In spite of all monetary measures taken in 2006, Croatia recorded a 22-23 percent credit growth, but this still cannot be compared to the credit growth in some of the new EU members, which exceeds 50 percent, the lead economist at the World Bank Croatia Office, Sanja Madzarevic Sujster, said in Zagreb on Thursday.
Madzarevic Sujster was speaking at the presentation of the EU8+2 Regular Economic Report "Credit Expansion in Emerging Europe".
She added that it was because of last year's growth that banks still had enough room to keep interest rates at a relatively low level, notably through internal cuts of other costs.
Under the report, which covers Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia and, for the first time, Croatia, the excessive loan growth rate in some countries is contributing to the overheating of the economy and major macroeconomic imbalances.
World Bank experts believe that the concentration of new loans in the household sector is not contributing to long-term growth and that it is creating conditions for an unsustainable asset price growth.
Madzarevic Sujster said that Croatia had managed to overcome that phase in mid 2006, when the growth of prices of real estate slowed down.
Still, Croatia's rate of economic growth is not as nearly as high as in most other countries covered by the report, which have an average growth rate of 7 percent, which indicates a gap that must be overcome, primarily by carrying out the 'more difficult' structural reforms, she said.
She noted that there was room for progress in the country's private sector, which accounted for only 60 percent of GDP, while in most other countries it was up to 75 percent of GDP. Madzarevic Sujster also pointed to rather high social spending and costs of restructuring of the Croatian Railways company, and high subsidies for the shipbuilding industry and health reform.
Speaking of the positive developments, she noted progress in the judicial reform, faster privatisation, the "Regulatory Guillotine" project, and the start of the reform of the state administration.