Can Current Fiscal Policy Initiate Economic Growth in Croatia?

During 1992-1999 in Croatia significant expansion of public expenditure followed by the primary budget deficit was registered. The only exception was the year 1998, when the primary budget suficit was achieved as a result of VAT introduction. A large number of consequences have arisen from the budget deficit and unsustainable public spending expansion in the present economic condition. Direct consequence can be seen through national saving decline, investment and net export decline to illiquidity and solvency problem in the firms. Fiscal consolidation and cuts in public spending in Croatia are needed for long-term and stable economic growth. However, if the government will not invest in education, science, infrastructure, research and development, the fiscal consolidation efforts will be in vain. The private returns in Croatia are less in comparison to the state returns in mentioned area, so extra budgetary efforts for growth-generating governments project will be needed in order to achieve future high growth rates.