The new prime minister makes an impact
Overview:
The Croatian economy has been hard hit by the global economic crisis. The currency peg against the Euro has proved robust and has aided financial stability but it has meant that Croatia has been unable to allow the same degree of fiscal loosening (to soften the impact of the downturn) that has been seen in countries with flexible exchange rates. Nevertheless, the real exchange rate remains fairly valued despite a strong Euro because productivity growth has exceeded real wage growth. The key threat to macroeconomic stability remains a deteriorating external debt to GDP ratio although the economic crisis has at least halved the current account deficit. Prime Minister Kosor has made a positive impact on EU integration since coming to office by improving relations with Slovenia and clamping down on corruption.