November the 5th, 2021 - RBA analysts are more cautious when it comes to predicting Croatian economic recovery or the growth of domestic GDP as the instability of the ongoing global coronavirus pandemic still remains a huge issue.

As Poslovni Dnevnik/Ana Blaskovic writes, contrary to the optimism of the central bank and the government about the dynamics of Croatian economic recovery in 2021, ranging from between 8.5 and 9 percent, Raiffeisen Bank analysts are still somewhat more cautious with the expectation that GDP growth will stop at 7 percent.

"Our estimates are significantly lower than those provided by the government because we expect a slowdown in the last quarter of the year," said RBA chief economist Zrinka Zivkovic Matijevic at the presentation of this, the latest RBA research.

The summer quarter, due to the-then good epidemiological situation and a surprisingly good tourist season that brought in 8.5 billion euros (85 percent of pre-pandemic 2019's level), could end with a double-digit growth rate.

However, on the side of the rapid deterioration of the epidemiological situation as the end of the year approaches, the withdrawal of the ''parking brake'' in terms of optimism is a reflection of the uncertainty of energy and raw material prices, as well as disruptions in supply chains. Nevertheless, real Croatian economic recovery and indeed growth throughout 2021 will remain strong, primarily driven by growth in the export of services, ie tourism and personal consumption.

Next year, domestic economic growth should pull in investment on the wings of using European Union (EU) money under the much talked about National Recovery and Resilience Plan.

"From a macroeconomic point of view, investments are a desirable generator of growth," said Zivkovic Matijevic, explaining that the benefits of a generous European Union cash injection are wider than the availability of the money itself, because its withdrawal depends on measures and reforms that will work to reduce the weaknesses of the domestic economy in the long run, and whose outlines are slowly emerging.

The news about Croatian economic recovery and the acceleration of economic dynamics has recently been overshadowed by inflation, which accelerated to 3.3 percent in Croatia back in September (as opposed to 4.1 percent in the Eurozone), which is expected to peak in the first quarter of next year.

"Inflationary pressures continued to strengthen, dominantly caused by strong growth in energy prices, thus reflecting developments in world crude oil exchanges. Since the second half of the year, energy prices have been joined by rising food prices,'' they added from RBA.

Assuming global supply chain disruptions subside, they added, the price jump should slow down in the second half of 2022, but with the caveat that uncertainty, longer supply-side disruptions and steeper transport costs could suggest that inflation could last, not only in Croatia but also in the Eurozone, which Croatia is soon set to join.

That such a scenario will not materialise is strongly assured by central banks, including Croatian ones, from which messages are coming that inflation is only a passing phenomenon.

The refreshed picture of public finances, precisely in the parliamentary debate, wasn't overly surprised by the increased inflows from VAT or the deepening of expenditures, due to which the general government deficit increased to 4.5 percent.

With the cost of the coronavirus crisis totalling a staggering 40 billion kuna so far, in the first half of next year, it is to be expected that the state will actively borrow on the capital markets in order to meet increased financing needs. These activities, together with good market conditions of high liquidity and low interest rates, will be positively marked by the process of introducing the euro, a drawn out process which is entering its final phase.

"The set goal of joining the Eurozone on January the 1st, 2023 is achievable and strong political support across the European Union is important," said Zivkovic Matijevic, believing that it is very likely that Croatia will meet the Maastricht criteria on public debt, deficit, interest rates, exchange rate and inflation.

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ZAGREB, 2 Sept 2021 - The latest macroeconomic trends indicate the upward revision of forecasts of the growth for this year and we now can expect a 7% rise on the year, Finance Minister Zdravko Marić said on Thursday.

He recalled that the government's current forecast is five percent.

Marić said that tax revenue from 1 January to 31 August was 0.7% higher than fin the corresponding period last year while VAT was over four percent more year on year.

