A Story of Unfortunate Events: The Crisis in South Eastern Europe – the Case of Croatia
28 October 2010 4:00 pm
Katarina Ott, Director, Institute of Public Finance, Zagreb
wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (entrance from the ground floor)
The South Eastern European countries (SEECs) were hit hard by the crisis. The growth of real GDP turned negative in 2009 after five years of strong growth that averaged 6.5% p.a. in 2004-2008. General government balances deteriorated, and government expenditures were higher than in other transition countries. The overall situation in Croatia is not much different from the situation in other SEECs - decreasing GDP, increasing general government deficit, decreasing current account deficit and high general government expenditure. Estimates for Croatia show an increase in the national budget deficit from 2.3 billion kuna in 2008 to 9.3 billion kuna in 2009 and a planned 14.5 billion kuna in 2010. This resulted in an over 50% public debt to GDP ratio at the beginning of 2010. The presentation will address the poor competitiveness, the democratic deficit, the necessity of the immediate fiscal retrenchment and long-run institutional reforms and readiness for these reforms. The way out of the crisis is expected to come automatically through the country's accession to the EU, but it will not be possible without the implementation of the economic recovery programme passed by this government or any other serious programme. The success will depend on the readiness of both citizens and politicians to accept reforms and to fulfil the requirements of the EU. As the situation in Croatia is more similar to that in other SEECs than many Croats are aware or would like to admit, some of the conclusions and recommendations might be of relevance for other SEECs.