ZAGREB, August 31, 2019 - Prime Minister Andrej Plenković on Friday received representatives of the European Bank for Reconstruction and Development (EBRD) headed by the bank's vice president Pierre Heilbronn, the government said in a press release, underscoring that cooperation between EBRD and Croatia and the implementation of projects were continuing.

"Prime Minister Plenković expressed his satisfaction with the cooperation with the EBRD thus far which is reflected in 3.8 billion euro in funding that the EBRD has approved until now to finance 210 projects in Croatia in the field of transport infrastructure, energy, shipbuilding, tourism, local infrastructure and environment protection, and small and medium-sized enterprises," the government said in a press release.

During the meeting, there was talk of positive economic trends in Croatia with regard to continuing GDP growth, the stability of public finances, generating a budget surplus as well as having the country's credit rating reinstated to investment level (according to Standard & Poor's and Fitch).

Plenković and Heilbronn discussed the EU's new multi-annual financial framework 2021-2027 and Croatia's chairmanship of the Council of the EU in the first half of 2020. The EBRD has been recognised as an important partner in achieving common priorities directed at job creation, growth and strengthening competitiveness, employment, with special focus on young people, connectivity, security and EU enlargement.

In that context, Heilbronn announced a summit of Southeast European countries that EBRD is organising in February 2020 in London, the press release said.

Prior to meeting with the prime minister, Heilbronn met separately with Finance Minister Zdravko Marić and Regional Development and EU Funds Minister Marko Pavić.

More news about Croatia and the EBRD can be found in the Business section.

ZAGREB, August 28, 2019 - Prime Minister Andrej Plenković on Wednesday described the GDP growth of 2.4% in the second quarter of 2019 as good and positive news, underscoring that the government is doing everything to strengthen the Croatian economy's resilience to a possible new recession.

The State Bureau of Statistics (DZS) on Wednesday released its initial estimate according to which GDP in Q2 rose by 2.4% on the year. That is the 20th quarter in a row that GDP increased but significantly slower than the 3.9% rate in Q1.

"That means that we are at the level of the first six months of a 3.15% growth rate which I think is absolutely in line with the European Commission's summer forecast released a few weeks ago. That is still above the average growth that we ourselves forecast in our Economic Guidelines and Fiscal Policy," Plenković told reporters in the eastern town of Osijek.

The European Commission forecasts an annual GDP growth for Croatia of 3.1% while the government has estimated that it will be 2.8%.

Plenković says that the data released today are showing a large growth of gross fixed capital formation, rising exports, and considering a high basis, a slightly slower rise in imports in the second quarter, and added that it is necessary to work on increasing industrial production.

The greatest positive contribution to GDP in Q2 was generated with the growth of gross fixed capital formation. Those investments grew by 8.2%, which is however somewhat slower than in the first quarter when it increased by 11.5%.

"Croatia's economy is growing for the 20th consecutive quarter, hence we are recording a continual growth which is positive and good," Plenković said.

He reiterated that during the term of his government the average monthly pay increased by 800 kuna, the average pay in the city of Zagreb is about 7,500 kuna, indexation on pensions has increased by more than 12% and the number of beneficiaries was growing and that with its budget discipline the government has generated a surplus for two years in a row despite unplanned payments for enforced guarantees of 4.5 billion kuna for the Uljanik shipyard.

"As a government, we are doing everything for the Croatian economy's resilience to grow," Plenković told reporters when asked if Croatia would be prepared for a global recession that economists have been forecasting.

He added however that economic trends have to be monitored in countries with which Croatia has a high level of trade.

He also underlined that Croatia's GDP growth in Q2 was a lot higher than the EU average.

Recently Eurostat released a report showing that the EU growth in the second quarter increased by 1.3% on the year.

Croatia's economic growth in Q2 was 0.2% the same as the EU's Q-on-Q.

Finance Minister Zdravko Marić on Wednesday said that Croatia's GDP growth of 2.4% in the second quarter was as the government and ministry had expected, he warned however that the Croatian economy was still highly dependent on imports.

