Boosting Croatia’s Economic Resilience
It has taken Croatia over a decade to reach the level of output it enjoyed before the 2008 crisis, highlighting the economy’s weak resilience to shocks and the poor ability of its institutions and policies to ensure a faster recovery. The recovery...
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| Format: | Report |
| Language: | English |
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World Bank, Washington, DC
2020
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| Online Access: | http://documents.worldbank.org/curated/en/207221592991942471/Croatia-Boosting-Croatia-s-Economic-Resilience http://hdl.handle.net/10986/34105 |
| Summary: | It has taken Croatia over a decade to
reach the level of output it enjoyed before the 2008 crisis,
highlighting the economy’s weak resilience to shocks and the
poor ability of its institutions and policies to ensure a
faster recovery. The recovery started only in 2015 but in
2020 Croatia is again facing a deep downturn due to the
COVID-19 (Coronavirus) pandemic that resulted in a global
economic shock of unprecedented magnitude. Country’s
economic resilience is under an influence of a range of
institutional, economic, and social factors. Fiscal policy,
as a demand management tool, and structural policies for
increasing the flexibility of factor and product markets are
at the core of Croatia’s resilience agenda. While certain
features of the economy make Croatia particularly exposed to
external shocks, fiscal position has been improved and labor
and product market institutions have been made more flexible
after the global financial crisis, so Croatia is now in a
better position to recover from the crisis faster. First,
once economic recovery gains momentum from the COVID -19
pandemic more ambitious fiscal targets and a fully binding
national fiscal framework will help to rebuild the fiscal
space needed for the countercyclical response in the next
downturn. Second, streamlined regulation of permanent work
contracts, coupled with active labor market policies and
adequate social safety nets, will reduce labor market
duality and facilitate adjustment to exogenous shocks.
Third, speedy recovery from shocks will be facilitated by
the improved functioning of product markets, with a reduced
state footprint, less restrictive regulation of entry and
conduct in service sectors, and improved bankruptcy
practices to favor the seamless exit of market players.
Reforms in these areas will help Croatia to recover more
quickly from adverse shock and prepare the country for the
next recession. |
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