December 1 (SeeNews) - The Croatian authorities should find a balance between short-term priorities of economic support amid the Covid-19 pandemic and medium-term priorities of restoring fiscal space and raising productivity and growth through green and digital public investment, the International Monetary Fund (IMF) said.
"Over the medium-term, implementation of the long-standing agenda on structural and fiscal reforms remain essential to reaping the maximum benefits of forthcoming euro adoption and restoring the economy to a path that ushers greater convergence of living standards with the EU," the IMF said in a statement on Monday.
The statement was issued after the end of the virtual discussions between an IMF team and the Croatian authorities held during November 16-25 that were focused on the economic challenges ahead of the country in the face of a resurgence in Covid-19 infections.
"Despite the difficulties of this year, Croatia is faring better than many other countries with a similar degree of tourism-dependence. Rises in unemployment have been contained thus far thanks to strong policy support. Yet, significant challenges persist due to the resurgent pandemic," the head of the IMF team, Srikant Seshadri, said in the statement.
He pointed out that in the short-term, Croatia should ensure that its economic support is not withdrawn until the Covid-19 recovery is well entrenched; that the measures remain effectively targeted in reaching viable business sectors; and that resources for potentially higher healthcare expenses can be met, particularly if the epidemiological situation gets worse.
At the same time, in the medium-term the country should once again increase fiscal space ahead of euro adoption; guide budgets back towards balance; enact structural reforms to fix healthcare and pensions; and enhance business climate, among others, Seshadri noted.
The Croatian economy is expected to contract between 8-10% this year, reflecting lower domestic and external demand, and a 50% decline in tourism revenue, the IMF said, reiterating its earlier released forecast. Growth is projected to rebound to some 6% next year, driven by a partial recovery in tourism and higher public investment, even though this projection is subject to significant pandemic-related uncertainty.