ZAGREB, May 23 (Reuters) - The International Monetary Fund (IMF) urged Croatia on Wednesday to push on with structural reforms to support its goal of joining the euro zone.
Croatia’s prime minister has said he wants the Balkan country to start using the euro within seven or eight years.
After a regular consultation, the IMF said Croatia needed to streamline public administration and cut red tape; strengthen the legal process and property rights; and make its labour market more flexible and state-owned firms more efficient.
It forecast Croatia’s gross domestic product (GDP) growth would remain at 2.8 percent in 2018, but would decelerate over the medium term toward 2 percent in the absence of substantial structural reforms.
The lender praised Croatia’s recent fiscal performance, which resulted in a general government surplus in 2017 for the first time since it declared independence from the former Yugoslavia in 1991.
Croatia’s public debt fell by nearly 5 percentage points to about 78 percent of national output at the end of 2017, but the IMF warned that fiscal gains needed to be retained to reduce it further.
It said the country should offset any further tax cuts by introducing a modern real estate tax and focus on lowering wage bills.
Though the banking sector remained in good shape, the IMF warned it should be monitored closely due to the expected tightening of global financial conditions and the credit risk arising from uncertainties over indebted food group Agrokor.
Agrokor, the largest firm in the Balkans with some 60,000 staff, was put under state-run administration last year and its crisis manager has said it plans to present this week a settlement text to its creditors. (Reporting by Maja Zuvela; Editing by Mark Potter)