Addressing the press, Marić said that several good things can be concluded from the figures released by DZS today but also several warnings that aren't just related to the second quarter but regarding Croatia's economic structure in general.

In reference to the warnings, Marić said that growth structure, particularly on the expenditure side indicated a negative growth rate of commodity exports as well as a high growth of imports once again, particularly commodities but of services as well.

"The import of commodities and services has that "deductible" component and negative contribution to GDP growth," Marić said.

Marić underscored that Croatia's economy is still highly dependent on imports and we all have to focus on additionally strengthening local productivity and creating added value so that that import dependency is reduced.

On the other hand, positive trends on the expenditure side of GDP is continuing with increased personal consumption which Marić described as completely following the trend of retail growth but also increased employment and wages. He added that as soon as domestic demand records a growth, be that personal consumption or investments, a strong import component is noticed and that needs to be emphasised.

Although the IMF and the EC recently upgraded their GDP growth estimates for Croatia, the government however remained cautious and did not wish to exaggerate its forecast for the second quarter and that Croatia's forecast of annual GDP growth will remain at 2.8%.

Asked by the press whether he was concerned by the fact that Germany and Italy, which account for 40% of the destinations for Croatia's exports are on the brink of a recession, the minister said that the duty of the government is "to make the country resilient to all scenarios".

More economy news can be found in the Business section.

ZAGREB, August 28, 2019 - In the second quarter of 2019, the Croatian economy increased 2.4% on the year, markedly slower than in the first quarter, when GDP growth jumped to 3.9%, the national statistical office said on Wednesday..

The second quarter of this year was the 20th quarter in a row that Croatia's GDP grew.

The biggest positive contribution to GDP came from a 8.2% growth of gross investments in fixed capital, which was down from the 11.5% growth recorded in Q1.

The contribution of domestic demand was positive, as was the contribution of final consumption and gross investments.

The net foreign demand contribution was negative.

In Q2 2019, household consumption went up 2.7% on the year, as against the 4.4% growth in Q1, while government consumption went up to 3.9% from 3.1%

The export of commodities and services went up 1.3%, slower than in Q1, with commodity exports decreasing by 0.9%, while service exports went up 3.6%.

The import of commodities and services went up 6.7%, with commodity imports rising by 7.9% and service imports by 1.3%.

In Q2 2019, according to seasonally adjusted data, Croatia's GDP grew 0.2% from Q1 2019 and 2.5% from Q2 2018. This was higher than the EU average. Eurostat said recently that in Q2 2019 the EU economy grew 1.3% on the year and 0.2% on the quarter.

More news about GDP growth can be found in the Business section.

ZAGREB, August 27, 2019 - After on Tuesday the Ministry of finance auctioned off 32 million euro in treasury bills, at a negative interest rates of - 0.05%, Finance Minister Zdravko Marić welcomed the fact that the treasury bills were issued at a negative interest rate.

This is the first time Croatia issued treasure notes at a negative interest rate and Minister Marić hailed that as good information.

Earlier in the day the ministry issued treasure bills for 81 million kuna with a maturity of one year and at an interest rate of 0.01 percent, which was down by 0.01 percentage point lower than last week's auction.

The ministry issued also treasury notes for 32 million euro with a maturity rate of a year and at a negative interest rate (-0.05%), which means that financial institutions will actually pay the Finance Ministry to keep their money in the form of those securities.

These transactions were conducted ahead of the maturity of treasury bills worth 199 million kuna and 50 million euro.

The balance of the treasury bills issued in kuna will be reduced by 118 million kuna to 17.84 billion kuna.

The balance of the euro-denoted treasury bills goes down by 18 million to 100.6 million euro.

More economic news can be found in the Business section.

ZAGREB, August 26, 2019 - Mass-scale emigration of Croatians abroad has triggered off two significant processes on the labour market: a salaries rise and the opening of the market to older workers, the Večernji List daily newspaper wrote in its issue on Monday.

