Croatia’s fiscal policy remains unsustainable, as analyses in the past two years have shown. However, unlike prior analyses, for the first time we are registering steps in the right direction. A mild adjustment of the primary fiscal balance was recorded in 2011, for the first time since the start of the crisis. The new government strengthened the adjustment and drafted its course to 2014 when, thanks to the Act on Fiscal Accountability, the primary fiscal balance is expected to approach zero.

Though the fiscal course is good, the stride might be too short. In conditions in which it is realistic to expect unfavourable, or at least insufficiently stimulatory international environment, the necessary fiscal adjustment should be greater than envisaged in the three-year budget 2012–2014 because the Croatian public debt will continue its uncontrolled growth, which by the end of the mandate of this government could lead Croatia into a dangerous fiscal zone.

On the other hand, consistent implementation of the Act on Fiscal Accountability, for which there is still an objective chance, would contribute to preserving the credit rating. After this, a gradual reduction in the costs of financing could be expected. This could occur in the most favourable possible political moment, after our accession to the EU. In this way, a political and economic constellation could be formed in just over a year, in which Croatia could draw significant ‘development dividends’.