May the 9th, 2023 - Croatian wages are set to increase for a significant proportion of the population thanks to recently introduced government measures, but it won't be the case for everyone.

As Poslovni Dnevnik writes, neither the complete abolition of surtaxes, nor the increase of the non-taxable part of Croatian wages, nor the reduction of income tax rates will raise the salaries of about two-thirds of taxpayers from next year on, because even with the current rules, those individuals don't pay those particular taxes, as Novi list reports.

Only those people with a net salary of at least 800 euros per month or even those who earn more than the average net salary stand to actually benefit financially from this latest government move aimed at increasing Croatian wages. This is the main reason why the government is seriously considering reducing pension contributions in the first place in order to raise the figure those who earn lower salaries take home each month.

That said, after the abolition of surtaxes, Croatian wages would not increase even for those with above-average incomes, because many of them live in cities and municipalities that have not introduced or abolished the surtaxes and so they'll keep on having to pay local levies.

Where surtaxes aren't already being paid, its cancellation from January the 1st will not actually bring anyone a higher salary, and it's highly unlikely that those cities and municipalities will take advantage of the opportunity to further reduce income tax rates, because they already tried to relieve the burden on their residents by deciding to waive the need to pay surtaxes previously.

Just many workers will actually be left without a salary increase from January the 1st due to these circumstances, although the government keeps on claiming that salaries will increase for everyone, is currently unknown. All we do know is that facts will need to be faced at some point or another, as the Croatian Government is expected to come out with this data when it presents its proposal for tax changes.

For more, make sure to check out our dedicated news section.

April the 24th, 2023 - Croatian inflation has seen certain investments shelved, with 6.8 percent less being spent on investments across the board, but aside from that, a better fiscal picture than previously expected has emerged.

As Poslovni Dnevnik/Jadranka Dozan writes, like most other member states of the European Union and the Eurozone, Croatia ended 2022 with a better general government budget balance and a further decline in the level of national debt measured as a share of gross domestic product. The improvement of the Croatian fiscal picture was manifested in the realised surplus of 0.4% of GDP instead of the deficit recorded the year before (which was also planned for 2022).

The dynamics of the debt-to-GDP ratio, which was reduced by as much as 10 percentage points, down to 68.4 percent, proved to be better than expected, according to the first of two reports on the budget deficit and national debt that the national statistical offices submit to Eurostat during the fiscal year, under the supervision of the European Commission.

High levels of Croatian inflation contributed to the aforementioned outcome, and in addition to enterprises who were forced in most cases to increase their profit margins, inflation also "benefited" the state in certain ways, on the one hand by filling the state budget, and on the other by "devaluing" state debts in relation to nominal GDP.

The surplus of the consolidated general government reached almost 2 billion kuna last year, while a deficit of almost 11 billion kuna or 2.5 percent of GDP was recorded the year before that. The last time the state had a fiscal surplus was otherwise back during the pre-pandemic, record tourism year of 2019.

Bearing in mind the relatively generous fiscal incentives that last year were primarily motivated by the Russian aggression against Ukraine and its consequences on supply chains and price pressures, in such conditions (taking into account the beneficial effect of inflation on tax revenues such as those from VAT) the realised surplus could could indicate that Croatia's fiscal policy was actually relatively restrictive.

The Central Bureau of Statistics (CBS) pointed out that the favourable balance of the state budget itself, which stood at as high as 11.6 billion kuna, had a big impact on the amount of last year's surplus. Taxes on production and imports were collected, they say, in the amount of 94.44 billion kuna (according to the time adjustment method) which represents a 13.6 percent increase compared to the year before, current taxes on income and wealth were collected in the amount of 37.4 percent more, and net social contributions poured in 12.8 percent more than they did back in 2021.

On the expenditure side, fiscal incentives were manifested through increased expenditures for subsidies. Last year, interest expenses reached a staggering 7 billion kuna, or about 250 million (3.5%) more than the year before. However, in the context of the achieved surplus, it should be noted that last year, there was a noticeable decrease in general government expenditures for investments, by 6.8 percent, to slightly more than 19.1 billion kuna, and some analysts believe that this speaks volumes about the weak investment activities of the City of Zagreb.

From the aspect of state finances and debt, it is certainly important that two tranches of EU grants for the National Recovery and Resilience Plan "settled" things a little bit more last year.

