ZAGREB, April 22, 2020 - In 2019, the consolidated general government surplus amounted to HRK 1.55 billion, or 0.4% of GDP, while the consolidated general government debt amounted to HRK 293 billion or 73.2% of GDP, shows a report on the Excessive Deficit Procedure by the national statistics office, published on Wednesday.

In 2018, Croatia saw a consolidated government surplus of HRK 850 million or 0.2% of GDP while the consolidated government debt amounted to HRK 286 billion or 74.4% of GDP.

The official statistics indicate that 2019 was the third consecutive year that the government achieved a general government surplus while the debt to GDP ratio continued to decrease thanks to a nominal increase in GDP.

The surplus was mostly owing to a considerably improved financial result of extrabudgetary beneficiaries and public companies and increased tax revenues.

In 2019, taxes on production and imports totalled HRK 81.3 billion, an increase of 6% on the previous year.

Investments also grew by 27.6% to HRK 17.2 billion but last year was also marked by payments of government guarantees for shipyards amounting to HRK 1.78 billion, which impacted the surplus, DZS said.

At the end of 2019, the consolidated general government debt increased by HRK 6.9 billion, up 2.4% compared to the end of 2018. Of that amount, HRK 5.7 billion was net borrowing while the rest is attributed to positive exchange rate changes in the kuna against the euro.

The debt-to-GDP ratio fell by 1.5 percentage points compared to 2018 and stood at 73.2% of GDP at the end of 2019.

Last year the government adopted a budget based on an expected economic growth of 2.5%, a consolidated general government surplus of 0.2% of GDP or HRK 629 million, and a public debt to GDP ratio of 71.3%, however, with the outbreak of the novel coronavirus, which is seriously affecting the economy, it will be difficult to achieve those goals, the DZS said in its report.

More economy news can be found in the Business section.

ZAGREB, April 21, 2020 - Prime Minister Andrej Plenković said on Monday that the government was making well-thought-out decisions in the context of the coronavirus epidemic and would also define measures to relaunch some of the economic activities in line with epidemiological standards.

The measures to relaunch some economic activities will be defined at a government session on Thursday, Plenković said, declining to specify those measures.

"Once the entire set is finalised, we will present it," he told reporters after a session of his HDZ party's presidency.

He did not agree with assessments that Croatia was late in adopting measures to restart economic activities, describing them as an attempt to exert pressure on the government.

"All the countries that announced a certain easing of restrictions, notably big ones, had the highest number of fatalities on the day when they expressed their hope that restrictions would be eased. We are not in such a situation nor do we have a large number of infections or fatalities. Our decisions are rational, well-prepared, based on experts' opinions and on a clear political estimate as was the set of measures designed to alleviate the impact of the crisis on the economic sector," he said.

He added that measures designed to reactivate some parts of the economic sector would also be well-thought-out and rational.

The government must not allow a situation in which it would be pressured into easing restrictions and then experience an upsurge in the number of infections, he warned.

As for President Zoran Milanović's comment that decisions in Croatia should start to be made at the political and no longer at the expert level, Plenković said that all decisions that had been made were also political decisions.

"One should distinguish between political decisions of the government and ministers and the so-called health-epidemiological framework, which is about adjusting certain measures in the interest of our citizens' health safety. The national civil protection authority did not just come out of the blue, it was established based on a government decision," he said.

He added that all members of the national authority were appointed to represent departments. "And those departments are government departments... decisions to be made by the government on Thursday will also be political decisions and then epidemiologists will fit them into a framework to prevent putting at risk all the achievements of the recent weeks," he said.

Plenković also said that the HDZ would give up 20% of its funds, from the tranche for the second quarter, to be used for the fight against the coronavirus epidemic.

More coronavirus news can be found in the Lifestyle section.

ZAGREB, April 21, 2020 - The Croatian Employers' Association (HUP) on Tuesday called for the reduction of the 20 highest parafiscal taxes, whereas other parafiscal charges should be either revoked or reduced by 70%.

The HUP believes that during the coronavirus crisis it is high time that those charges were thoroughly analysed and most of them revoked or reduced.

The press release signed by HUP director-general Davor Majetić reads that the current crisis imposes an obligation on the authorities to remove all hurdles and costs that make doing business harder and affect the investment potential of companies in Croatia.

