Croatia's economy continues to grow steadily, aided by a positive contribution from net exports. The economic outlook remains upbeat, although the large fiscal deficit and high level of external debt pose continuing risks, reads the report.
The EBRD estimates that business activities in 2006 will grow by 3.7 percent. The 2005 inflation rate is estimated at 2.9 percent and the inflation rate for 2006 at 2.8 percent.
According to the report, foreign direct investments in Croatia in 2005 will reach 1.5 billion US dollars. For the sake of comparison, of the other EU candidate countries, Bulgaria and Romania are expected to attract investments worth 1.8 and 3.8 billion dollars respectively.
According to the report, which estimates the degree to which a transition country complies with the standards of industrialised market economies, Croatia has not made progress in any category of the transition process in the last year.
Croatia was given the best mark in only two of eight categories - small-scale privatisation and the trade and foreign exchange system. It received the lowest mark in the category of competition policy (2+). As regards infrastructure transition, Croatia was placed in the middle of the list, with mark 3, the same as Bulgaria, Latvia and Slovenia.
The average time needed to settle outstanding claims has been reduced from 18 weeks in 2002 to an average of 12 weeks in 2005, while the average in all transition countries is slightly more than 10 weeks.
Data on corruption, obtained from a survey of Croatian companies, show that 11.3 percent of companies regularly or occasionally pay bribe in relation to 12.9 percent in 2002 and the 20.6 percent average in transition countries.
The EBRD has also assessed company management standards and placed Croatia among countries where those standards only moderately comply with international standards. The other countries in the group are the Czech Republic, Estonia, Serbia and Montenegro, Slovakia and Slovenia.
The privatisation and restructuring of remaining state-owned assets remains a priority, reads the report. While administrative barriers to doing business have been reduced, further measures are still needed to enhance the functioning of the judiciary and public administration. A continuation of tight monetary policies and further fiscal consolidation are crucial to lower the persistently large external imbalances, reads the EBRD report.