Croatian inflation might be what is making all of our wallets feel a little slimmer, but issues like this are very much in evidence across the EU, and when compared to the peak in 2020, marked by a sharp economic decline, in just two years, Croatia's debt ratio dropped by as much as 18.6 percentage points of GDP.

Among the EU member states, Greece (-23.3 points), Cyprus (-14.7), Portugal (-11.5) and Ireland (-10.7) also reduced their respective debt levels by more than 10 percentage points last year. However, while in the case of Ireland it fell below 45 percent of GDP, in Greece and Portugal, even with such reductions, their debt remains higher than their GDP (Greece is at 171 percent, and Portugal is 114 percent).

In relation to the countries of Central and Eastern Europe with which Croatia and the situation of ongoing Croatian inflation are usually compared, the level of the national debt of Croatia is still generally higher. For example, Slovakia's stands at 57.8 percent, Poland, Romania and the Czech Republic are all below 50, and Bulgaria at only 23 percent. In neighbouring Slovenia and Hungary, which still had lower level of debts, it is now slightly higher (standing at 70 and 73 percent respectively).

The lowest ratio of national debt to GDP was recorded in Estonia (18.4%), and it is below 40 percent of GDP in five other countries, including two from the "upper house" according to the level of development (these are Denmark and Sweden). Thirteen other EU member states exceed the "Maastricht" limit of 60% of GDP, and in six nations, the debt exceeds GDP, among which are some of the largest EU economies, such as Italy, France and Spain.

For more, make sure to check out our news section.

April 15, 2023 - Fitch Ratings has confirmed Croatia's 'BBB+' rating and stable outlook, estimating that the Croatian economy should preserve its resilience to external shocks thanks to improved fiscal and external positions and the successful adoption of the euro. In mid-July, Fitch raised the rating of Croatia's debt securities by one level, to 'BBB+', with a stable outlook, after the conclusion of the admission process to the eurozone.

As Index writes, in October, Fitch confirmed the assessment and outlook, warning that economic growth should slow down in 2023 due to inflation and slowing growth in the eurozone.

Reaffirming the 'BBB+' rating and stable outlook on Friday, the agency reiterated that the Croatian economy should remain resilient to external shocks thanks in part to an improved fiscal and external position and adopting the euro.

Approaching the core

Croatia became a member of the eurozone at the beginning of the year, and adopting the euro should improve its integration with the countries in the core zone of the common European currency and strengthen its institutional capacities, according to Fitch. "Access to the ECB's credible monetary policy framework and liquidity capacities for banks will significantly reduce external and financial weaknesses, given the elimination of currency risk," Fitch points out.

European incentive

The Croatian economy will grow by 6.3 percent in 2022, Fitch estimates, raising the forecast from the October report by 0.2 percentage points. This year, growth should slow to 1.7 percent, which is 0.6 percentage points more than they expected last autumn.

Personal consumption is likely to slow down to around one percent this year as disposable income continues to be pressured by inflation and consumer confidence remains muted, Fitch estimates. The key engine of economic growth this year will be investments, which should grow by around 5.5 percent since the withdrawal of money from EU funds should reach its peak, they note, highlighting the fast pace of withdrawal of funds from the European Program for Recovery and Resilience.

In 2024, the growth of the Croatian economy should accelerate to around three percent, driven by the recovery of personal consumption, Fitch estimates.

Less debt

Public debt expressed as a share of GDP should drop to 65.2 percent this year, from 68.3 percent in 2022, to be 20 percentage points lower than at the peak of the pandemic, and will continue to decrease in the coming years, albeit at a slower pace, due to weaker nominal GDP growth.

The budget should be in deficit this year, of 24 percent of GDP, after a surplus in 2022, due to weaker economic growth and higher consumption, Fitch forecasts.

The current account balance should show a slight deficit due to weaker demand from the main trading partners and more significant investments that require imports, they estimate, adding that the adoption of the euro and entry into Schengen could further support tourism.

The fruits of the euro

Fitch notes that it could lower the rating of Croatia's debt papers if the public debt grows over a more extended period, "for example, due to a more pronounced and more extended period of looser fiscal policy.

A trend of weaker economic growth due to structural shocks or weaker demographic indicators would also negatively affect the rating. On the other hand, the agency could raise the rating if it assesses that the government can preserve the trend of reducing public debt through fiscal consolidation.

