Croatia's economy still in recession-EIZ

The Zagreb Institute of Economics (EIZ) has announced that Croatia's economy is still in a recession, according to HINA. GDP is expected to decline 1.7% this year. An economic upturn, of 1.7%, is expected only in 2011.

The EIZ forecasts a continuation of negative trends on the labour market, with the worst expected next February and March, when the number of the jobless could exceed 330,000 and the registered unemployment rate reach 19%. Lack of readiness of those in charge of the economic policy to launch more comprehensive reforms could lead to a slow and weak economic recovery in coming years, according to the EIZ. This year's second quarter saw the ninth consecutive quarterly decline of GDP, of 2.5%.

Despite other negative indicators such as steep declines in construction and investments as well as a reduction in personal and government spending, there are encouraging signals, such as growing exports and a mild increase in retail. Inflation is expected to remain low and the balance of payments deficit to decline, while the fiscal deficit and the public debt are expected to grow markedly. Next year is expected to bring a mild economic upturn due to stronger exports, a recovery of personal spending and more favourable overall trends, in part due to the global economic upturn. On the other hand, 2011 is not expected to see an increase in employment.

Growing exports and declining imports will reduce this year's balance of payments deficit to about 3% of GDP, which should markedly slow down external debt growth. Next year, import growth will raise the balance of payments deficit to 3.8%. The EIZ expects monetary support for economic growth to continue, with a significant growth of liquid funds and the credit volume in 2011. The EIZ points to extremely poor investments, a relatively low export growth, which points to problems in competitiveness, and lack of measures to encourage competitiveness. The EIZ also notes the government's unwillingness to launch unpopular reforms, saying this is linked to parliamentary elections, although they are scheduled for the end of 2011

News source: Balkans.com link: article