Croatia: EC Sees Low Growth Potential as Big Problem for Recovery

The funds made available by the European Union’s recovery and sustainability program for Croatia are seen as an opportunity to strengthen its growth potential, which is still low and as such is a barrier to capturing richer economies. said the European Commission.

Vulnerabilities are linked to government and private and external debt in the context of low potential growth. Looking ahead, the Recovery and Resilience Plan provides an opportunity to address imbalances, investments and reform needs, the Commission said in an analysis of macroeconomic trends in EU member states.

The EC presented the European Semester Spring Package, “which focuses on providing financial guidance to Member States as they continue the process of gradually opening up their economies.”

“This guideline aims to help Member States strengthen their economic recovery by making the best possible use of the Recovery and Sustainability Facilitation (RRF), the key instrument at the heart of NextGenerationEU,” the EU said on its website.

Croatia’s potential for economic growth is among the lowest in Central and Eastern Europe, although it has increased in recent years.

“Implementing reforms and investments under NextGenerationEU, particularly the Recovery and Resilience Facility, is expected to have a substantial positive and long-term impact on GDP growth in the coming years, which should contribute to strengthening debt sustainability,” he said. KE.

The mitigating circumstance is that in recent years, Croatia planned its debt with very low interest rates and long maturities.

Public debt is expected to fall this year and the economic recovery will help it fall below 83% of GDP in 2022.

In 2020, based on Eurostat-verified data, the general government deficit was above and not close to the Treaty reference value of 3% of GDP in 23 Member States, including Croatia.

The EC said member states would not be expected to adhere to the Maastricht rules governing the deficit and public debt criteria.

The re-imposition of the rules can be expected in 2022.

The EC also recommended that fiscal policies should remain supportive throughout 2021.

Member states are called upon to continue to “provide targeted and temporary fiscal support in 2021 in a context where the general escape clause is activated while maintaining fiscal sustainability in the medium term”.

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