ZAGREB, Nov 10 (Hina) - The International Monetary Fund (IMF) assesses that the economic situation in Croatia has improved and that the country has already realised the economic growth of 3.5 percent, which is above expectations.
Therefore, the four-percent-growth can be expected in 2001, particularly if investments are stimulated.
ZAGREB, Nov 10 (Hina) - The International Monetary Fund (IMF)
assesses that the economic situation in Croatia has improved and
that the country has already realised the economic growth of 3.5
percent, which is above expectations. Therefore, the four-percent-
growth can be expected in 2001, particularly if investments are
stimulated. #L#
This was the assessment which Hans Flickenschild, the head of the
IMF mission that paid a two-day visit to Croatia, gave at a news
conference he held in Zagreb at the end of their stay.
Positive steps in the economy were the consequence primarily of a
rise in export and consumption, but also of the fiscal policy the
Government was conducting in cutting the public spending,
Flickenschild added.
Although a rate of inflation rose (reaching 7.3 percent in
October), it is not a worrisome fact for Flickenschild as he regards
that the inflation rate will come to 7.5 percent in 2000.
In 2001, the inflation should drop to approximately four percent,
and this will be possible to achieve only if there is no further
increase in the price of oil and petroleum products, if the exchange
rate remains stable and if no rise be done in taxation obligations,
the IMF official told reporters.
The particular importance is attached to the enlargement of
investments which have so far been at an unsatisfactory level,
despite record-high amounts of foreign exchange reserves in the
commercial banks and the Croatian National Bank (HNB) after a very
good tourist season.
The IMF delegation has resumed negotiations with the Croatian
Government on a new stand-by arrangement. Although some headway has
been made, nothing concrete has been agreed on, Flickenschild said
answering a question and added that the IMF would have to consider
the final draft of the state budget for the next year. In addition,
the negotiations between the Government and unions on the social
peace came to a standstill, he said.
According to him, the adopted constitutional amendments have
strengthened the position of the Government making it possible for
the Racan Cabinet to concentrate more on the economic issues than on
political topics.
Asked about possible devaluation of the kuna, Flickenschild said
the IMF official stand is that taking into consideration the
current situation on the market there is in need for the
devaluation.
Although such a measure could lead to the enhancement of the export
and the reduction in the import, thanks to a short-term drop in
prices of domestic products, it would likely entail an increase in
prices which eventually lead to strong demands for an increase in
salaries and thus the effect of the devaluation will not be what it
should be.
Besides, this could trigger off many bankruptcy procedures as many
companies which are in debt have the currency clause in their debts,
and all of this can cause a recession, he explained.
Commenting on the latest draft of the 2001 state budget,
Flickenschild said he maintained that it would be better if the
final amount were smaller, but he was aware of the fact that Croatia
had a coalition government and that this compromise was
sufficiently good.
As regards the expected revenue from the privatisation, he believed
it was too early now to comment on it.
One should also be careful in drafting a projection of the budget
for the coming three years, as once the privatisation of companies
such as INA (Oil Industry), HEP (Power Industry), Croatia
Osiguranje (insurance company) is wrapped up, there will no longer
be such one-off inflows and this will have to be substituted, the
IMF mission's head concluded.
(hina) jn ms