The rating would also be positively affected by determining the positive consequences of adopting the euro, which would support Croatia's approach to countries with a higher rating and strengthen its institutional capacities, according to Fitch.

For more, make sure to check out our dedicated News section.

April 14, 2023 - The Croatian Association of Employers presented its new forecasts for the Croatian economy, which came as a somewhat pleasant surprise following a good period.

As Poslovni writes, back in the winter, employers' associations (HUP) in Croatia expected that this year would be stagnant for the Croatian economy and that after two years of strong post-pandemic growth (cumulative about 20 percent), the GDP growth rate could be slightly negative.

However, the situation in the environment, primarily in the eurozone, has so far turned out to be more favorable than expected: a mild winter and high levels of gas storage eliminated the need for stronger rationalization of the consumption of key energy sources, the improvement of the situation with supply chains favors the recovery of the industry in the first half of the year, and fiscal expansion aimed at mitigating the consequences of the energy crisis greatly helps preserve the purchasing power of the population.

So now, in the HUP report for this year, in the basic scenario (with a 40 percent probability), they expect a growth of the Croatian economy of 1 percent, inflation calming down to 3 percent at the end of the year, and a solid 2 percent employment growth.

A few 'ifs'

Although they underline that pronounced uncertainties still mark the global environment, they are more optimistic about the potential for growth in the somewhat longer term. They calculate that it could rise to an average of 3 percent per year in the next ten years. Hrvoje Stojić, the chief economist of HUP, nevertheless mentions several important "ifs".

This forecast, he says, presupposes tax relief and the implementation of reforms in health, education, justice, and the public sector. They are essential for productivity growth and competitiveness and ultimately for the continuation of the downward trajectory of the level of public debt.

"I believe that Croatia will achieve an A credit rating in the next few years, if necessary reforms are implemented that lead to faster and simpler business, lower tax burden, less administration, and if the absorption of EU funds continues. We have all the preconditions, including stable public finances, and a decrease in public debt. and a significantly increased GDP growth potential," he said.

All this is important in the context of approaching membership in the Organization for Economic Cooperation and Development (OECD). Along with HUP Horizonti as the new format of macroeconomic forecasts of the Association of Employers for the next two years, the expectations of trends for the economies of the 20 most developed countries were presented by the Director of Economic Affairs of the OECD, Isabell Koske, who also referred to the examples of several members of the organization from the Middle and Eastern Europe, which stood out for its progress.

In this sense, she emphasized the successes of the Czech Republic and Poland, which through raising competitiveness, using EU funds, and above all by implementing reforms of the education system, made significant progress and positioned themselves as leaders in the region. So, for example, in the case of Poland, she cited a high-quality and highly educated workforce as the key to success. In 20 years, Poland has raised the share of highly educated people from 9 to more than 30 percent, he says.

Constant improvement

Among the key reforms for the advancement of Croatia, he emphasizes education, because "the labor market must have adequate and qualified personnel in order to be able to develop ideas and compete on the global market." In addition, he adds, it is equally important to enable those who have completed their education to have more accessible re-education and continuous improvement with new skills that the modern world is looking for. "Employment rates in Croatia are still lower than those in OECD countries," she reminded.

Despite the relatively optimistic forecasts of HUP, this year's expectations still reflect a strong cooling of personal consumption and a slowdown in growth, and inflation on average (in the base scenario) should remain elevated, around 6.5 percent.

Nevertheless, along with its slowdown, a gradual recovery of the real income of the population is expected in the rest of this year. The acceleration of investments on the wings of EU funds will contribute to GDP growth; according to HUP's forecasts, investments could grow by 7.5 percent this year. Finally, although a strong slowdown in the growth of merchandise exports is expected this year, HUP expects that the "niche" structure will mitigate the effects of an unfavorable environment.

For more, make sure to check out our dedicated News section.

April 7, 2023 - The World Bank raised its estimate of growth of the Croatian economy this year to 1.3 percent and forecasts that inflation in Croatia will slow down to an average of 7.2 percent in 2023. The World Bank has thus corrected to a higher estimate of the growth of the Croatian economy for this year, considering that at the beginning of 2023, it forecasted that the Croatian GDP would grow by 0.8 percent.

