EFFICIENCY ANALYSIS OF CROATIAN ECONOMY

Tomislav Brozović
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Tomislav Brozović: Institute of Economics, Zagreb

Ekonomski pregled, 2000, vol. 51, issue 1-2, 91-106

Abstract: In general, the process of transformation and privatization has not suceded. Owners have not met their expectations, regarding asset maximization, distribution of current earnings distribution through dividends or sharing of earnings since profitability in general has been low. In addition, the average return in the economy is 1,20% to 1,34% what is too low. What is also disturbing is the fact that the absolute amount of losess is greater than capital employed in industries and mining, manufacturing, agriculture and fishing, construction, services and tourism, trade and transportation. This means that reported losses cannot be covered from revenues and owners equity, but rather fall on creditor's back. Possibilities for self-financing future growth are small since net income and depreciation together represent around 3,77% to 533% of annually employed capital. In other words, it would take around 20 years to achieve a 100% self-financing. This is long period of time, especially considering that the average life of machinery and equipment requires outside financing for the most part. This problem becomes even more obvious when one takes into account that profitability does not meet companies' hurdle rates or cost capital. One of the goals is also to increase capital which is possible only if net earnings and reserves increase. All in all, the capital has decreased in all industries except crafts.

Date: 2000
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