The beginning of the rise in monthly salaries coincided with the end of the recession and the start of the economic recovery in 2014, Croatian Chamber of Commerce (HGK) analyst Zvonimir Savić was quoted by the daily newspaper as saying.

The average monthly take-home pay is around 6,500 kuna (878 euro), with the average monthly wage in Zagreb being 1,000 kuna higher than that.

The daily shows in a table that expressed in euro, the gross monthly salary in Croatia stood at 1,030 euro in 2016 to rise 10.6% to 1,139 euro in 2018.

Analyst Savić warns that a rise in salaries in Croatia in the recent years was lower than that in some countries in transition.

When it comes to the gross salary, Slovenia, Estonia and the Czech Republic have average gross salaries than those in Croatia. Of the 16 countries presented in the table, the first mentioned three countries occupy the top three places, Croatia ranks fourth (€1,139), and is followed with Poland with the gross monthly salary of €1,070 in 2018 and by Hungary (€1,035). Slovakia and Latvia are in the group with the gross monthly salary above 1000 euros (1,013 and 1,010 respectively) last year.

In Slovenia, for example, the gross salaries rose by 6.2% from €1,585 in 2016 to €1,682 in 2018.

A majority of countries in transition have been faced with the brain drain and Romania, for instance, addressed that with a significant increase in salaries. For example, gross salaries in Romania skyrocketed by 54% from 2016 to 2018 to come to €964.

Broken down by sectors, in Croatia one of the biggest rises of some 5 percent was registered in the healthcare sector. Thus, currently the average net salary paid to employees in this sector is 8,413 kuna (€1,137).

In Croatia, every other employee receives the monthly salary below 5,595 kuna (€756) and every fourth worker earns less than 4,252 kuna (€574) monthly.

More economic news can be found in the Business section.

ZAGREB, August 16, 2019 - Consumer prices in Croatia in July this year were 1.1% higher than in July 2018, and inflation this July was higher than in June, when it stood at 0.6%, the national statistical office (DZS) said on Friday.

The 1.1% year-on-year increase in consumer prices is the highest since November 2018, when inflation stood at 1.3%.

Prices of alcoholic drinks and tobacco saw the highest year-on-year increase in July, of 5%, followed by prices of housing, water, electricity, gas and other energy products, which rose by 3.9%.

On the other hand, prices in the health segment and prices of transport both dropped by 1.1% on the year, with prices of petrol going down 1.9%.

Month-on-month, consumer prices in July dropped by 0.5% on average, with prices of clothing and footwear dropping the most, by 11.8%, owing to seasonal discounts.

On the other hand, restaurant and hotel prices grew the most on the month, by 1.6%, followed by prices of recreation and culture, which rose by 1.2%.

In the first seven months of this year, consumer prices were 0.7% higher than in the same period last year.

"In general, the level of prices in Croatia is at 68% of the EU28 average. Prices of food and non-alcoholic drinks account for 97% of the EU average, while prices of electricity, gas and petrol account for only 65% of the EU average," analysts of Raiffeisenbank Austria have said.

The analysts expect that the inflation rate in this and coming years should be moderate and stay below 2%.

More economic news can be found in the Business section.

ZAGREB, August 13, 2019 - At the end of April 2019, Croatia's gross foreign debt totalled 39.9 billion euro, 1.1 billion or 2.9% more than at the end of 2018.

Raiffeisen Bank analysts have said that the increase in the gross foreign debt is due to the usual seasonal worsening of credit institutions' international position (in the amount of 347.5 million euro, an increase of 8.5%) and an increase in the central bank's foreign debt of 1.4 billion euros.

The central government's foreign debt rose slightly, by 0.7%, while other domestic sectors reduced their gross obligations, the analysts said.

The statistics for April confirm a continued decline of the foreign debt that has been going on since the end of 2015, with sporadic exceptions in June 2018 and February 2019.

The biggest contribution to the year-on-year reduction of the foreign debt came from the public sector. At the end of April, the general government's gross foreign debt totalled 13.8 billion euro, which was 458.8 million euro or 3.2% less than in the same month of 2018, the analysts say.

