Your Excellency Minister Primorac, State Secretaries,
Your Excellencies, Ladies and Gentlemen,
Dear Friends,
I would like to start by thanking you all for attending this event.
I am honored to be here with you today and I hope that today’s presentation and discussion will bring optimism for the future in an otherwise somber and testing global environment.
The entire world is going through incredibly difficult and challenging times.
We are witnessing a sharp slowdown in global growth in the face of elevated inflation, rising interest rates, reduced investment, and disruptions caused by the twin shocks of the COVID-19 pandemic and the Russia’s invasion of Ukraine. In these fragile economic conditions, any new adverse development could push the global economy into recession. This would mark the first time in more than 80 years that two global recessions have occurred within the same decade.
In the World Bank’s most recent Global Economic Prospects report, we project the global economy to grow by 1.7% in 2023, almost half from what we expected six months ago. According to our projections, average global growth between 2020-2024 will be less than 2%, which is the slowest 5-year growth average since 1960. We are deeply concerned that the slowdown may persist.
Weakening growth and rising inflation have caused a rise in both the incidence and depth of poverty. Global progress in reducing extreme poverty has come to a halt and reversed during the pandemic. Rising food and energy prices are putting the heaviest burden on the poor across the globe.
Europe is no exception. Europe’s growth forecasts have also been downgraded significantly for 2023-24.
Yet, in our latest economic report on the European Union (EU), we argue that the EU countries are not necessarily looking at a decade of growth disappointment if policy makers focus on smart investment coupled with structural reforms to boost the labor force, strengthen inclusion, improve institutions, and raise R&D.
If these reforms are implemented, potential growth through the end of this decade (2022-30) in Poland and Romania could significantly outperform the previous decade, while Bulgaria and Croatia could see growth double from the current baseline scenario.
Allow me now to delve a little deeper into Croatia’s circumstances and how we at the World Bank see Croatia’s opportunities ahead.
Croatia has made significant progress in living standards over the last two turbulent decades, with Gross Domestic Product (GDP) per capita reaching 70 percent of the average EU27 level in 2021. In 2001, Croatia’s GDP per capita stood at only 50 percent of the EU27 average. During this period Croatia has also joined the EU, improved its policy and institutional framework, achieved macroeconomic and financial stability, and has accessed to abundant EU funds.
Croatia’s preparedness and response to the global recession caused by the COVID-19 pandemic was also effective, with GDP rebounding to its pre-pandemic level by 2021. This was a remarkable outcome considering the pandemic had a particularly detrimental impact on tourism, which is a major component of the economy. [The Government’s package of fiscal measures was perhaps most beneficial to this industry.]
The Russia’s invasion of Ukraine further disrupted global supply chains, contributing to surging energy and food prices causing a high inflationary effect in Europe, including Croatia.
As a step towards full EU integration, exactly one month ago, in the tenth year of EU membership, Croatia simultaneously entered the eurozone and the Schengen area further strengthening the country’s resilience and trade integration.
I am thrilled to be here today to have the opportunity to personally congratulate the authorities on these remarkable achievements.
All of this creates an environment where the returns on further reforms can be much higher.
Attaining higher living standard for its citizens and speeding up convergence with the average EU income can be delivered by deepening reforms with a focus on improving the productivity of the overall economy, strengthening the quality of education, and increasing labor market participation. Digitalization and increased attention to the green transition also provides an excellent opportunity to decouple economic growth from environmental degradation and put the country on a more sustainable path.
All of this is well within Croatia’s reach. The good news is that many of the reforms critical for growth are already envisioned and under implementation in Croatia, and once fully achieved, will provide a major boost to the country’s growth potential. enabling Croatia to close the income gap with the EU27 average over the next two decades.
But before I divulge too much of what will be discussed today as we present the findings of our most recent analytical piece on Croatia, entitled - Laying the Foundations: Boosting Productivity to Ensure Future Prosperity in Croatia, allow me to close with some words of encouragement and support.
While these reforms are ambitious, they are also achievable. And perhaps most importantly, you are not alone in facing these challenges. The World Bank will continue to accompany Croatia on this journey towards prosperity as it has been doing for the past 30 years.
Therefore, our message here today is ‘never let a good crisis go to waste’. Let’s set the bar higher and build a better, more resilient, inclusive and greener Croatia that can weather future economic storms.
Thank you!
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Conference: Raising Croatia’s Long-Term Growth and Productivity
