Chapter 3: Croatia
(continued)
3.2 Introduction
Political Situation
The Croatian Parliament is dominated by the Croatian Democratic Union (HDZ), of which President Tudjman is the founder and party leader. The Croatian Democratic Union won the most recent elections, held in early 1997, and through the complicated electoral system gained a majority in the House of Representatives. HDZ is also the controlling party throughout local government. The government still controls almost all the television, radio and printed media.
In early 1992, Croatia's status as an independent country was officially recognized by the EU and other countries. Croatia became a member of the UN in April of that year and shortly afterward joined the IMF and the World Bank. In 1995, negotiations with the EU regarding a trade and cooperation agreement were suspended after the military took over the area of Krajina. In 1996, the ministerial committee of the Council of Europe rejected Croatia's application for membership until more progress had been made on human and democratic rights. However, Croatia was admitted in late 1996 even though these conditions were only partially fulfilled. This decision allows new negotiations on a trade and cooperation agreement, although an EU association agreement remains a long way off and will not be possible until the government undertakes more serious efforts to protect human and democratic rights.
Economic Situation
The transition to a market economy has been quite different in Croatia compared to other countries in the region. In particular, the Yugoslav war contributed to an economic crisis that set the country's economic development back by at least a few years.
| TABLE 3.1: KEY ECONOMIC INDICATORS
|
| |
1994 |
1995 |
1996* |
1997* |
|
| GDP growth (%) |
0.8 |
-1.5 |
5.0 |
6.0 |
| Inflation (%) |
97.6 |
2.0 |
3.7 |
3.9 |
| Unemployment (%) |
n/a |
13.9 |
15.0 |
14.2 |
| Exports (bln USD) |
4.26 |
4.63 |
4.80 |
5.20 |
| Imports (bln USD) |
4.71 |
7.51 |
7.80 |
8.50 |
| Budget balance (% of GDP)
|
-1.7 |
-0.8 |
-2.5 |
-3.0 |
| Gross debt (bln USD) |
3.1 |
3.7 |
4.6 |
5.1 |
*forecast
Source: Business Central Europe, The Annual Report, 1996 |
After a significant decline in GDP growth in the early 1990s, Croatia's economy has begun to recover. In 1996, GDP increased by 5 percent, and its growth is expected to continue at 6 percent in 1997. However, this mainly reflects a return to normal conditions upset by the break-up of former Yugoslavia and by high military spending. The average inflation rate was approximately 100 percent in 1994, its highest level. Since then the government has been successful in controlling inflation and stabilizing it at around 4 percent. Unemployment, which was more than 15 percent in 1996, is expected to fall slightly in 1997. As a result of lost markets in Central and Eastern European countries and the ongoing unrest in Bosnia and Herzegovina, Croatia's exports are currently focused on developed countries, especially those of the EU. Exports have increased only slightly, from USD 4.2 billion in 1994 to USD 4.8 billion in 1996. However, during the same period imports increased from USD 4.7 billion to USD 7.8 billion, and this increase substantially widened the country's trade deficit. Germany, Italy, Slovenia and Austria are currently the main trading partners with Croatia.
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