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Croatian economy to shrink 1.0 % in 2012: central bank

10 May 2012, 16:35 CET
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(ZAGREB) - Croatia's economy will shrink 1.0 percent this year, the central bank governor said on Thursday and warned the structural reforms are needed in the Balkans nation that joins the European Union in 2013.

"We estimate that this year gross domestic product (GDP) will contract by some 1.0 percent due to a reduction of consumption and exports," governor Zeljko Rohatinski said.

Rohatinski, who also forecast 3.5 percent inflation this year, stressed that "only deep, painful structural reforms" would help the country overcome economic hardship.

"The government is aware of that," he emphasised.

Croatia's economy was flat 2011. It was the third consecutive year the Balkan country's economy, based mostly on its tourism industry on the Adriatic coast, saw no growth.

Economists say the centre-left government that took over last December needs to reform the country's generous welfare system and inefficient public administration while improving the overall business climate.

The former Yugoslav republic's current budget is based on a forecast of 0.8 percent growth in 2012.

Croatia is set to become EU's 28th member in July 2013.


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