Croatia is going slowly in the right direction, Harrold told reporters, speaking about a rapid increase in exports on the one hand and high unemployment on the other.
Croatia's fiscal deficit is still high, above five percent of Gross Domestic Product, while it should go down below three percent, Harrold added.
The government should implement the measures defined in the Economic Recovery Programme. When you pass the peak of the recession, it is the right time for fundamental structural reforms and Croatia needs to carry them out before its entry into the European Union because it will be much harder later, the World Bank official said.
He recommended public spending cuts, regardless of the election year, adding that Croatia could follow the example of Great Britain, the Czech Republic or Slovakia, where parties that vowed to carry out belt-tightening fiscal policies had won elections.
According to him, Croatia should encourage private investments and prepare high-quality public projects to draw EU funds.
It is still difficult to attract private capital investments because Croatia's environment still feels the consequences of the recession, although some countries, such as Germany, Slovakia and Poland, are recovering very successfully.
The Croatian economy depends to a large extent on developments in other countries, for instance on the speed of Germany's recovery or on the state of affairs in the Italian economy against a backdrop of an ongoing political crisis in that country and turmoil in north Africa, according to Harrold.
High unemployment presents a problem of stimulating stronger employment in the private sector that lost more jobs than the public sector during the crisis and in this context the World Bank official spoke about necessary changes to labour legislation in order to remove obstacles to the easier dismissal of surplus labour and also to facilitate new employment.
Harrold praised the Croatian National Bank for pursuing a competent policy during the crisis which was why the Croatian banking system retained stability during disruptions throughout Europe.