While policy-makers and the public are focused on the excessive deficit procedure, Croatia is also entering the EU procedure for the elimination of macroeconomic imbalances (MIP). This is a relatively recent corrective mechanism built into the procedure of the European Semester. The in-depth analytical report was published in March; the first result of the functioning of the procedure will be seen as early as June, when the European Commission will also include suggestions for the elimination of macroeconomic imbalances in its recommendations to Croatia.
The CBA Analysis contains a detailed overview of the European Semester and of the way the procedures of excessive deficit and macroeconomic imbalance intertwine therein. Indicators and criteria of macroeconomic imbalance are shown, the rigid boundaries of the criteria of balance are reexamined, and the particularly poor indicators for Croatia — those related to exports and the labor market — are underscored.
The values of macroeconomic imbalance indicators for Croatia break the permissible limit with 4 of the 11 main indicators — net international investment position, share of exports in the world market, public debt, and unemployment. In addition, the gearing ratio of the private sector is touching the limit.
Exports and unemployment (labor market) are noted as specific problems within the MIP. Therefore, the MIP should not be understood solely as a macroeconomic tool. Macroeconomic stability is impossible if the structural problems of the Croatian economy are not resolved; these problems have hindered the sustainable economic growth thus far. The MIP is therefore another useful framework illustrating the structural economic problems and the possible ways to resolve them.