Croatia's unemployment will rise and living standards deteriorate after a brief respite in the summer, which may complicate the government's reform agenda, analysts and union leaders said on Friday. The statistics office put the July unemployment rate flat month-on-month at 14 percent, but 13 percent higher than in July last year.
It also said net wages in the recession-hit European Union candidate had mildly risen in June. Hrvoje Stojic, an analyst at Hypo Group Alpe Adria, said unemployment would resume its upward trend in most sectors, hit by shrinking demand and lack of fresh capital, after the seasonal jobs in tourism come to an end.
"I think unemployment will peak next year and it will be a big political burden for the government as it tries to implement administration reforms and fiscal cuts," Stojic said. After three budget revisions, Prime Minister Jadranka Kosor's government brought this year's fiscal deficit down to 2.8 percent of the gross domestic product, and promised to halve it next year, when it hopes to undertake more ambitious reforms.
Kosor on Thursday gave state firms 10 days to come up with measures to cut managerial salaries and pay outstanding dues, which are draining economy of cash and driving many healthy businesses towards bankruptcy. Union leader Ozren Matijasevic of HUS (Croatian Trade Union Association), said at least 20,000 more people were likely to lose their jobs in the real sector in the next few months. "Unless the government manages to break the liquidity crunch, we could see a wave of bankruptcies in small and medium-sized companies. In that case, some 100,000 jobs in the private sector could be jeopardised," Matijasevic said.
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