Croatia needs to further strengthen its economic competitiveness, reduce the fiscal deficit, and pursue structural reforms, the head of the International Monetary Fund mission to Croatia, Zuzana Murgasova, said on Thursday, welcoming the government's economic recovery programme.
She was speaking during a meeting with representatives of the parliamentary Finance and Central Budget Committee, whose chair, Goran Maric, briefed the IMF delegation about the state of affairs in Croatia, according to a statement from parliament.
Maric said 2009 was extremely difficult for the Croatian economy, as confirmed by a 5.8% annual drop of GDP. This year saw the first positive results of the economic recovery measures, but GDP is expected to rise only next year, by 1.6%, he added.
Maric said next year's budget would be at this year's level, adding that the government's economic recovery measures were being implemented and that complete results could be expected in the middle term.
Murgasova said the IMF was aware of the challenges Croatia faced, notably the fight with the consequences of the recession, but also the final state of the accession negotiations with the European Union.
She said the IMF, too, expected positive indicators for Croatia only in 2011, but added it was nonetheless necessary to further strengthen economic competitiveness, reduce the fiscal deficit, and pursue structural reforms.
Murgasova welcomed the government's economic recovery programme, saying it did a good job of detecting current problems. Progress is visible in labour legislation, primarily the new provisions of the pension insurance act, and in the easier registration of companies and the reduction of para-fiscal levies.
Areas requiring additional reform are the financial sustainability of the pension and health care systems, the downsizing of the public sector and improving of its efficiency, and the strengthening of labour market flexibility.
Murgasova once again reiterated the need to cut public expenses, saying that such measures were painful in the short term, but that they provided for the growth of the economy and employment, and therefore living standards, in the long term.
Committee members Gordan Maras and Zlatko Koracevic agreed that it was necessary to cut spending and carry out all the necessary reforms as soon as possible in order to boost the economy.
Maric said it was also imperative to find a way to increase employment as soon as possible.
The two sides agreed to cooperate further.