"Economic activity in Central Asia and Europe, including in Croatia, will probably remain at a modest level in 2023 due to the consequences of the Russian invasion of Ukraine, persistently high inflation, and increasingly strict financing conditions," the World Bank pointed out in a report on the economic news in the Europe and Central Asia region, published on Thursday, as reported by Index.

According to the report, in the period after 2023, the growth of the Croatian economy will start on the path of a gradual recovery in parallel with the reduction of uncertainty, assuming the normalization of prices on the energy market, the removal of the remaining supply bottlenecks and the improvement of the external environment.

As a result, the World Bank expects economic growth in the period 2024-2025 to strengthen and reach an average of 2.9 percent, which will have a positive impact on labor market trends, along with employment growth, and a drop in the unemployment rate below 6.5 percent by 2025.

After the inflation rate in Croatia reached a peak of 13.5 percent last November, the World Bank estimates that it will fall to an average of 7.2 percent in 2023.

Growth in the region is 1.4 percent, but the prospects are still highly uncertain

In the report on current economic affairs in Europe and Central Asia, the World Bank expects regional growth to reach 1.4 percent in 2023, significantly better than the previously expected 0.1 percent.

"The positive, albeit deeply subdued, economic activity this year reflects a milder decline in the Russian and improving prospects for the Ukrainian economy. During 2024 and 2025, regional growth will increase by an average of 2.7 percent, thanks to the easing of inflation, the recovery of domestic demand, and the improvement of the external environment ", are the expectations of the World Bank.

However, they noted that the prospects for the region are still highly uncertain, so growth in 2023 may be weaker, which may be affected by an additional escalation of the war in Ukraine, further increase in food and energy prices, acceleration of the growth of interest rates in the world or the region, and there are potential adverse effects of current events in the banking systems of some developed economies.

The Bank estimates that the Ukrainian economy will grow by 0.5 percent this year, after last year's sharp decline of 29.2 percent due to Russian aggression against the country.

"Although Ukraine paid a huge economic toll due to the invasion, the reopening of Ukrainian ports on the Black Sea and the continuation of grain trade, as well as substantial donor support, are helping to strengthen economic activity in the current year," the World Bank wrote.

Their latest estimate is that reconstruction and recovery costs in Ukraine have risen to $411 billion, more than double the scope of Ukraine's pre-war economy in 2021.

In 2022 we saw the highest level of inflation among all regions of the developing world

The World Bank reminded that due to the sudden increase in consumer prices, primarily food, and energy, the average annual inflation rate in emerging and developing economies in Europe and Central Asia jumped to as much as 15.9 percent at the end of 2022, reaching the highest level in more than 20 years, but also the highest level among all regions of the developing world.

The World Bank's Chief Economist for Europe and Central Asia, Ivailo Izvorski, warned that the high inflation rate affects the poorest segments of the population much harder than the richest.

"To better protect vulnerable groups and stimulate economic growth, public policies should consider the differences in the impact of inflation on different income classes and resort to more accurate indicators to determine the real cost of high prices for the poorest," Izvorski believes.

The World Bank reminded that the governments of countries throughout the region responded to the cost of living crisis by introducing social assistance and subsidies, but with the assessment that the burden of the cost of living crisis was not evenly distributed.

"Public policies that do not consider the different rates of inflation faced by individual households are likely to result in inadequate support for vulnerable groups and may ultimately prove ineffective and less effective. Moving away from the Consumer Price Index (CPI) is therefore recommended as the established measure of inflation to more accurately determine the real living costs of the poorest citizens. This is of crucial importance for designing better policies to stimulate growth and alleviate poverty," according to the World Bank.

They also referred to Croatia, writing that the increase in inflation reduced the purchasing power of households, especially when it comes to the poorest fifth of the population. "Croatian government partially prevented the more severe consequences of the global spike in energy and food prices by bringing several aid packages during 2022 and early 2023. These packages include price limits for electricity, gas, and certain food products and targeted financial compensation for the most vulnerable segments of society," the Bank reminded.

For more, make sure to check out our dedicated News section.

February the 23rd, 2023 - The Croatian labour market is no stranger to lacking when it comes to getting the staff, and it is now proposing certain solutions to the fact that it is currently missing workers for around 28 different professions.