YTD profit tax is a little lower as against the same period last year, but that was to be expected given that that is calculated based on the results in 2020. Contributions for pension insurance were 4% higher and that is on track with what we expected, he said.

The only levy that is mildly staggering is for automobiles which he explained by the reduction in some levies and global stagnation in the automobile industry.

As far as budget revenue is concerned, in August alone the value of fiscalised receipts was almost 21% higher than they were in August 2020.

He underscored a key role of the expenditure side for the sustainability of public finances.

Asked by the press about possible inflation in autumn particularly regarding food prices, Marić said that the latest data calls for caution.

According to the latest information from the national statistical office (DZS), inflation in July amounted to 2.8% on the year, the highest rate since April 2013. Consumer prices are fuelled by industrial producer prices which in July rose by 7.9% on the year, the biggest jump since April 2011.

Marić said that inflation was to be expected given monetary concessions on the global level and the amount of money released in the system which resulted in a drop in its price which then impacted inflation pressure.

He added that he isn't sure that the price hike on food and construction material can be entirely attributed to global trends and disruptions in the supply chain.

He warned there are very few prices that can be regulated as they are mostly regulated by the market and that market development and competitiveness are a must.

He recalled that when VAT was reduced on eggs, fresh meat, fish, fruit, and vegetables, tax policies had a limited impact because even after VAT was reduced the price of these products did not decrease significantly.

He mentioned the recurring rise in the debt by hospitals and that payment deadlines are now about 180 days for hospitals, 200 days for pharmacies and that the health insurance fund had transferred about HRK 5.9 billion to settle liabilities.

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August the 29th, 2021 - There has been a record and entirely unexpected (when looking at previous predictions from various sources) Croatian GDP jump in the second quarter of 2021, some are even daring to say that the Republic of Croatia is ''out of the recession'' the global coronavirus pandemic forced it into.

As Poslovni Dnevnik/Ana Blaskovic writes, the Croatian economy grew 16.1 percent year-on-year in the second quarter of 2021, the Central Bureau of Statistics (CBS) said.

Although the CBS points out that this is the first growth after four quarters of decline, it is also the largest since 2016, and it should be taken into account that the performance of the economy is compared with the same period last year during which the spring ''lockdown'' continued for some time. It's also worth noting that the fall in Croatian GDP reached a record 14.4 percent, which illustrates the scale of the low base effect.

While according to seasonally adjusted data, the Croatian economy recorded annual growth in the second quarter, the quarterly Croatian GDP was down by 0.2 percent.

Croatian GDP growth in the second quarter of 2021 is the first after four quarters of continuous decline due to the global coronavirus pandemic and its aftermath. At the level of the whole of 2020, the economy fell by 8 percent, which is one of the biggest minuses in the entire European Union (EU).

The growth of the economy in the period from April to the end of June is a consequence of the increases across all components of Croatian GDP, with personal consumption/spending expected to be the highest.

Household consumption grew 14 percent when compared to a 0.3 percent minus in the previous quarter. Exports of goods and services jumped 40.9 percent year-on-year; with exports of goods up by 35.2 percent and services up by 56.3 percent on the wings of a good preseason.

The imports of goods and services also jumped by 30.3 percent. The imports of goods rose 30.5 percent and services rose by 28.9 percent. Of the other components that make up the Croatian GDP, gross fixed capital formation rose 18.3 percent year-on-year and government spending rose by 4 percent.

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December the 11th, 2020 - The ongoing coronavirus crisis has dealt a heavy blow to the economy this year, and countries like Croatia which rely very heavily on tourism and hospitality have lost out tremendously. Croatian restaurants and cafes have lost an enormous 5.6 billion kuna since back in March when the pandemic first penetrated Croatia's first lines of defence.

As Jadranka Dozan/Poslovni Dnevnik wirtes, the catering and hospitality sector has found it very difficult to accept the tightening up of the epidemiological measures which put the keys in the locks of Croatian restaurants, bars and cafes. Of course, they are not the only ones, as gym owners have also had to come to terms with the impossibility of that very same situation.