The HUP recalls that for the last twenty and odd years it has forwarded requests for the reduction of parafiscal charges to various governments.

"We have underscored on several occasions that those taxes should be suspended and then thoroughly analysed so as to reduce their number to a minimum and within the acceptable frameworks business-wise," Majetić was quoted as saying.

The HUP published a first list of parafiscal taxes in 2007 and the list contained 245 various charges. Since then their number has risen almost twofold.

The press release cites several examples of this burden on businesses in various sectors.

For instance, a manufacturer in the timber industry that employs 2,000 workers is expected to pay HRK 4.6 million kuna annually in parafiscal charges. They include HRK 123,700 as the annual membership fee of the Croatian Chamber of Commerce (HGK), taxes for preservation of listed building in the amount of 47,300 kuna, the television and radio subscription fee in the amount of 54,500, the fee for packaging waste management in the amount of HRK 65,200, water management tax in the amount of 52,500, forest parafiscal charges in the mount of 191,400.

Another example is an agricultural producer with about 100 workers on its payroll who is expected to pay nearly 380,000 in parafiscal taxes annually.

More economy news can be found in the Business section.

ZAGREB, April 20, 2020 - At the end of March, there were 1.515 million employed persons in Croatia, which is almost the same number as in the previous month or 715 fewer workers, while the number of job-seekers rose by 4%, sending the registered unemployment rate up by 0.3 percentage points to 8.6%.

Data from the national statistical office (DZS) shows that there were 1,515,174 employed persons in the country at the end of March, an annual increase of 0.5%.

In mid-March Croatia introduced restrictions to step up the fight against the coronavirus epidemic, which has caused a decrease in monthly employment figures for trades and freelance professions and an increase in the number of the unemployed.

Statistics show that at the end of March the number of workers in legal entities, which employ the largest number of workers, rose mildly on the month while in trades and freelance professions it dropped by more than one percent.

According to DZS data, at the end of March legal entities employed 1,314,034 persons, 0.1% up or 1,309 more employees than at the end of February this year and 0.7% more than in March 2019.

Month-on-month, the number of employees in the real estate sector rose the most, by 1.2%, to 9,220 employees.

The number of workers dropped the most in the catering industry and tourism, by 3.3% to 67,000.

A total of 181,959 people worked in trades or as freelancers at the end of March, which is 1.1% down from February.

According to figures from the Croatian Employment Service (HZZ), at the end of March there were 143,461 job-seekers, which is 5,484 or 4% more than in February. Year-on-year, the number of job-seekers dropped by 1.6%.

The registered unemployment rate in March stood at 8.6%, 0.3 pp more than in February.

The number of job-seekers continued rising in April as well, and according to daily figures available on the HZZ website, there are currently more than 155,000 job-seekers, so the registered unemployment rate is expected to continue growing.

More economy news can be found in the Business section.

ZAGREB, April 16, 2020 - Finance Minister Zdravko Marić said on Thursday budget revenues in the first half of this month were only a third of those generated in the first half of April 2019.

Speaking in parliament, he said the ministry expected May and June to be even more challenging.

Speaking of the effects of the crisis caused by the COVID-19 epidemic, Marić said fiscalised receipts in all activities were down 40%.

Responding to MPs' questions, he said HRK 13-15 billion a month was needed for the health, pension and welfare systems as well as for the measures to help the economy.

That is about HRK 45 billion for three months and if we add over HRK 20 billion for liabilities due, there is a need for HRK 65-70 billion, Marić said.

He reiterated that 95,000 employers had applied to the Employment Service for support to keep 550,000 jobs, and said that HRK 1.4 billion had been paid out to date for 439,000 workers.

He said the rest of the money for the March wages would most likely be paid out by tomorrow, after which applications would be invited for April wages, which would be paid in the first two weeks of May.

Marić said the Tax Administration had received 102,000 applications for the deferral, full or partial write-off or instalment payment of public contributions and that 85% had been granted.

The government's support for the economy shows the level of trust we have put in enterprise, the real and private sector, and we don't expect this trust to be abused, he said.

Marić voiced hope that the government's help would be utilised in the only right way, "which is that only with solidarity and unity can we ensure Croatia overcomes this crisis with the smallest scars possible and welcomes its end as prepared as possible."

More economic news can be found in the Business section.

