Croatia is waking up from its recessionary sleep, the head of the IMF mission to Croatia Zuzana Murgasova has said.

"We expect the recovery to start in second half of this year, and we predict a growth of one per cent for the entire 2011."

The institution expects a faster recovery in the medium term, but problems with competitiveness will be limiting. Politics should step in and make a difference, said Murgasova.

The main problems the IMF has identfitied are weak economic perspective, lack of competitiveness and growth of fiscal deficit and public debt.

The IMF warns that elections should not slow down reforms that were started in 2010, with a focus on labour laws to create flexible salary systems and cutting down on public administration and costs.