Event

After weeks of negotiations following inconclusive elections in November, a coalition including the conservative party HDZ and the reformist MOST was finally sworn in on 22 January. The condition for the newly formed MOST party to join was the appointment of a politically independent prime minister. That condition was fulfilled with the nomination of a technocratic PM, Tihomir Oreskovic, a Croatian-Canadian businessman coming from the pharmaceutical industry.

Impact on country risk

The appointment of a centre-right cabinet and the willingness of reforms by MOST are a good signal for the Croatian economy considering its lingering structural weaknesses such as the lack of competitiveness due to wage levels remaining higher than average in peer countries and significant when compared to productivity levels and the still large share of state-owned, less-efficient enterprises. In the short term, an improvement in the business climate and the announced priority of fighting corruption would also support economic growth, which became positive again last year after 6 years of recession. On the negative side, the appointment of two controversial ministers gave rise to fears of possible ultranationalist drifts.

Analyst: Florence Thiéry, f.thiery@credendogroup.com