ZAGREB, April 15, 2020 - The Croatian National Bank (HNB) said on Wednesday it had agreed with the European Central Bank (HNB) to set up a precautionary currency agreement, known as a swap line, that will allow the HNB to borrow up to €2 billion from the ECB in exchange for Croatian kuna.

The HNB said in a press release that the precautionary currency swap line would be activated if needed.

"The currency swap line allows for the exchange of the kuna for the euro in the amount of EUR 2bn," the national bank said.

This swap line gives the HNB "the space to provide additional euro liquidity to Croatian financial institutions, should they need it, without using its own international reserves."

The Croatian central bank said that it "will notify the ECB of the use of euro liquidity acquired through the currency swap line. The currency swap line will remain in place until 31 December 2020, and can be extended if necessary."

In March, the HNB conducted five interventions on the foreign exchange market to maintain the stability of the exchange rate of the kuna, selling a total of € 2.25 billion.

It has also taken some other measures to mitigate the economic impact of the coronavirus pandemic.

More economic news can be found in the Business section.

ZAGREB, April 15, 2020 - Deputy Parliament Speaker Željko Reiner said on Wednesday the ruling coalition meeting today focused on amending the law on the protection of the population from contagious diseases and that it did not discuss pay cuts in the public sector.

"We all agreed that in this special situation Croatia, and the whole world, is exposed to a new virus that didn't exist the last time that law was passed. We must adapt it just as some ten days ago we adapted the law on civil protection," Reiner (HDZ) told reporters after the meeting.

Asked if the adjustments requested by the opposition would be introduced, he said he did not know but that amendments would be discussed if there were any.

Reiner said the coalition did not discuss pay cuts in the public sector and that, as far as he knew, there was no proposal to cut them by 20%.

He said all decisions about that should be made in agreement with trade unions and in line with financial developments.

As for the steps necessary to come out of this crisis, Reiner said Croatian People's Party president Ivan Vrdoljak mentioned that they must start talking about them and that all were for it.

More politics news can be found in the dedicated section.

ZAGREB, April 15, 2020 - The political platform "We Can!" said on Wednesday that the Tax Administration should be tasked with controlling how state grants for keeping jobs during the corona crisis are used by employers who are entitled to that measure.

This non-parliamentary political group thus responded to statements made by the Tax Administration head, Božidar Kutleša, that dealing with possible misuse of the funding granted under the government's job preservation scheme to employers for furloughed employees was not within the remit of the tax authority.

This political group says in a press release that it is unacceptable that public funds could be spent without control, and expresses fear that this would make it possible for employers who behave irresponsibly towards their workers to take advantage of this scheme.

Therefore "We Can!" demands that during the financial intervention in the economy the government should impose two criteria for the implementation of the grants: employers who use the funds should be expected to keep the workers on their payrolls and ensure salaries for a decent life, and they should not be allowed to make profit off those grants.

The political group also proposes that the non-payment of taxes and contributions could be implemented more flexibly which means that some of the companies that already feel the consequences of the corona crisis can be freed from the payment in the current three-month period, while those that will feel the consequences later should be allowed to be exempted from the payment any time this year.

More coronavirus news can be found in the Lifestyle section.

ZAGREB, April 15, 2020 - Prime Minister Andrej Plenković said on Tuesday the government's biggest task was to fight the socio-economic fallout of the coronavirus pandemic, asking all ministers to make economies and underlining that the burden of this crisis must be borne with solidarity.

Speaking for the public broadcaster, he said rationalisation was the main concept and that ministers would have to plan in stages how to reactivate the economy in line with health and safety guidelines. "We don't want to fall into the trap of lightly easing something and then having new infection hotspots."

Plenković said the uncertainty of the pandemic's duration was the key problem of the crisis as no one knew when a vaccine would be found or immunity acquired.

He said he would do everything for the state to function as much as possible while primarily seeing to citizens' health. "It's not just a common sense obligation of the government but a constitutional category as well."

Plenković said he was satisfied with the results of the second set of measures to help the economy and that some 100,000 companies had applied for aid to keep jobs.

Speaking of the third set, he said the government today tabled a bill to enable a stay on the enforcement on physical persons' monetary funds for the duration of the crisis.

He said the government's measures had been planned for a period of three months and another three if the crises continued.

Asked if the crisis would delay Croatia's introduction of the euro, he recalled that Croatia adopted a euro introduction strategy two years ago and that it would complete an action plan next month. He said the pace might be somewhat affected but that Croatia remained committed to that goal.