The alarming situation due to the restrictions is also being felt on the skin of the event industry. As the incidence of coronavirus infection remains high, additional restrictions by the National Civil Protection Headquarters will follow at the end of this week, primarily affecting the work of traders.

The president of the National Association of Caterers, Marin Medak, is now calculating that the work ban could be extended until the end of January 2021.

In addition to the battle over compensatory assistance measures, the owners of Croatian restaurants, bars and cafes are thus turning to the topic of facing future challenges and legal solutions for the sector in talks with government representatives. However, in the meantime, they are still trying to "negotiate" with the Headquarters to at least allow those who can and want to make coffee to do so for those remaining outside and taking it away.

The Voice of Entrepreneurs Association, on the other hand, accused the Government yesterday of making the new job preservation measures into ''just another spin''. They were disappointed by the Tax Administration's instruction regarding the reimbursement of (part) of the fixed costs as part of support for the preservation of jobs.

Authorities failed fulfill the promises they made at meetings they'd held with entrepreneurs, the aforementioned association said, stating that, according to the Tax Administration, "employers should first pay their obligations, and only then will they receive a refund from the state." In this situation, they argue, for most entrepreneurs this is mission impossible because everything they had to their names from previous years was spent during the first lockdown back in spring.

One indicator of the extent of the coronavirus crisis is the worrisome fiscalisation data, and the Ministry of Finance or the Tax Administration publishes that information weekly.

It has since been revealed that starting from March, the reported turnover of Croatian restaurants and cafes reached 8.74 billion kuna by the end of November. Compared to the same period last year, it is 39% or 5.58 billion kuna less. Of course, the decline is distributed unevenly; some within the industry have sunk far more than that, and some less than the average decline in fiscalised turnover suggests. In addition, since the beginning of the year, the decline is somewhat smaller because in the first two months of 2020, before the crisis began, Croatian restaurants and cafes recorded growth.

For accommodation services, on the other hand, data on fiscalisation indicates that their performance in the period from March to November was lower than last year by almost 57 percent or 5.7 billion kuna. Last year, it exceeded 10 billion kuna, and this year, the coronavirus crisis cut down it to 4.35 billion kuna.

The value of bills/receipts issued in the transport and storage sector fell by more than half, by almost 52 percent, down to 1.3 billion kuna when compared to last year's impressive 2.7 billion kuna. More than halved turnover in year-on-year comparisons over the past nine months was also reported by activities related to culture and sports (arts, entertainment and recreation). In this group of activities, less than 603 million kuna in turnover was fiscalised, which marks a decrease of 52 percent or 664 million kuna when compared to last year's far higher 1.26 billion kuna.

During the second wave of the pandemic, unlike during the first, hairdressers and beauty salons managed to avoid locking their doors and compared to last year, they recorded a decrease in turnover by 185 million kuna or 22 percent) Slightly stronger than hairdressers and beauty salons, the category of body care and maintenance activities was hit with a drop of 35 percent.

According to the percentage drop in fiscalised turnover, the coronavirus crisis hit the real estate business far more severely. With 109 million kuna in turnover since March, the tax data on this shows that this is a year-on-year decline of as much as 280 million kuna, or more than 70 percent. Although Croatian restaurants and cafes are the loudest when it comes to losses, this too is extremely concerning.

In contrast, Information and Communications is a segment of the business sector in which entrepreneurs haven't recorded a negative impact as a result of the ongoing coronavirus crisis. However, this group of activities also recorded a decline in fiscalised turnover, albeit in single digits. The reported 1.04 billion kuna is only about 80 million kuna or a little more than seven percent less than how things stood last year.

Approximately the same percentage decrease is indicated by the data on fiscalisation for the activities of Agriculture, Forestry and Fisheries with 1.2 billion kuna worth of invoices issued compared to around 1.3 billion kuna's worth issued in the comparable period last year.

