The Government believes in its macroeconomic policy and has rejected calls from some Croatian economists for devaluation and an easing of credit restrictions by Zeljko Ivankovic Foreign capital is flowing into the infrastructural and monopoly sectors of the economy, including in the form of state spending, because it is able to gain considerable profits and charge high interest rates in these sectors. There have been shifts in relative prices in its favour, not least because these sectors are not exposed to foreign competition. This process visibly apparent in Croatia. Capital arrives to finance highway construction with state guarantees, and buys bonds from the Croatian Bank for Reconstruction and Development or the state. They suggest, paradoxically, that foreign investment can soon be expected in small bakeries.
Capital is attracted primarily by the infrastructure and monopoly sectors of the economy.
This will complicate the issue of repaying loans. The difficulty is that one does not see the problem during the period of intensive capital inflows, but only increasing consumption and foreign currency reserves. There is only a small problem of inflation on the domestic market, and an appreciation of the domestic currency, which further reduces the competitiveness of domestic exporters. Thus, in times of peace, discussions about domestic economic policy in Croatia have become more heated. Let us remind ourselves that a successful anti-inflationary programme was carried out in Croatia more than four years ago.