ABSTRACT
In the case of Croatia, the basic similarity is subject to two main differences. First, due to the destruction and disruptions caused by the war and the problems created by the enormous refugee influx, the economic crisis is much more serious than it would have been otherwise. Second, the Croatian economy has displayed an astonishingly high degree of vitality, the capability to operate under highly unfavorable conditions, and an ability to adjust very quickly to the rapidly changing environment. Croatia was successful, in view of the circumstances, to have maintained a surprisingly well-functioning system of free-market mechanisms throughout the whole war period. The external liquidity of the Croatian banking system has been brought to a level which can provide regular financing of the ongoing economic activities. The budget deficit continues to rise rapidly. This is partly caused by the war effects and the large inflow of refugees, but also by some important deficiencies of Croatian economic policy.
