republics need to work harder to modernize their economies
and root out corruption to improve their prospects of joining the European
Union, the EU said.
Croatia, the ex-Yugoslav state closest to getting into the EU, is making only
limited progress in adopting EU-style free-market regulations and in stamping
out organized crime, the European Commission said. "The road to EU
accession goes through substantial reforms," EU Enlargement Commissioner
Olli Rehn said at a Brussels news conference in mid- November. "It will not
be a walk in the park."
Macedonia, Serbia, Montenegro and Bosnia-Herzegovina faced similar criticism,
highlighting the hurdles to EU membership that remain in the aftermath of the
violent break-up of Yugoslavia. Croatia, the richest EU aspirant, is aiming to
join in 2009, a date that depends on Croatia's progress as much as on the EU's
willingness to let it in.
Slow economic growth in Western Europe and an upsurge in anti-immigration
sentiment has fuelled opposition to further EU expansion, though focused more on
Turkey than the ex-Yugoslav republics. Croatian Prime Minister Ivo Sanader said
he was satisfied with the report, which talks about the progress Croatia made
and the tasks ahead. "We are looking forward with optimism toward
cooperation with the European Commission and we are preparing for full European
Union membership," he told reporters in Zagreb. "All the reforms that
must be completed, from judiciary reform, public administration, fight against
corruption and organized crime, all that is ahead of us, we are doing that for
ourselves as well," Sanader said.
Croatia's entry negotiations got off to a bumpy start last year after a
six-month delay due to the government's inability to arrest General Ante
Gotovina, the leading war-crimes suspect still at large from the 1991-95 war.
Rehn said further efforts were needed in particular "as regards judicial
reform, the fight against corruption and economic reform."
"EU accession is no bullet train, no Eurostar," Rehn said. "It is
rather like the Orient Express, which despite its name is not an express
Gas pipe network will be completed by 2010
A gas trunk line that will enable the establishment of a gas piping network in
Lika and Dalmacija, gas piping between Bosiljevo and Split and to Ploce,
together with connecting gas piping and measurement and regulation stations,
will cost about 250 million Euro, "CT" was cited by website
reporter.gr as reporting.
After the construction of the gas pipeline to Split, the extension of the
pipeline to Ploce will be constructed by 2010, after which the southern-most
Croatian town of Dubrovnik will be connected to the national gas piping network,
Vladimir Djurovic, a Plinarco representative, said.
Biofuels sale to start in 2007 - Croatia
Starting next year, the sale of biofuels, especially biodiesel, will finally
start on the Croatian market, energyobserver.com reported on November 8th.
The ministry of ownership, labour and entrepreneurship, based on the
government's regulation about biofuel quality, is preparing a plan on
introducing biofuels to the domestic market, which will define a compulsory
annual quantity of biofuels that has to be introduced on the market by each
distributor in 2007. By the end of 2010, the percentage of biofuel in the total
fuel consumption should be 5.75 per cent. Based on the regulation, the biofuels
to be offered in the market are pure biodiesel or biodiesel mixed with
eurodiesel, petrol mixed with biofuel, bioethanol mixed with liquid oil fuel up
to 85 per cent, biogas, pure plant lubricants and other liquids acquired from
biofuel. Due to the compulsory sale of biofuels from next year, the ministry of
agriculture, forestry and water management announced the introduction of state
incentives for the organised growing of oilseed rape for biodiesel production.
FOOD & DRINK
Plodine invests 8m Euro to open two supermarkets
Croatian supermarket chain Plodine has invested eight million Euro to open two
new supermarkets. The two new outlets take its countrywide total to 25, and are
located in the southern cities of Cakovec and Pitomaca, Croatia Post reported.
The company plans to open five more by the end of the year, it was reported. The
supermarkets will create a total of 90 jobs. Plodine had a turnover of 136
million Euro last year, compared to 106.2 million in 2004.