Martina Dalić, Deputy Prime Minister and Minister of Economy, Small and Medium Entrepreneurship and Crafts since 2016 (photo: Dean Tošovic)

This is the third article in a series of interviews with policymakers from Central, Eastern, and Southeastern Europe. Central bank governors and finance ministers discuss how their countries are doing in terms of catching up to Western Europe. What are the main obstacles for reaching the same living standards in the East as in the West? We conducted the interviews during a conference on economic governance within Europe that was held in Dubrovnik, Croatia, in July 2017.

Our previous interviews feature Octavian Armasu, Moldova’s Minister of Finance, Sergiu Cioclea, Governor of the National Bank of Moldova, and Boštjan Jazbec, Governor of the Bank of Slovenia. Watch out for next week’s interview.

Croatian Economy: Be Dynamic, Not Only in Tourism

September 19, 2017

We sat down with Martina Dalić, Croatia’s Deputy Prime Minister and Minister of Economy, to find out how her country is doing, more than 20 years after the disintegration of Yugoslavia in the early 1990s. What are the obstacles for catching up fully with living standards in the West? Martina Dalić is the first woman to hold the post of deputy prime minister and minister of economy, just as she was the first (and so far, only) female minister of finance in Croatia, serving 2010-2011. 

Croatia hosted a recent conference that asked why countries in Central, Eastern, and Southeastern Europe are having trouble closing the gap in living standards with Western Europe. 

Croatia’s economy has been growing strongly for the past three years. The latest growth figure for 2016 is 2.9 percent of the GDP. Can such growth continue? 

The projections of the Ministry of Finance and the Central Bank, as well as of the international institutions, are positive, around three percent for the next few years. 

At this growth rate, we finally see the benefits of the European Union membership, which has contributed to the recovery after a long-lasting and deep recession. The membership, and the access to the European market that goes with it, provide an excellent opportunity to expand: this year, during the first six months, we have seen double-digit growth in exports. Investments are also picking up.

Of course, personal consumption remains the main contributor to growth besides the recovery of exports and investments. 

With roughly a fifth of GDP coming from tourism, Croatia’s economy is by far the most reliant on visitors from abroad among its European peers. Is this a blessing or a curse?

 Tourism is important for Croatia, but its direct contribution to GDP is not so big: only 3 to 4 percent. Its indirect effect on different industries, of course, is extremely important.

One should keep in mind that manufacturing contributes a 17-18 percent of GDP in Croatia, and other types of services, including transportation and financial services, are also strong contributors. 

Of course, we want an economy which is diversified, not a mono-industry venture. This is exactly why the focus of the government is on the improvement of the investment climate, with the recent reduction of administrative barriers and a tax reform to lower the tax burden. At the heart of the government’s policies is the goal to create a business climate which make Croatia an attractive and dynamic investment destination, and not only a touristic destination. That is why we initiated a comprehensive tax reform which brought reduction in income and corporate tax rates was initiated at the very beginning of this government’s mandate. 

You've been a pioneer in many aspects. You were the first woman finance minister and you are currently the first woman deputy prime minister and economy minister. Croatia’s President is also a female. But this still seems to be an exception. In Croatia, only 46 percent of women work. How do you plan to improve this ratio? 

In Croatia, it is normal and socially expected that women work. At universities, in a number of faculties, including engineering ones, there is actually a majority of female students. But problems start with rising seniority. In the highest ranks at management boards, supervisory boards, among senior directors, there is a male dominance. While this is certainly the result of a certain kind of culture, we would like to change it. 

I'm not sure that quotas requiring a certain percentage of females in certain positions are the answer. I think the overall social atmosphere should be improved instead, and women should also be more courageous, and more ambitious in their decisions and choices on their career path. 

In politics, however, we have a quota: in general elections, it is required that the lists of candidates should have at least 40 percent of female candidates. Yet, this recipe failed to produce the ratio of 40 percent of female representatives in the parliament.

 Do you have candid remarks or advice that you could offer on the IMF’s role in your country?

I negotiated with the IMF teams on a number of occasions when we had a precautionary standby arrangement. My experience from that time is very positive because the IMF was focused on the economic problem, as opposed to some other institutions which are very often focused only on the legislative side of the issue.