IMF MISSION PREDICTS TWO PERCENT DROP IN CRO GNP IN 1999

ZAGREB, Oct 8 (Hina) - According to estimates of the International Monetary Fund (IMF), Croatia's Gross National Product (GNP) will drop by two percent this year, while in 2000 a recovery is expected, alongside higher export, a stable currency rate, and low inflation. The IMF Mission, which spent two weeks in Croatia as part of regular annual consultations, recommended the continuation of the trend of reduced state expenditure, structural reforms, and privatisation. The head of the IMF Mission to Croatia, Hans M. Flickenschild, told reporters in Zagreb on Friday the IMF believed the reasons behind the lower GNP were decreased personal spending, reduced trade with Croatia's two biggest partners, Italy and Germany, the Kosovo crisis, which did not affect tourism as negatively as feared, and the state budget. According to data the Croatian Finance Ministry submitted to the IMF Mission, the state and public sector's share in the GNP in 1997 was 49.9 percent. Since data relative to 1998 is as yet unavailable, the IMF estimates the share to be between 55 and 60 percent. Flickenschild said it was necessary to cut the share by four to five percent, adding the new government, to be constituted after the parliamentary elections later this year, will have to pay attention to the maintenance of a low inflation and a stable currency rate. Flickenschild in particular singled out the necessity of salary discipline, especially in the government and state sector. He also expects the continuation of the privatisation process of state-owned companies, and the financial restructuring of banks. The IMF Mission will compile a report on Croatia for 1999 upon returning to Washington, and will then forward it to the Executive Committee, which is expected to discuss it in late December or early January. (hina) ha jn