Entrepreneurs within the Professional, Scientific and Technical Activities in the pandemic were struck with losses amounting to about 11 percent or slightly less than 290 million kuna in turnover. At the same time, a much more drastic decline was recorded in Administrative and support service activities, which reported a turnover of only 415 million kuna, whereas it stood at more than 1.7 billion kuna in 2019.

More detailed data shows that within the trade sector, as expected, super and hypermarkets suffered the smallest decline. The turnover of the category of non-specialised stores, mainly food, beverages and tobacco products, decreased by only 1.3 percent when compared to the comparable period last year from March onwards. A moderate 6.4 percent drop in turnover was also recorded in specialised stores, mostly in the food and beverage sector, but the turnover in the non-food trade sank significantly more.

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September the 24th, 2020 - There have been many predictions about the state of Croatia's GDP as a result of the ongoing coronavirus pandemic, with some expectations being worse than others. Finance Minister Zdravko Maric was a guest of the Croatian Radio show "A sada Vlada/And now the Government" recently, during which he spoke about the guidelines for the 2021 budget.

As Poslovni Dnevnik writes on the 23rd of September, 2020, Zdravko Maric said that a document on economic fiscal policy should be adopted at a Croatian Government session on Thursday.

"These will be updated macroeconomic projections for this year and for the next three years. As was the case in May when there was a rebalance, the circumstances are really difficult. In a situation when we don't have a vaccine and it's still difficult to predict that epidemiological-health part of things as well as some other things, we got the best possible quality,'' said Zdravko Maric.

"For this year, our original projection regarding the fall in GDP will be somewhat improved. The drop should be smaller than we expected. We forecasted a decline of about -8 percent for 2020. For next year, we predict growth, but lower growth than we predicted, it will somewhere at the level of 5 percent,'' explained Zdravko Maric.

We will exceed the level of GDP back in 2019 somewhere in the middle of 2023

Zdravko Maric said that one could hear from analysts predicting a recovery in the shape of the letter V. It represents a fall which is significant, followed by immediate recovery.

"It quickly became clear that it all depends on various situations because there are still negative risks for these projections, especially from the health and epidemiological point of view. We'll exceed the level of GDP in 2019 in the middle of 2023,'' he stated.

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As Poslovni Dnevnik writes on the 28th of August, 2020, the Minister of Finance, Zdravko Maric, commented on the decline in Croatian GDP in the second quarter, which amounted to 15.1 percent and is the largest decline since statistics have been recorded over the last 25 years.

"This is the biggest quarterly drop ever recorded in the Republic of Croatia, which I don't think should come as big surprise considering the coronavirus pandemic. Government spending is the only category that has recorded growth, which is expected given the circumstances and what we've done. The 14 percent drop in personal consumption is the largest drop in personal consumption ever recorded. We didn't expect such a big drop in investments,'' Zdravko Maric commented.

''Of the total investments in the Republic of Croatia at the annual level, 52 percent refers to construction, and that recorded a slight plus. We believe that the procurement of equipment led to the fact that total investments fell more than we expected them to. We also had a physical barrier regarding the procurement of equipment due to the pandemic,'' noted the Minister of Finance.

When asked whether a large number of dismissals would follow, Zdravko Maric said that no one could guarantee anything, nor can anyone really be very specific on that issue.

"Challenges remain. We all need to do everything we can to save jobs as much as is possible, that's the most important thing now. In some segments, such as construction, it can already be seen that things are getting better, while in others, such as catering and hospitality, things are more difficult,'' stated Maric.

"The decline in the second quarter is at the level of the Eurozone. When looking at individual countries, there are countries that have a higher rate of decline, Italy, Spain, Portugal… We also did an analysis with the first quarter included, and that marked a decline of 7.8 percent, concluded Zdravko Maric.

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