Transcript Document

Case of Croatia:
Accession driven economy
Presented by:
Martina Dalić
Secretary of State
Ministry of Finance
1
Republic of Croatia
Ministry of Finance
Croatia—en route to the EU
Economic policies driven by EU
accession
In support of reforms arrangement
with the IMF negotiated
Support for structural reforms
under negotiation with World Bank
2003 GDP
US$28.3 billion
Population
4.4 million
2003 inflation
1.5%
Real GDP growth (03/02)
4.3%
Credit rating
Baa3 / BBB–
EU countries
2004 accession countries
Source: Croatian National Bank (“CNB”)
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Potential 2007 accession countries
Republic of Croatia
Ministry of Finance
EU accession: Government strategic goal
 Strategic goal of the government is to prepare country
for the EU accession by 2007
Stability and
Association
Agreement
with EU
2001
3
2002
EU
membership
application
made
Invitation to
start
negotiations in
2005
2003
2004
2005–2007:
Full EU negotiations
2005
2006
Prepared for
EU accession
2007
Republic of Croatia
Ministry of Finance
An update on accession driven activities
 EC issued Strategy paper for Croatia on October 6, 2004 identifying:
 Principles for general negotiating framework and call for the beginning of
negotiations in early 2005
 EC decided that Croatia should benefit from all three pre-accession
instruments: Funds from Phare and ISPA are recommended in the amount
of 105 mil EUR in 2005 and in 2006 140 mil. EUR from Phare, ISPA and
Saphard
 EC recommends that pre-accession strategy for candidate countries decided
by EC in 1997 in Luxemburg be extended to Croatia
 Croatia:
 Pre-accession economic programme
 Implementation of institutional infrastructure for pre-accession funds
 Intensive political activity
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Republic of Croatia
Ministry of Finance
Economic policy goals
 Sustainable growth
 maintain strong growth rates through stronger private sector
participation
 government investments in infrastructure and areas related to EU
accession
 Continued macroeconomic stability and reduction in
existing macro risks
 fiscal consolidation and stable monetary policy
 reduction of government debt and external debt levels
 Reforms to improve competitiveness
 reduction in the size of public sector
 privatization
 reform of judiciary system to improve efficiency
5
Republic of Croatia
Ministry of Finance
Where do we stand?
 Income gap significantly smaller than in the case of second wave
candidates
Income gap with EU,
Growth rate differential
GNI pc in 2002 at PPP
8
Slovenia
CZ Rep.
49,0%
Poland
Lithuania
Croatia
3,7
4
45,3%
40,7%
(%)
Estonia
39,6%
2
Euro-Zone
4,2
4,7
4,3
3,8
2,5
39%
35,8%
Latvia
Bulgaria
0
27,4%
Romania
25,3%
Macedonia
25,0%
EU-12 = 100
-0,9
(2)
19,3%
2004F
80%
2003
70%
2002
60%
2001
50%
2000
40%
1999
30%
1998
20%
1997
6
Croatia
50,9%
Slovakia
Albania
6
58,1%
Hungary
Source: World bank
0%
10%
6,8
71,9%
Republic of Croatia
Ministry of Finance
Sustainable growth – engines of growth
THE STRUCTURE OF GROSS VALUE ADDED
 Current situation:
EU-12, avg
Structure of the economy
already dominated by services
23,2
HUN
CRO
SLO
24,0
2001
15
2002
55,9
14,8
20%
30%
40%
Agriculture
51,3
50%
60%
Construction
70%
80%
90%
100%
Services
Source: WIFO, Eurostat
 Improvements in
competitiveness and efficiency of
real sector
%
0
Imports
Exports
Investm.
Gover.
Cons
Consum.
-5
GDP
57,9
4,2
28,4
10%
59,3
13,7
 Needed:
5
7
3,2
Industry (inc. energy)
2003
10
62,2
32,8
ROM
61,7
8,5
31,4
0%
20
4,2
24,7
CZECH
Sources of GDP growth
68,8
29,5
BUL
Growth led by growth in
investments
2,5
Stronger contribution of private
sector to growth – completion of
privatization
Republic of Croatia
Ministry of Finance
FDI Flows
 Croatia compares well in per capita FDI inflows
 EU accession will change investors perspective of Croatia’s market - to maintain
positive growth differential to peer economies further FDI flows are needed
6
Growth rates vs. peer economies
FDI per capita 1995-2003, in USD
CZRep.
SLK
CRO
HUN
EST
SLO
LAT
LITH
POL
BUL
MAC
ROM
S&M
4
1.802
1.702
1.611
1.601
1.331
4,3
4,1
3,7
2,9
1.071
2,9
2,5
2
1.151
647
506
433
309
0
8
Real GDP growth (%)
3.820
1.959
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
Croatia
Slovakia
Hungary
Slovenia
Czech R.
Poland
Republic of Croatia
Ministry of Finance
FDI Flows
Needed: better diversification of FDI among industries
Actions taken: agencies for investment promotion and support to investors
reforms in judiciary system already underway
Croatia: THE STRUCTURE OF FDI, 19932003
Financial
services and
telecommuni
cations
Pharmaceuti
cal products
Czech Republic: FDI STRUCTURE 19972003
Financial
services,
telecommuni
cations and
transport
Refined
petroleum
and
chemicals
Nonmetalic
products
Nonmetalic
products
Other
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Trade, hotels
and
restaurants
Trade hotels
and
restaurants
Machinery
and
equipment
Other
Electricity
Republic of Croatia
Ministry of Finance
Openess – new opportunities in SEE
Export markets in 2003
 Croatia is already integrated into the
EU supply chain through extensive
trade and investment ties
 Region of SEE offer new
opportunities
Other
7%
Other
European
developing
27%
EU
54%
CEFTA
12%
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Republic of Croatia
Ministry of Finance
Fiscal consolidation
 Government medium term fiscal framework envisages the reduction in fiscal
deficit from 6,3 in 2003 to 2,9 % of GDP in 2007
 Government deficit in 2005 3,7 % of GDP (general government)
 Fiscal consolidation is main instrument for external debt stabilization
0
-1
-2
-3
-4
-5
-6
-7
-8
-9
-10
60
% of GDP
50
40
30
10
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General government debt, % GDP
(2002)
70
.
% of GDP
General government deficit, % GDP
(2003)
Source: EBRD
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Republic of Croatia
Ministry of Finance
External debt position
 Increase of external debt: in 2003 by more than 8 bill. USD
in 2004 by not more than 2,3 bill USD expected
100
180
80
150
120
60
%
40
90%
2,5
60
2,0
2004F
2003
2002
1,0
2001
0
2000
0
1999
1,5
1998
30
1997
20
External debt as % of GDP (left)
12
Coverage of external debt due by CNB
reserves
0,5
0,0
-0,5
1999
2000
2001
2002
2003
External debt as % of exports of G&S (right)
CNB net reserves above tree months of imports/debt due of all sectors
Debt service as % of exports of G&S (right)
Total net reserves of CNB/debt due of all sectors
Republic of Croatia
Ministry of Finance
Deficit financing in 2005
 General government deficit 3,7
percent of GDP expected in 2005
Debt maturity profile
Foreign financing up to the level of
3000
2000
1000
Other
2011
2010
2009
2008
2007
2006
0
2004
instruments expected in 2005
Other sectors
4000
2005
 Significant amount from non – debt
Government
5000
million USD
foreign debt due in 2005 plus IFI’s loans
to support reforms
6000
Domestic market
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Republic of Croatia
Ministry of Finance