As Poslovni Dnevnik writes, owing to the chronic lack of workers with the necessary skills on the Croatian labour market, the European Commission (EC) declared 2023 the year of skills. An entire spectrum of occupations is lacking in the area of Dalmatia, with a struggle to find employees in almost every field from construction to tourism. One of the solutions is retraining, writes HRT.

Irena Radic from Komiza is one of the sixty participants of the pottery and ceramics workshop. After thirty years of working in a store, she decided to take a different direction.

"It's about retraining the production of souvenirs for our Komiza, today everything is focused on digital skills, but I think these skills should be developed as well," she believes.

"People come to us - some because it's just something they want to do for pleasure, but some people come because they want to take on new jobs. There are no rules when it comes to which genders approach us, and men and women come here," said Sandra Sumic, the head of a pottery and ceramics workshop in Split.

Only 37 percent of adults regularly attend training, and the representative office of the European Commission in Croatia, in cooperation with the Europa Direct Centre in Split, pointed out the problem through the holding of various different workshops and lectures.

"The whole of Europe is facing a labour shortage, both with highly qualified and lower professional qualifications. Three quarters of employers in the EU are coping with difficulties in finding labour both in Croatia and elsewhere in Europe," said the deputy head of the European Commission's representation in Croatia, Andrea Covic Vidovic.

"The Croatian labour market is lacking in tourism and healthcare workers, and that's why in the last two years, we have opened courses for nurses and we also have a competence centre," said Blazenko Boban, the Prefect of Split-Dalmatia County.

Back in 2021, there was a shortage of workers on the Croatian labour market for as many as 28 professions!

"This issue spans the whole spectrum of occupations, from construction, personnel such as carpenters, masons... and on the other hand tourism workers, cooks, bartenders... That's why we're constantly organising retraining and training sessions," said Marin Kanajet from the Croatian Employment Service's (CES) regional office in the City of Split.

"We have an institution that deals with lifelong training. We'll also strengthen this and we have to educate our people, not only the young, but also the elderly, because artificial intelligence (AI) is taking over jobs and that's why they need to be retrained for something else," said the mayor of Split, Ivica Puljak.

Undoubtedly, training and retraining are a big step in business across the European Union as a bloc, and these are issues which stretch far beyond the Croatian labor market.

For more, make sure to check out our news section.

February the 15th, 2023 - Despite the economic crisis that we're still stuck in owing to not only the negative effects left behind by the coronavirus pandemic but also the ongoing war in Ukraine, the Croatian labour market is coping well. There's even been a considerable drop in the unemployment rate.

As Poslovni Dnevnik/Suzana Varosanec writes, it's to be expected that the start of seasonal employment will break the trend of the increase in the number of unemployed people on a monthly basis, as it always does each and every year. In January, 122,369 unemployed people were registered with the Croatian Employment Service (CES), meaning that on a monthly basis, the number of registered unemployed persons continued to grow for the fourth month in a row. Compared to December, it increased by 4553 or 3.9%.

However, at the annual level, as RBA analysts point out in their analysis, the downward trend that began back in April 2021 has continued, and compared to the same period in 2022, a decrease of 8,624 persons or 6.6% was recorded.

"Compared to January 2021, the number of unemployed people registered at the CES is lower by 42,976 people or 26%, while compared to January 2020, it's lower by 17,555 people or 12.5%. This is a reflection of the recovery of economic activity after the coronavirus pandemic, but also of generally positive trends across the Croatian labour market, which has been reflected in the improvement compared to the period before the outbreak of the pandemic," the analysis states.

Under the influence of these processes, the Croatian labour market is active and the demand for workers definitely hasn't decreased, and according to RBA analysts, the lack of labour in certain industries is also reflected in the increase in the number of workers coming into Croatia from third countries.

According to the Institute's data, the number of received applications for residence and work permits for foreign (non-EEA) workers in 2022 stood at almost 130,000, and 109,241 were granted by MUP. During January, 12,653 applications were received for 163 occupations, and the most requested were from the construction industry. Most of the requests received came from the City of Zagreb, followed by Istria and Split-Dalmatia counties.

However, reliable statistics on the total number of workers from third countries don't yet exist, so we can only talk about estimates, the analysis emphasises. Economist Damir Novotny has drawn attention to the fact that it isn't a question of the general robustness of the Croatian labour market, but of the sectoral one, because the Croatian labour market is quite shallow and there's a big difference from sector to sector, as well as territorially, so one type of trends applies to Adriatic Croatia, and the other for the continental part of the country, and especially for the City of Zagreb.

