Invite More Immigrants to Boost the Economy, Croat Governor Says

(Bloomberg) -- Croatia’s government should bring in more immigrants to staunch a plunge in the Adriatic nation’s population and tackle a "huge problem" for economic growth, the governor of the central bank said.

Like in most countries in the European Union’s eastern wing, Croatia’s low birth rate and emigration to the bloc’s more affluent western members is leaving companies without qualified workers, straining the budget and holding down growth. According to Governor Boris Vujcic, that will only get worse, with the number of Croats seen dropping 12 percent to 3.7 million by 2050.

“Croatia is on track for a permanent demographic decline, and scarcity of labor is becoming one of the biggest problems for the economy,” Vujcic told a conference at the Adriatic Sea town Opatija on Thursday. “Along with negative demographic trends, strong emigration and a low active labor rate present huge pressure on the budget.”

Policy makers across eastern Europe are searching for solutions as the drop in population has contributed to record-low unemployment and helped trigger double-digit wage hikes that haven’t produced similar surges in productivity. Companies throughout the region complain they’re unable to fill hundreds of thousands of jobs. There are 267,000 vacant jobs alone in the Czech Republic, a country where companies are lobbying for looser restrictions on entry for Ukrainians and other non-EU European nationals.

Tripled Quota

The trend is hitting especially hard in the Baltics. Latvia has lost a quarter of its residents since 1991, and the United Nations predicts that by 2050, it will have lost another fifth. That’s second only to Bulgaria, which may see its population sink to levels not seen since World War II.

Most immigrants to Croatia hail from Bosnia-Herzegovina and other eastern European countries and work overwhelmingly in the country’s crucial tourism industry and construction. Unlike many EU countries, however, political forces in Croatia haven’t mounted aggressive campaigns against Muslim refugees like those that have sprung up in Poland, Hungary, the Czech Republic, and Slovakia, which have fought against the imposition of mandatory quotas to shelter migrants from Africa and the Middle East.

The government in Zagreb tripled its immigrant quota this year to 30,000. But more needs to be done, according to Vujcic, who said economic growth won’t exceed 3 percent this year and next, lagging behind the regional average.

"Given the economic situation, we probably need more immigrants," Vujcic said.

While the unemployment rate has halved this year to 11.5 percent from 22 percent in 2014, there’s still a shortage of qualified workers, and the country’s labor participation rate is the second-lowest in the EU.

©2018 Bloomberg L.P.

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