Croatian National Bank (HNB) governor, Boris Vujcic said on Thursday that exports were expected to continue to grow in 2016 and recovery of consumption and investments would continue, adding, however, it is still necessary to implement structural reforms which will increase short
Vujcic said this at the 19th edition of the expert conference called "Croatian Money Market", held in the northern Adriatic resort of Opatija on Thursday.
The central bank governor said the structure of Croatia's economy was still relatively unfavourable, adding that more complex products and services were necessary to accelerate growth. Vujcic stressed that obstacles which make business operations more difficult needed to be removed.
Vujcic said economic growth was expected to continue in 2016, at 1.8%, adding that consumption could also go up 1.8%. He noted that salaries in Croatia were lower than believed and that this indicated that Croatia was even more competitive than believed.
Speaking of a negative inflation rate, Vujcic said this was a consequence of lower prices of raw material on the global market. "In 2016, average annual inflation of consumer prices could go down to -0.9%," Vujcic said.
According to the HNB governor, in conditions when the economic recovery has just started, inflation is low and pressures on the exchange rate are subdued, the central bank will continue pursuing the expansionary monetary policy. He also announced the continuation of repo operations and reassured the event that the HNB was adamant to keep the kuna exchange rate stable.
The governor also said that fiscal adjustment was strong last year and that it had exceeded the expectations of the HNB, the European Commission and the fiscal authorities. He added that the consolidated general government deficit was reduced to 3.2% of GDP. "The result is more favourable than the level of deficit we needed to reach in 2015 during the Excessive Deficit Procedure and Croatia has thus made a significant step forward in ending the procedure," he added.
Vujcic said Croatia's economy had seen positive changes in the past three years, adding that the economy was turning to foreign markers, which was a prerequisite for higher growth rates and better living standards. He stressed that export figures started to grow only after Croatia joined the European Union, but despite the progress, the structure of Croatia's exports was still unfavourable compared to peer countries. He stressed the importance of small and medium size companies for the export sector, adding that the main obstacle to their business activities was the institutional framework.
"I believe that the abolishment of seals is a good thing, but this should be only the beginning of much more complex changes," Vujcic said commenting on the government's decision to abolish the use of official seals.
Vujcic said that according to the World Bank's Doing Business report, Croatia's results in 2016 were below the average and that its expenses were relatively high compared to its peers. He said costs needed to be cut and administrative procedures simplified.