Economy Minister Darko Horvat said on Tuesday that he considered economic growth rates of below three percent to be economic stagnation, adding that if Croatia did not achieve growth rates of close to 5 percent in the next few years, it would be developing at a much slower pace than countries in its neighbourhood.

“A 2.2 percent growth rate is not enough, there is definitely potential for a higher growth rate… if our neighbours Slovenians and Austrians have done it, we do not have the right to ask if we can do it too. We simply must,” Horvat said at a round table discussion on the economy and the EU, held as part of the conference on Croatia’s five-year membership in the EU.

The minister said that economic growth would be much higher had Croatia used all of the grants and money from structural funds made available to it by the EU.

Investment in industrialisation as a condition for innovation is the key element in policies of faster growing economies, Horvat said.

“How many new products with the Original Croatian Product label have we had in the last ten years? Very few, almost none,” he said, adding that too much emphasis was put on foreign investments while Croatian investors had significant amount of frozen capital that could be put in use by improving the business environment.

Structural reforms are necessary for faster, sustainable economic growth, said central bank governor Boris Vujcic.

He said the main problems were unpredictable regulations and red tape, poor business climate, as well as local administration and judiciary.

The education system, he added, is entirely out of sync with labour market needs.

For Croatia, internal reforms are much more important than joining the EU and the euro zone, he said.

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