ZAGREB Oct 5 The World Bank on Wednesday urged
Croatia's new cabinet, likely to be formed this month, to act
quickly to tackle fiscal imbalances and restructure public
spending so as to draw more investment and boost persistent low
The international lender said growth over the next two years
was unlikely to surpass this year's forecast 2.4 percent. Next
year the bank expects it to fall to 2.0 percent before
recovering to 2.4 percent in 2018.
"Next year we expect a major effort in fiscal consolidation
to affect growth ... Croatia's large refinancing needs require a
credible fiscal consolidation programme," said Sanja Madzarevic
Sujster, the World Bank's chief economist for Croatia.
Croatia's budget gap is seen coming in at 2.7 percent of
gross domestic product this year, falling to 2.1 percent in 2017
when it will need to refinance some 30 billion kuna ($4.49
billion) in maturing bonds and interest payments alone.
"Croatia has a good probability to exit the (European
Union's) excessive deficit procedure next year, which would
strengthen investors' confidence," Madzarevic Sujster said.
The European Commission has put Zagreb under strict
monitoring for macro-economic imbalances and deficits. Croatia's
public debt is now at around 85 percent of GDP.
The conservative HDZ and a small centre-right reformist
party, Most ("Bridge"), are in talks on forming a new cabinet,
and leaders have said they hope to strike a deal within days.
The World Bank also said that Croatia should strive to
achieve higher growth levels for which, besides addressing
fiscal and debt drags, a new government will have to strongly
improve the investment climate.
The main efforts, it said, should be focused on simplifying
regulatory framework, reducing non-taxation fees and improving
court efficiency, in particular related to land registries and
(Reporting by Igor Ilic; Editing by Thomas Escritt/Mark