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Credibility in reforms key for Croatia, World Bank official says

ZAGREB, June 30 (Hina) - Croatia must cut its high debt and budget deficit and spur private sector growth if it wants to create jobs, Carlos Pinerua, who heads the World Bank's office in Zagreb, told Reuters on Tuesday, adding that "the key question is showing credibility in reforms."

This year the gap is projected at 5 percent, while public debt is close to 90% of GDP, Reuters said, adding that Croatia's economy last expanded in 2008, having lost some 13% of output since then, and that this year it is likely to see mild growth of around 0.5%.

"At the moment any growth is good, but it's not enough. To dent unemployment the growth should be at least two to three percent," Pinerua was quoted as saying.

He said Croatia was vulnerable to external and internal factors, with high debt levels and unemployment at around 17%.

"Currently it is possible to borrow at low interest rates, but that could change. So it is now the time to pursue reforms to be better prepared if the global borrowing conditions worsen," Pinerua said.

According to him, "the key question is showing credibility in reforms... I think it is our job to warn what can happen if reforms are not pursued and credibility gets lost. We all know what is happening in Greece. It is important for the people to realise the risks."

He said the main problem was the poor business environment, stifled by frequently changing regulations and red tape, particularly at the local level, which made it difficult to set up businesses.

"Such an unfavourable climate especially hurts small- and medium-sized enterprises and they should become the main growth and employment driver," Pinerua said.

He also said Croatia must improve management of many public firms which still weigh heavily on budget expenditure.

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