Croatia reduced its growth projection for this year to 0.7 per cent from the 1.8 per cent originally forecast, Finance Minister Slavko Linic told state radio yesterday.

“In the coming Budget we will change our growth projection to 0.7 per cent from 1.8 per cent,” Linic said. “It is evident that this year the private sector will not boost growth significantly, so we have to rely on public sector investments.”

Croatia, which is scheduled to join the European Union on July 1, has suffered four consecutive years of recession.

The Government is being urged to speed up economic reforms to improve the country’s competitiveness by the time it joins the EU. Reforms should include improving the investment climate, lowering public expenditures and more efficient public administration, analysts say.

Moody’s and Standard and Poor’s have in the past two months cut Croatia’s rating to below investment grade, citing slow fiscal consolidation and meagre growth prospects. Fitch has kept it at BBB-, but with a negative outlook.

Prime Minister Zoran Milanovic said late on Tuesday the country plans to cut public sector pay from next month as part of efforts to reduce the budget deficit.

“Our public debt nears 60 per cent of gross domestic product and we must realise that some expenses have to be cut. It won’t include pensions, but will include salaries,” Linic said.