WORLD BANK: DEEPENING, ACCELERATING REFORMS - MAIN CHALLENGE

BRUSSELS/ZAGREB, Sept 15 (Hina) - The main challenge Croatia is facing is deepening and accelerating reforms to promote competitiveness and increase the living standards of all, said Anand K. Seth, the new World Bank's director for South and Central Europe, presenting the World Bank study "Economic Memorandum for Croatia: A Strategy for Economic Growth Through European Integration" in Brussels on Monday. #L# The study analyses Croatia's economic achievements so far, as well as its future challenges, and offers reform and economic policy options which promote sustainable growth in line with the implementation of the country's Stabilisation and Association Agreement (SAA) with the European Union. Sustainable development and compliance with the SAA will be critical for the country's integration into Europe, reads a joint statement released by the World Bank and the Croatian government at today's presentation. Speaking at the presentation, Croatian Vice-Premier Slavko Linic said that the main objectives of the government's economic programme for this and next year would remain the same. "It is becoming more and more obvious that our strategy of increasing employment and living standards through fiscal consolidation, stable prices and reforms is yielding results - it is expected that income per capita in 2003 will exceed US$6,000, as against $4,371 in 1999, while employment will probably increase by about five percent until then," said Linic. It is noted in the study that although Croatia is already making significant progress in many areas, it must define priorities and the order of reform programmes. The study emphasises several long-term but strategically important reforms, such as the fiscal reform and the reform of the public administration, as well as improved property and creditor rights, the rule of law, strict budget limitations, and labour market flexibility. Although implementing the reforms fully will take time, it is recommended that the process start immediately, it is said in the study. It is also noted that the Croatian economy had deeply transformed since the country gained independence. Market laws and institutions have been introduced, and the plunge of real domestic product has been compensated despite a very unstable geopolitical environment. The incumbent government, elected in 2000, has accelerated the transformation process by opening to global markets through membership in the WTO and CEFTA, cooperating with neighbouring south-east European countries, signing the SAA with the EU, and speeding up the implementation of crucial economic reforms, the study reads. The World Bank has prepared similar reports for other economies in transition in Central and East Europe, the main purpose being to define crucial problems and determine the order of reforms, taking into account the countries' macroeconomic and social situation. (hina) rml