They note that the annual decrease in the gross debt was also owing to a continued deleveraging in other domestic sectors whose gross foreign debt at the end of April dropped to 13 billion euros (-3.4%), continuing deleveraging trends that have been going on since January 2016.

These trends were mostly owing to deleveraging in the private business sector, whose gross foreign debt at the end of April dropped to 9.4 billion euro, 2.4% less than in the same period of 2018. The share of the gross foreign debt of other domestic sectors in the total gross foreign debt dropped to 32.5% from 34.3% at the end of December 2018, which reflects a continued decline in foreign borrowing that has been replaced by kuna loans taken from domestic banks.

April saw a continuation in the growth of borrowing by domestic banks, whose gross debt at the end of that month amounted to 4.4 billion euro (+8.2% from April 2018 and +8.5% from the end of 2018).

The share of the financial sector's gross debt in the total gross foreign debt rose from 10.5% in December 2018 to 11.2% at the end of April 2019.

Analysts attribute the increase in borrowing by the banking sector that started at the end of 2018 to a growing demand for loans, notably non-purpose cash loans.

They note that statistics for May and June could confirm a temporary increase in the central government's obligations towards foreign creditors after the government in June issued 1.5 billion euro worth of ten-year euro bonds to repay an international bond issued in November in the amount of 1.5 billion US dollars.

As for the whole 2019, analysts expect continued improvement of debt statistics.

More economic news can be found in the Business section.

ZAGREB, August 9, 2019 - The Financial Agency (FINA) has reported that at the end of this June, 256,322 citizens' accounts were blocked due to unpaid obligations, with the debt principal amounting to 16.6 billion kuna, and broken down by region the largest number of debtors with overdue liabilities was in Zagreb, 53,045 with the debt of 4.8 billion kuna.

Thus, at the end of June 2019, every one in ten Zagreb residents of working age (9.87%) had their accounts blocked.

Split, the second biggest Croatian city, had 9,414 citizens' accounts blocked due to overdue liabilities.

In Split-Dalmatia County, 23,149 citizens' accounts were blocked over unpaid obligations and their accurate debt totalled 1.4 billion kuna. Thus, 7.63% of residents of working age in that southern county had their accounts blocked.

FINA recalled that one of the measures in resolving the problem of citizens with blocked accounts was the adoption of a package of laws regarding write-offs, distraint procedures and personal bankruptcy, which entered into force in July and August 2018.

Thus in late September 2018, FINA reported that as of 31 August that year, 274,529 citizens' accounts were blocked due to unpaid obligations, with the debt principal amounting to 19.2 billion kuna as were 20,826 commercial accounts, with their debt principal amounting to 7.9 billion kuna. That August, the number of citizens with blocked accounts was down 43,992 or 13.8% on the month, while the value of the debt principal was HRK 24 billion less.

More economic news can be found in the Business section.

ZAGREB, August 2, 2019 - Croatia was among the EU countries with the highest retail trade in creasesin June, both month on month and year on year, according to figures released by Eurostat on Friday.

The seasonally adjusted volume of retail trade in Croatia in June increased by 6.8% from May, when it had observed a decrease of 4.4%.

The highest monthly increases were registered in Croatia (+6.8%), Germany (+3.5%) and Poland (+2.8%), while the largest decreases were observed in Portugal (-0.9%), Ireland (-0.8%) and Slovenia (-0.5%).

In June 2019 compared with May 2019, the seasonally adjusted volume of retail trade increased by 1.2% in the EU28 and by 1.1% in the euro area. In May 2019, the retail trade volume decreased by 0.7% in the EU28 and by 0.6% in the euro area.

In June 2019 compared with June 2018, the calendar adjusted retail sales index increased by 2.8% in the EU28 and by 2.6% in the euro area.

The highest yearly increases in the total retail trade volume were registered in Croatia (+7.4%), Lithuania and Romania (both +5.7%) and Malta (+5.6%). The only decrease was observed in Slovakia (-0.4%).

More economic news can be found in the Business section.

