FEDERATION OF EURO-ASIAN STOCK EXCHANGES
ANNUAL REPORT JUNE 2013
ZAGREB STOCK EXCHANGE
CAPITAL MARKET DEVELOPMENT
AND ECONOMIC OUTLOOK
Since 2014 budget and policy uncertainty plus
a sizeable 20%/GDP funding needs distance
Croatia from CEE peers, we wonder how the
sovereign can restore credibility. Unfortunately,
bureaucracy surrounding EU funds has made
the carrot lose appeal, and the EC has not
made a full use of the sticks available in the EU
Semester, perhaps influenced by reform fatigue
and the IMF critics. This suggests Croatia will
attempt to tick some of the boxes that the EC
demands but won’t play policy too tight to really
boost competitiveness, let alone the proposed
2.3pp/GDP consolidation in 2014, as politics
decide comprehensiveness and quality of
reform initiatives. Come what may, Croatia must
detail contingency measures (tax hikes, public
wage bill, tighter benefits eligibility, reduction
of subsidies, etc) in April that determines if
the country avoids another downgrade and
retain access to debt markets. Among steps
the EC including us will judge progress ahead,
switching from tax- to spending measures is a
priority, and the quality of the adjustment will
be more important than the speed. Hence,
spending transition to a means-tested basis and
legal amendments to reflect lower unfunded
liabilities should all form the new fiscal rules.
Instead of just talking up tax intake (which is
procyclical and destabilizing), systemic review
Key Information Contacts
Croatian Agency for Supervision of Financial Services www.hanfa.hr
Ministry of Finance www.mfin.hr
Croatian Government www.vlada.hr
Croatian National Bank www.hnb.hr
CONTACT INFORMATION
Contact Name Sanda Kuhtic Nalis
PAGE 96
E-mail [email protected]
Website www.zse.hr
of the tax base must move toward non-tradable
taxes to make it growth-friendly. Since austerity
would be a Herculean task in growth-less and
high interest environment, Croatia has no choice
but to resort to the long overdue deleveraging
via monetization and privatization of a part of its
infrastructure.*
* Hypo Alpe-Adria-Bank d.d.
Economic Research Department