World Bank Releases New Report on Croatia

The World Bank officially released today a major new analytical study entitled “A Strategy for Growth through European Integration.” The study analyzes Croatia’s economic achievements thus far and the challenges ahead, and provides reform and economic policy options to promote sustainable growth consistent with the implementation of the Stabilization and Association Agreement (SAA). Both sustainable growth and compliance with the SAA will be essential for Croatia’s European integration. The Croatia Country Economic Memorandum (CEM) examines the structural reforms that need to be undertaken in order to complete the transition to a market economy and tap into Croatia’s growth potential. These reforms cover fiscal policy and public administration, improved property and creditor rights, functioning legal system, agriculture and environment adjustment and education reform. The Croatia CEM analyzes the opportunity for economic growth through SAA implementation and European integration. The study notes that much of the growth impact will come not only from increased access to EU and integration with markets, but from the improved investment climate that would result from aligning Croatian policies and institutions with EU best practices. This would facilitate the development of low-cost, high-quality integrated infrastructure, harmonization of financial regulatory frameworks, modern social institutions, and more generally private sector development driven by the strengthening of competition from broad-based trade liberalization. Croatia’s economy has undergone profound transformation since independence. Market laws and institutions have been introduced and the enormous real output decline of the first war-torn years of independence have been virtually recuperated. These achievements have been made despite a highly unstable geopolitical environment. The current government elected in 2000 has accelerated this transformation by opening Croatia to global markets through WTO and CEFTA memberships, cooperation with neighbors in Southeastern Europe, the signing of the Stabilization and Association Agreement (SAA) with the EU, and accelerating the implementation of key economic reforms. “We hope this study, which examines Croatia’s achievements in introducing market mechanisms and institutions and the challenges ahead, will be useful to all of us devoted to the cause of Croatia. The need is now for Croatia to consolidate the impressive economic and social reform agenda it has embarked on, aimed to promote growth and advance towards the goal of EU integration. The critical challenges the country faces is to deepen the reforms and accelerate the pace of implementation to enhance Croatia’s competitiveness and raise living standards for all,” said Mr. Anand K. Seth, World Bank’s new Country Director for South Central Europe (Bulgaria, Croatia, and Romania).