Ekonomski Vjesnik (Jul 2009)
Analysis Of Financing Deficits In Balance Of Payment Of The Republic Of Croatia
Abstract
This work analyses the financing sources of balance-of-payment deficits in the Republic of Croatia from 2003 to 2007. It is notably done by the application method of horizontal cutting of balance of payment, which offers a clear insight in the surplus and deficit components of balance, i.e. the ways of balancing its individual accounts. In addition to it, two criteria of how to classify balance on financial and capital account are applied – the term of payment criterion and solvency criterion. The use of the mentioned criteria resulted in difference of the long-term from short-term and solvent from non-solvent capital, which rendered possible to create additional conclusions regarding the financing of deficits in the balance of payment in the Republic of Croatia. In the course of the observed, the balance on the current account is in deficit, which is the consequence of balance of goods deficit and balance of incomes deficit. Although the Republic of Croatia realizes surplus in the balance of services and in the balance of current transfers these surpluses are not sufficient to equalize balance on the current account. Thus, finally the deficit is financed by the foreign exchange currency inflow based on the direct investments and foreign debt accumulation. When the mentioned sources of deficit balance financing on the current account become inaccessible, the Republic of Croatia will face the necessity of how to put in effect the thorough organizational and economic changes with the special accent on the investments in export-oriented sector.