ZAGREB, August 1, 2019 - The Croatian government projects budget revenues for 2020 at 141.6 billion kuna and expenditures at 144.3 billion kuna, Finance Minister Zdravko Marić said while presenting the Economic and Fiscal Policy Guidelines 2020-2022 at a Cabinet meeting on Thursday.

Marić said that the projections were a continuation of the policy aimed at ensuring the sustainability of public finance, economic growth and increasing the citizens' living standards.

Real GDP growth was forecast at 2.8% in 2019, 2.5% in 2020 and 2.4% in 2021 and 2022.

Prime Minister Andrej Plenković said that the projected rates were realistic and sound. He said that the focus of the Guidelines was on further strengthening fiscal sustainability and economic growth, adding that reform activities would be aimed at strengthening the long-term potential of the national economy.

He announced effective use of budgetary funds, with strict control of expenditures, and said that the faster absorption of EU funding would help accelerate growth. He also announced further efforts to improve the business climate.

Marić said that domestic demand and personal consumption would be the main drivers of growth in the entire three-year projection period, citing a rise in economic sentiment, improved credit terms, positive labour market trends and tax changes that leave the citizens with more disposable income.

He also mentioned a positive contribution from investment, which he said generated one percentage point of total growth on average, and added that further efforts would be made to improve the business climate and encourage private investment.

The finance minister warned that with stable exports growth rates imports were also growing and that therefore he expected a negative net contribution from exports in the projection period.

For 2020, government budget revenues are projected at 141.6 billion kuna. The Guidelines say that revenues are expected to rise by 2.6% to 145.3 billion kuna in 2021 and by 2.4% to 148.7 billion kuna in 2022. These movements are based on the expected economic growth and the fiscal impact of further tax cuts.

Marić noted that budget expenditures were also growing at a slower rate that GDP.

The most important changes with a fiscal impact on government budget revenues relate to changes to Value Added Tax (VAT), notably a reduction of the general VAT rate from 25% to 24% as of 1 January 2020 and a reduction of VAT on food in the hospitality industry to 13%.

The latest round of the tax reform provides for changes to profit tax, under which income subject to a profit tax of 12% will be raised from 3 million kuna to 7.5 million kuna. In that way an additional 10,000 businesses, or a total of 93% of businesses liable to profit tax, will be subject to the 12% rate.

The government also expects a considerable impact on budget revenues from the absorption of EU funding, which is expected to continue to grow.

As for budget expenditures, they are forecast at 144.3 billion kuna for 2020. Expenditures financed from general revenues and receipts, contributions and special-purpose receipts are projected at 113.6 billion kuna, 2 billion kuna higher than for the current budget.

At the same time, expenditures financed from other sources of financing, which do not affect the level of the budget deficit, are projected at 30.7 billion kuna, up by 1.9 billion kuna.

In 2021, total expenditures are planned at 146.1 billion kuna, an increase of 1.8 billion kuna compared with 2020. Expenditures financed from general revenues and receipts, contributions and special-purpose receipts are expected to be 2.2 billion higher, while those financed from EU funds and other sources would be reduced by 369 million kuna. In 2022, expenditures financed from EU funds and other sources are expected to be reduced by 569.1 million kuna.

The reductions follow from the dynamics of implementation of EU-funded projects from the programme period 2014-2020 which will be in final stage. Contracting for projects that will be funded from EU funds in the next programme period 2021-2027 is yet to begin. As a result, total expenditures in 2022 are projected at 147.5 billion kuna.

The Guidelines say that the public debt to GDP ratio in 2019 is expected to decrease by a further 3.3 percentage points to 71.3% of GDP. In the medium term, the ratio should continue to fall by 3.1 percentage points annually to 68.3% of GDP in 2020, 65.3% in 2021 and 61.9% of GDP in 2022.

The general government budget is expected to run a deficit of 0.2% in 2020, while surpluses of 0.2% and 0.6% are forecast for 2021 and 2022 respectively.

The inflation rate is projected at between 1% and 1.5%.

More economic news can be found in the Business section.