"The whole of eastern Slavonia has a weak offer of jobs spanning all sectors, while Istria has a trend of immigration because it has a very strong offer of jobs in the tourism sector, but also in the accompanying activities that supply it with food and various services, which is why Istria is the most developed Croatian region after Zagreb,'' explained Novotny.

Of the total number of unemployed registered back in January, 12,996 (77.1%) came from previous employment, and the most common reason for their job termination was the expiration of a fixed-term employment contract (52.4%). Back at the end of January, there were almost 28,000 vacancies, which is 77.5% more than there were back at the end of 2022 and 5.3% on an annual basis.

According to RBA analysts, the Croatian labour market is continuing to show very strong resistance to unfavourable economic and geopolitical trends so far in 2023 - this is a characteristic of the entire EU, which is contributed to by the already present labour shortage. In the coming months, they expect the continuation of positive trends, but at a lower intensity due to the slowdown in economic activities.

Novotny notes that tourism, despite the global slowdown in economic activity, will continue the strong growth that began last year as new capacities are opened and investments are being made, and this is similar to the construction sector, which is facing an investment cycle funded by the EU. Processes on the Croatian labour market in the upcoming period will also continue to differ greatly from sector to sector.

For more, make sure to check out our dedicated news section.

February the 10th, 2023 - Croatia is among only three European Union (EU) member states to have actually improved its budget balance when compared to the pre-pandemic year of 2019.

As Jadranka Dozan/Poslovni Dnevnik writes, the energy crisis and ongoing high inflation has forced the national governments of the majority of EU member states to implement various generous packages of fiscal incentives, from various subsidies and one-off benefits to reductions in VAT rates. As rising inflation followed the coronavirus pandemic, some enacted as temporary measures until coronavirus no longer pised an economic threat were prolonged, and some new ones were also introduced, primarily related to energy and food.

For many of these measures, which were conceived as temporary as mentioned above, the deadlines finally expire in the next few months, and among them are the shock absorbers that the Croatian Government introduced for gas and electricity prices in the spring and autumn package of measures last year. As things stand, it's realistic to expect new prolongations throughout the EU as a bloc, in the same form or with some modifications. The global overviews regularly published by the VATcalc portal, specialised in VAT, are also on that same track.

Belgium, for example, has already converted last year's temporary VAT reduction from 21% to 6% into a permanent one for electricity, natural gas and other supplies in heating systems, and excise tax reforms have also been announced. Under the influence of double-digit inflation, Greece extended their reduced VAT rates on certain goods from 24% down to 13%, which is already the fourth extension of the temporary rate reduction introduced during the coronavirus pandemic. Currently, the duration of this measure is planned until the middle of this year.

At the same time, already this fall, the German Government, along with the introduction of temporarily reduced VAT rates on gas (from 19% down to 7%) until the end of March 2024, also extended the application of the lower VAT rate for catering and hospitality establishments for the second time. From the end of 2022, it was extended until the end of this year.

Although statistics suggest a slowdown over the last two or three months, inflation is simply still very high. Last year, 16 out of a total of 27 EU member states ended the year with double-digit rates (in Hungary, Lithuania and Latvia, they were above 20%), and almost as a rule - wage growth trotted quite far behind the rising prices. Very soon, the Croatian Government will also announce a new framework or a possible extension of the measures regarding electricity and gas prices.

At the end of next month, the deadline for applying the lowest VAT rate of 5% to natural gas deliveries, for which as part of last year's April package of measures for Croatia, the rate was permanently reduced from 25% to down 13%, and exceptionally temporarily - down to a mere 5%.

As part of Croatia's autumn package, a scheme was designed to limit or mitigate the rise in electricity prices for households, the public and non-profit sector, and enterprises, also with the now looming date of March the 31st, 2023 as the expected deadline. It remains to be seen what the solutions will look like from April on, i.e. whether the 5% rate for gas and the existing price limit model for electricity will only be left as it is until a new deadline is drawn up.

However, given the drop in standards (despite nominal growth, the average salary in Croatia has fallen by 5% in real terms over the past year), as well as the fact that an election year is coming, it is easy to assume that issues related to peoples' living standards will gain additional importance. This also facilitates a better state of public finances compared to recent expectations. According to the latest consensus forecast by FocusEconomics, until recently, analysts expected a deficit of around 2% of GDP in 2022. However, it seems that the beneficial effect of inflation (especially with a good summer tourist season) on filling the budget was significantly stronger.

