The World Bank (WB) has revised upward its growth projection for Croatia for 2016 to 2.4% from 1.9% and maintained its forecast for 2017 at 2.0%, recommending that the future government launch necessary structural reforms at the start of its term to strengthen competitiveness and stabilise public finances.

Presenting the World Bank's "EU Regular Economic Report: Growth, Jobs and Integration: Services to the Rescue" in Zagreb on Wednesday, WB Senior Country Economist Sanja Madzarevic-Sujster said that the first steps by the new government should be directed at fiscal consolidation and boosting competitiveness through measures such as legislative reforms, strengthening the justice system and managing public companies.

I think Croatia should be growing faster, but this growth should be more sustainable and over a longer term. This rate of 2.4% which we are forecasting for this year is quite robust, given that Croatia will finally get back on the path of convergence above the EU average, which is one of the positive messages for 2016. What needs to be done, and the new political cycle makes it possible, is to step up efforts to strengthen the competitiveness of the Croatian economy and stabilise public finances, and we hope to see that in the new government's programme, she said.

The WB expects Croatia's economic growth to slow to 2.0% in 2017.

Madzarevic-Sujster said that conditions for stronger growth had not been created yet, given the risks that were already affecting the economy of the European Union as a whole, such as Brexit, a potential escalation of geopolitical tensions, and a tightening of monetary policy by the US Federal Reserve.

These are the risks that will be felt by our trading partners and will spill over to the Croatian economy as well, Madzarevic-Sujster said, noting that external factors were only some of the risks to the Croatian economy.

Speaking of internal risks, she cited possible consequences of the agreement with trade unions on a 6% increase of public-sector wages and arbitration over the conversion of loans denominated in Swiss francs.

That would mean that Croatia would not be able to exit the Excessive Deficit Procedure, which would be a lost opportunity, Madzarevic-Sujster said, adding that at a time of heightened risks the new government should step up work on reducing vulnerabilities.

She said she was also concerned about a large amount of central government debt refinancing due next year, with foreign debt accounting for over 3.5 billion euros. She added that the road sector also faced repayment of a large amount of debt next year.

Madzarevic-Sujster said she expected the new government to address the consolidation of public finances more seriously. This is indeed an opportunity to tackle certain vulnerabilities in the new political cycle and would enable Croatia to refinance its debt more easily over the long term, she added.

She expressed hope that the long-awaited growth would not be spent too soon, as happened in 2006 to 2008 when we spent our growth, ran up debts and then suffered the deepest recession in the EU.

Related stories

World Bank projects Croatia's growth in 2015 at 1.5%

FinMin says expects 2% GDP growth, but there are negative risks

S&P reaffirms Croatia's ratings, negative outlook

Fin Min: The key is to upgrade credit rating

Latest news

Syrian opposition rules out future role for President al-Assad

The Syrian opposition said Friday it would not accept any role for President Bashar al-Assad in the future of the war-torn country, reacting to a recent US shift saying that removing al-Assad is no longer a priority for Washington.

Russian Army integrates breakaway forces of Georgian province

Parts of the small fighting forces of the Georgian breakaway province of South Ossetia have been placed under Russian military control, Russian Defence Minister Sergei Shoigu said on Friday.

Czech Republic's Pilsner Urquell beer is now Japanese

Japanese brewing company Asahi completed its takeover of the Czech brewery Pilsner Urquell on Friday, Asahi said in a statement.

Judge approves 25-million-dollar settlement of Trump University case

A US district judge on Friday approved a 25-million-dollar settlement of lawsuits and state fraud allegations against Trump University, the US president's now-defunct business venture.

Former Thai premier Thaksin to junta on reconciliation: 'Cut me out'

Former Thai prime minister Thaksin Shinawatra on Friday announced that he is not interested in the junta-led reconciliation process, three days after the junta handed him a half-a-billion-dollar tax bill for his past business deal.

Dalic: We welcome possible deal between Agrokor and banks

The government welcomes the possibility of an agreement being concluded between the Agrokor food company and creditor banks, and the bill on vitally important companies is not a fallback plan but the result of the government's care for the overall economic and financial stability of Croatia, Deputy Prime Minister and Minister of Economy Martina Dalic told a press conference in Zagreb on Friday.

Croatia, China sign action plan for cooperation in agriculture

The Croatian and Chinese ministries of agriculture on Friday signed an action plan for cooperation in the field of agriculture for the period 2017-2018, the Croatian ministry said in a statement.

ZSE indices up, Agrokor shares in focus of investor interest

The Zagreb Stock Exchange (ZSE) indices on Friday rose by more than 1.8%, with stocks of the Agrokor food and retail concern being in the focus of investor interest again.

Berlin police defend handling of Berlin market attacker

Berlin police defended themselves on Friday against accusations that they stopped surveillance on Berlin Christmas market attacker despite knowing in June 2016 he was dangerous.

Croatia, creditors tailor emergency measures to save tottering giant

Croatia's tottering retail and food giant Agrokor reached an agreement with its creditors, putting its debts standby and allowing it to continue working during emergency restructuring, the Croatian branch of Austria's Erste Bank said Friday.

Agrokor's creditors say standstill agreement to go into force today

A standstill agreement regarding the Agrokor concern's existing financial obligations to banks will take effect on Friday, additional capital will be injected into the concern in the coming days and the concern will be actively restructured, which includes a change of its management, it was said on Friday after a meeting between Agrokor's suppliers and creditor banks.

Palestinians, UN slam Israel's new settlement plan

Palestinians, Israeli activists and the UN lambasted the government of Israeli Prime Minister Benjamin Netanyahu on Friday, a day after it gave the go-ahead for the first new West Bank settlement in a quarter of a century.

South Sudan rebels release three abducted foreign oil workers

South Sudanese rebels have released three foreign engineers they abducted in early March in the oil-rich Upper Nile region, Foreign Affairs Ministry official Mawein Makol Arik said on Friday.

Turkish opposition: Imprisoned party chief has gone on hunger strike

The head of Turkey's pro-Kurdish opposition party has launched a hunger strike from prison.

European leagues threaten Champions League schedule clashes

The European Professional Football Leagues (EPFL) on Friday threatened schedule clashes on Champions League matchdays in an ongoing dispute with the governing body UEFA.

Danish court revokes citizenship of IS volunteer

A Danish appellate court on Friday stripped a man of his Danish citizenship for volunteering to fight for the extremist Islamic State in Syria.

Banks and Agrokor agree on key elements of standstill agreement

Member banks of the coordinating committee of financial creditors and representatives of the Agrokor food company have in principle agreed on key elements of a standstill agreement, which is expected to be signed later today, announcing changes in the company's management team, Erste Bank said in a statement on Friday afternoon.

Syrian man on trial in Sweden; mosque attack labelled terrorism

A Syrian man went on trial Friday in the southern Swedish city of Malmo, charged with terrorism and arson after an attack last year on a building used as an assembly hall by Shiite Muslims.