The fragile recovery is still reliant on external demand and faces a number of risks, of which the main one is weak recovery in Europe, as prospects for exports, credit and jobs depend foremost on a strong recovery in the 15 so-called old EU members, the World Bank said in the Croatia supplement to the report it presented on Tuesday.
The bank warned that potential investors shunned risks as there was no confidence in recovery.
As a result, the number of unemployed people is not falling, and private investments are decreasing at two-digit rates although the downturn has hit the bottom, the WB said.
The World Bank said speedier implementation of the Croatian government's Economic Recovery Programme was necessary to shore up the recovery.
The Programme encompasses reforms aimed at consolidating state finances through the reforms of social welfare, state aid and state administration. It also includes a comprehensive programme to encourage growth in the private sector through privatisation, improved investment climate, labour market reform, and the know-how and innovations.
In the first half of 2010, the EU10 continued with its recovery, strengthened finance markets and began reducing unemployment.
The rebound in global trade and industrial production and the accelerating growth in the EU15 have backed the economies in the EU10 and Croatia, thanks to close trading and manufacturing connections within the EU, according to the report.