Addressing reporters in his office on Wednesday after he and his economic advisors studied the draft revised budget, Josipovic stressed that investments into science, education and new technologies were keys to progress and recovery from the crisis.
"Without these three fundamental factors, Croatia will keep lagging behind and every new budget will be surrounded by unpleasant discussions such as this one," the president said, calling on policy-makers to think about next year and about reforms necessary for an economic upturn.
Josipovic expressed satisfaction with the fact that the revised budget did not envisage cuts in salaries, pensions and social benefits.
"I am glad as I hold that a great number of people employed in the public sector is underpaid, which affects their performance," he said.
However, he added that the state administration and administration in local units was expensive and inefficient, with too many people on the payroll.
"I don't think that people should be fired right away, but I urge launching a project aimed at restructuring the state and public administration," he said.
Noting that the budget does not incorporate serious measures to boost the economy and export, he said he expected the government and the ministries of economy and finance to consider additional stimulating measures to that effect.
Commenting on borrowing, Josipovic said that Croatia was borrowing money at markedly higher interest rates than some other countries.
By taking loans from domestic banks, the state generates the bad effect of "squeezing out money" which is thus given to the state instead of going to the economy, he said.
Josipovic expressed concern over a deficit of 4.2 percent of Gross Domestic Product.
"There are countries with higher deficits but they have different economies and budget structures," the president said.
He sees "the abrupt increase in the public debt" since 2008 as a worrisome trend. Thus, by the end of this year, the public debt will account for some 50 percent of GDP and the external debt is to rise to nearly 100 percent of GDP.
Explaining that the revised budget was a consequence of the current situation and that it failed to meet the economy's needs, Josipovic said that he expected efforts aimed at tackling the causes.
He criticised all key actors in the adoption of the budget for "being guided by their own interests and needs" and called for paying more attention to the public interest.