Financing of current account deficit in new member states and CroatiaReport as inadecuate

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Proceedings of Rijeka Faculty of Economics : Journal of Economics and Business, Vol.26 No.1 June 2008. -

The aim of this paper is to analyze the transition results in the countries of the last wave of accession to the European Union. After they joined the EU, the average productivity growth dropped in the fi rst year, but later this was overcome. While the rate of GDP growth rose in most NMS countries, current account deficits remained very high and foreign direct investments were not capable of covering current account defi cits in all NMS countries. Both the rising external debt in many NMS countries and the accumulation of household debts resulting from fast credit growth create a risk in most countries. The comparative analyses show that some governments need to work at sustainable economic policies to keep infl ation under control and reduce external vulnerability. The conclusion of the paper is that regardless of the availability of EU funds, national investment policy will have considerable impact on the real growth of the economy.

Catching-up; transition; labour productivity growth; investment policies; external risk; foreign debt

Author: Radmila Jovančević - ; Faculty of Economics, University of Rijeka, Rijeka, Croatia



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