Croatian Government Must Take ‘Unpopular’ Decisions, Fitch Says

Croatia’s new government must take “unpopular” decisions on spending cuts after winning elections yesterday, said Michele Napolitano, an associate director at Fitch Ratings in London.

The following are comments Napolitano made in a phone interview today.

“We have to wait for their budget proposal. On paper, the new government’s economic program seems to be in the right direction, as we clearly see they want to cap the public debt at 60 percent of gross domestic product, and they also want to cut the budget deficit to 3 percent from 6 percent of GDP.

‘‘Fitch’s real GDP growth forecast for the next year is 0.3 percent, much lower than the 2.5 percent on which the current budget is based. Therefore, with weaker revenue growth, the government would need to cut expenditures, particularly in pensions, ministerial budgets and public sector wages. And these are not popular decisions to take.”

It’s “too soon” to say how the new government will impact the country’s credit ratings, he said.

To contact the reporter on this story: Jasmina Kuzmanovic in Zagreb at jkuzmanovic@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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