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The macroeconomic department of the Privredna Banka Zagreb (PBZ) estimated that this years GDP fall of 5.5 % in the base-case scenario will result in an economic stagnation in 2010. Still, this is only a preliminary estimate since there is a strong risk that the zero might turn into a slight minus.

The unknown variable in the projections of all of the macroeconomic experts trying to predict the GDP for next year is the fiscal policies (of the government). “The main negative influence is the poor fiscal policies,” says the latest PBZ weekly analysis. Concretely, unless the Government led by Jadranka Kosor reduces their financial appetites for the 2010 budget and stops squeezing out the private sector with increased loans from domestic banks, this could have serious consequences on the economic growth in the next few years. This is a realistic scenario if the income from VAT (PDV), excise duties and customs drops more than expected. PBZ analysts, led by Marko Škreb, point out that the state should take into serious consideration the latest World Bank study or the competitiveness report, because these “difficult reforms with short-term expenses and long-term benefits are rarely implemented during times of economic rise.”