May 17, 2018 / 10:44 AM / 9 days ago

Labour shortage weighing on Croatian economy -bank governor

OPATIJA, Croatia (Reuters) - A labour shortage has turned into one of the two biggest drags on Croatian economic growth, along with an unfavourable regulatory framework for businesses, central bank governor Boris Vujcic said on Thursday.

FILE PHOTO: Croatia's central bank governor Boris Vujcic poses for a picture during an interview with Reuters in Zagreb, Croatia, January 21, 2016. REUTERS/Antonio Bronic

The population of Croatia, which only joined the European Union in 2013, is falling as it ages and as more and more Croats leave to work in more economically developed EU member states.

According to Eurostat projections, Croatia’s population could fall to 3.7 million by 2050 from the current 4.2 million.

“A short-term measure is to raise the quota for foreign workers. It is good that the government tripled the number of licences this year to 30,000 from 10,000 in 2017, but the number will need to rise further,” Vujcic told an economic conference in the northern Adriatic resort of Opatija.

He proposed bilateral contracts with some countries such as Ukraine on workforce imports.

Croatia’s economy is forecast to growing at slightly below 3.0 percent this year and next, but Vujcic said this was not sufficient to catch up with more developed EU economies.

He also said Croatia must boost its employment level, which, at 57 percent, is the second lowest in the EU, after Greece.

Vujcic, who is widely expected to make himself available for a new term after his six-year mandate expires in July, said that the central bank plans to continue its expansive monetary policy, largely revolving around interventions on the foreign exchange market to tame upward pressure on the national currency, the kuna.

“It also boosts our currency reserves,” he said. Croatia’s currency reserves have reached an all-time high of 16.5 billion euros.

He also said that the central bank saw average inflation accelerating this year to 1.3 percent from 1.1 percent in 2017, and then to 1.4 percent in 2019.

Reporting by Igor Ilic; Editing by Kevin Liffey

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