EBRD for changing financing model in transition region

The European Bank for Reconstruction and Development (EBRD) has called for changing the financing model in the transition region, in which it includes Croatia, in order to overcome the investment gap, which is a serious obstacle to growth and prosperity, it was said in Zagreb on Thursday at a presentation of the EBRD Transition Report for 2015.

The "Rebalancing Finance" report reviews economic development and reforms in 36 countries, from central Europe to central Asia, including southern and southeastern Mediterranean, pointing to the need to change the approach to financing. The EBRD estimates that the investment gap in the region is US$ 75 billion annually in relation to developed economies.

"It's necessary to change the financing approach. Bank-centric financing is no longer enough and it's necessary to work on developing the capital market and investments in capital owned by companies so that they can invest, which will contribute to a more competitive economy," the EBRD's Croatia director, Vedrana Jelusic Kasic, said at the presentation.

She said Croatia's total debt exceeded 200% of GDP and that this restricted the approach to financing. "Over 60% of small and medium enterprises single that out as a problem, whereas in 2008 only 15% did," she said, underlining the need to diversify financing and strike a balance between debt and capital financing.

She said the reform programme presented by the government today was encouraging and that she hoped it would improve the business environment and encourage investments.

In the report, the EBRD recommends more focus on equity investments. These investments have a positive impact on job creation, capital investments, profitability and productivity, said EBRD Deputy Director of Research Alexander Plekhanov.

The Croatian Chamber of Commerce vice president for industry and IT, Tomislav Rados, said the tax system and capital availability were the key problems for SMEs in Croatia. "The tax system should be simplified and enterprises given access to alternative financing sources."

Assistant Economy Minister Zdeslav Matic said investments were key for growth and that the absorption of European Union funds provided a lot of possibilities.

Last update: Thu, 28/04/2016 - 21:14

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