Bloomberg News

Croatian Economy Will Contract 1% This Year, Rohatinski Says

May 10, 2012

Croatia’s economy will contract 1 percent this year as personal consumption and investment decrease, central bank Governor Zeljko Rohatinski said.

The fiscal deficit will narrow to “about 5 percent” of gross domestic product on the government’s cost-cutting measures, Rohatinski said today at a conference in Opatija, Croatia, according to a statement released by the bank. In December he forecast a “possible” recession, while forecasting the budget deficit to widen to 7 percent of economic output, should the government fail with fiscal consolidation efforts.

“Croatia needs a serious approach to basic problems, it needs to further consolidate the public sector, remove impediments to investment and improve the level of enterprise in the private sector,” he said.

Croatia, which is set to become the European Union’s 28th member in 2013, needs to service a growing external debt and revive its faltering economy. Prime Minister Zoran Milanovic said in February that the economy will grow 0.8 percent in 2012, while the World Bank said last month the economy will contract 1 percent, after stagnating in 2011.

The government, which took power in January, proposed to cut spending by 4 billion kuna ($689 million) by approving lower subsidies to state companies and clipping the public wage bill.

Inflation will rise to 3.5 percent this year from 2.1 percent in 2011, Rohatinski said.

To contact the reporter responsible for this story: Jasmina Kuzmanovic at jkuzmanovic@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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