Plenković said that if Croatia were in the euro area, there would be no pressure on the kuna now and the European Central Bank could do for it what it was doing for all euro area member states. "In a way, we would be secured."

He went on to say that this situation was an opportunity for a new start not just by the government but all of society as it provided "a fresh look on what is really good and what isn't good."

"We must strike a balance between understanding the role of the state and some chubby state which perhaps has taken more than it should. That's the key before us."

Asked about the objective of amendments to the law on the protection of the population from contagious diseases, Plenković said they proposed that instead of the minister of health declaring an epidemic as was the case now, it would be better if the government did it.

The amendments will also specify the link between activities related to an epidemic from the aspect of the Health Ministry and what the national civil protection authority and the government do, he said. "Since no one has been faced with such a situation yet, we have realised that it demands also improving legislation."

Asked if they had worked out a plan in case the coronavirus pandemic were to last long, the prime minister said the restrictions could not be limitless so they would try to work out a plan allowing the reactivation of certain industries but in a different way, within "an epidemiological framework."

Speaking of Croatia's presidency of the Council of the EU, Plenković said the wish was to find a common European response to how to coordinate while living with COVID-19 and acting better after COVID-19. "That will be our wish for June, that we come out of this stronger."

The European project can survive this and after the pandemic everyone will draw certain lessons and now there will be more focus on preparing crises response mechanisms, he said, adding that Europe was a strong project and that key parties, with Croatia's contribution, would work on making it stronger.

More coronavirus news can be found in the Lifestyle section.

ZAGREB, April 14, 2020 - In 2020 Croatia's economy will contract by nine percent, the most in the group of emerging European economies, shows the latest global economic forecast of the International Monetary Fund (IMF), published on Tuesday.

The coronavirus pandemic has been strongly impacting economic activity, shows the latest forecast, reflecting the consequences of quarantine and other stringent measures with which governments around the globe have been trying to fight the new, highly contagious virus.

According to the latest IMF forecast, Croatia's GDP will drop by 9% this year. For the sake of comparison, last autumn, before the outbreak of the epidemic, the IMF forecast a growth rate of 2.7% for Croatia's economy in 2020.

In 2021 recovery is expected, with an estimated growth rate of 4.9%.

The international lender has also revised the growth rate for 2019 to 2.9%, down by 0.1 percentage point.

The IMF expects a significant increase in unemployment this year, to 11.5%, as against the autumn forecast of an unemployment rate of 8%.

In 2019 unemployment was at 7.8%, whereby the October 2019 forecast has been revised down by 1.2%.

In 2021 unemployment is expected to drop again, to 8%.

The IMF also forecasts a deficit in the current account, expressed as a share in GDP of 4% in 2020, whereas in its autumn forecast it predicted a surplus of one percent.

A deficit in the current account of 1.5% is forecast also for 2021.

The forecast about consumer price growth in 2020 has been revised up by 0.1 percentage point, to 1.3%. In 2021 prices are expected to grow at an almost unchanged rate of 1.2%.

In 2019, according to the IMF's estimates, prices grew by 0.8%, a downward revision of the autumn forecast by 0.2 percentage points.

According to the latest forecast, the surplus in 2019 was 2.9%, which is 1.2 percentage points higher than forecast in October 2019.

The latest IMF estimates show that this year Croatia's economy is expected to drop the most in the group of emerging European economies, which also encompasses Russia, Turkey, Poland, Romania, Ukraine, Hungary, Belarus, Bulgaria and Serbia.

The IMF estimates that those economies will drop by 5.2% on average this year, as against a 2.5% growth, forecast in the autumn of 2019.

In 2021, strong recovery is expected, with an estimated growth rate of 4.2%.

Last year, the emerging economies grew by 2.1% on average, 0.3 pp more than forecast by the IMF in October 2019.

A more pronounced drop in economic activity is expected this year in Ukraine and Belarus, of 7.7% and 6% respectively. The two countries are followed by Russia, with an estimated drop of 5.5%, and Turkey and Romania, each with a decline of 5%.

Poland's economy is expected to contract by 4.6% and Bulgaria's by 4% while economic activity in Hungary and Serbia is expected to contract the least, by 3.1% and 3% respectively.

More economic news can be found in the Business section.