More specifically, in a weekly overview of selected economic and financial topics, the chief economist of the Croatian Association of Employers (HUP), Hrvoje Stojic, stated that Croatia "had returned to the budget surplus zone, namely 1.1% of GDP in the consolidated general government budget". This ranks Croatia among only three EU member states that have improved their budget balance compared to the pre-crisis year of 2019.

Admittedly, the surplus in the budget is primarily highlighted by HUP within the wider context of the question of the expediency of introducing an additional income tax and the generally high tax burden compared to the rest of the EU.

For more, make sure to check out our dedicated news section.

January the 26th, 2023 - Alright, this title is slightly misleading because we've needed Croatian pension and wage growth for a very long time now, but after becoming a full Eurozone member state, it's high time that we saw the numbers in our bank accounts go up, even just a little bit.

As Poslovni Dnevnik writes, recently, there have been signs of inflation finally stabilising after a certain drop in electricity and gas prices was duly noted, but despite that, in general prices are still high, and Croatian living standards are falling, which is why Croatian pension and wage increases are now more necessary than ever.

These are just some of the conclusions reached as part of the recently held "Eurostands - Perspectives and challenges" in the City of Zagreb. The head of the Independent Croatian Trade Unions, Kresimir Sever, reiterated that subjective inflation is still being very much felt by most of the country's households and is significantly higher than official statistics. He said because of that, Croatian pension and wage growth is necessary. On the other hand, the chief economist of the Croatian Association of Employers (HUP), Hrvoje Stojic, said that HUP members have seen their employee salaries rase above the national inflation level.

Stojic also noted that the wider Eurozone's economy will experience a certain strong slowdown throughout 2023, during which there will be a "cooling" of aggregate demand, but he added that inflation could be up to two percentage points lower compared to the estimates provided back at the end of 2022.

He believes that due to the unusually mild winter we've all been experiencing, the whole of Europe could avoid dipping into the expected recession in 2023, but also that there is an option to simply "postpone" it to the second half of this year, or even until next year. Professor Marijana Ivanov of the Faculty of Economics warned that inflation reduces the real value of everything we own, and that we need to keep paying attention to the trends.

However, it is positive that there are still no risks of unemployment growth in the Croatian economy, but the general standard of living in slipping.

''Croatian living standards are decreasing, but somehow we're managing despite all of the current challenges," she concluded.

For more, make sure to check out our dedicated news section.

January the 14th, 2023 - Croatian wage growth has been most visible in the companies which typically pay out the lowest salaries to their employees over the last year.

As Poslovni Dnevnik writes, as many as 60% of respondents of the Mojaplaca (MyWages) service have a lower salary than the average Croatian net salary, but last year, a higher growth of lower-ranked salaries compared to higher-ranked ones was also observed.

According to data from the MojPosao (MyJob) portal, the net salary including salary supplements throughout 2022 increased by 5% compared to the previous year, standing at 7,522 kuna (998 eutos), while the median salary of 7,000 kuna (929 euros) also saw higher growth, more specifically of 8%.

"Compared to the previous year, salaries grew the most within those companies which pay out the lowest salaries, that is, in the smallest; an average of 6%, while in large companies compared to 2021, Croatian wage growth stood at 4%", they stated in the analysis, which highlights significant differences in the salaries taken home by workers depending on a number of different factors.

There has been slight increase in the number of workers to whom their employer also provides certain benefits, most often reimbursements for travel expenses and public transportation costs, a mobile phone for personal use and a hot meal, which has the highest growth. Employers have been covering the costs of private pension insurance less often, however.

"Education and experience bring with them a higher salary, just like everywhere. Employees with a postgraduate degree or a business school (MBA) have an average 63% higher take home salary than the average,'' they stated, adding that studying is worth it because people with higher education diplomas have around a 17% higher salary than the average.

The highest average salaries were recorded in the City of Zagreb (11% above the national average), and the highest paid occupations are those in the field of technology and development (+78%), information technology (+38%) and telecommunications (+17%).

For more on Croatian wage growth and the domestic economy, make sure to keep up with our dedicated news section.