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The Possible Economic Effects of EU Policy Funds Inflow to Croatia

In the light of the current situation Croatia is definitely on the path towards EU. The most visible advantages of getting the applicant status and later joining EU are from the EU financial support that is set at the disposition to the candidate states and members throughout various funds which are part of the European Union's policies. Therefore, this paper is intended to systematically describe and analyze the effects and benefits of different policy expenditures from various EU sources that are expected in Croatia. They differ depending on the different phases in the way towards EU. From the present situation where in Croatia the EU's CARDS programme is active, throughout the Pre-Accession strategy and its policy instruments Phare, ISPA and SAPARD with corresponding expenditures to the Post-Accession appropriations for commitments and payments available for the member states throughout Common Agricultural Policy, the Structural Operations are divided between Structural and Cohesion Fund and Internal Policies. It is assumed that these expenditures in any phase will affect general economic performance and overall employment patterns and that the impact is likely to differ in sectoral aspect. In order to provide a sound methodological basis to study these impacts the paper gives a systematic presentation of current EU financing in Croatia, of the pre-accession and possible (estimated) post-accession funds that are expected to be at the disposition to Croatia with the corresponding projected expenditure items. The paper also provides a sound justification of its estimates by a quantified description of policies and, where applicable, the assumptions underlining the presented figures. The EU support towards Croatia is analyzed assuming the treatment of the Country in analogy with former ten candidate countries. The impact analysis on the basic economic variables is carried out using I-O model under different scenarios concerning various projected funds inflow to Croatia depending on different 'statuses' of Croatia at different points of time - current status, EU candidate status and the EU membership. The annual amounts (real and estimated) of mentioned funds are injected in national I-O matrices to derive estimates of the impact generated by differently defined scenarios. The scenarios presented in this paper illustrate maximum impacts as they are made under the assumption that the EU expenditures would be fully absorbed and they also exclude the expected national payments towards The analysis is performed in a static framework and estimates only the relative rates of change of output, income and employment thanks to the new available funds inflow and consequently the rise in the final demand and it does not refer to an absolute values. Actually, it measures the impacts of described funds inflow in terms of delta change in confront to the current situation. Therefore, only the effects of the EU's policy funds inflow for one year were estimated and the cumulative effects were The fact that the latest national I-O Table of Croatia used for the impact analysis in this paper is from 1997 and that it has been derived by the RAS method, based on the direct requirements matrix of the year 1987 might be the limitation to assess the precise values, but for such an illustrative analysis it is sufficiently representative and can provide the relevant results.

EU accession ; EU policies ; impact analysis ; economic development

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