ZAGREB, April 29, 2020 - The government will outline new macroeconomic and budget projections on Thursday, and Finance Minister Zdravko Marić warned on Wednesday that the figures would not be nice due to the consequences of the COVID-19 epidemic.

"Unfortunately, this is our reality, those consequences of the coronavirus" Marić said while coming to ta meeting of the inner cabinet in Zagreb.

A new national programme of reforms and convergence plan are to be added to the government's agenda on Thursday.

Marić today declined to answer questions whether the downward trends would be expressed in double-digit figures.

He dismissed reporters' speculations that the government underperformed in the implementation of the national reforms programme, and countered that the implementation had to date been at a level of 80% while the remaining part could not be fulfilled due to the outbreak of COVID-19.

Marić pointed out progress in making the country ready for the adoption of the euro.

More economic news can be found in the Business section.

ZAGREB, April 21, 2020 - The Croatian Ministry of Finance sold HRK 2.55 billion worth of treasury bonds at an auction on Tuesday, considerably more than planned.

In advance of the maturity of HRK 1.16 billion worth of treasury bonds, the Ministry offered HRK 1.5 billion for subscription with a maturity of one year. Financial institutions submitted bids totalling HRK 2.55 billion and the Ministry accepted them all.

The Ministry issued HRK 2.55 billion in kuna-denominated treasury bonds with a maturity of one year and at an interest rate of 0.06%, the same as at the previous auction. The low interest rate is not surprising given the liquidity surplus in the financial system of some HRK 34 billion.

With the maturity of HRK 1.16 billion worth of treasury bonds, the balance of kuna-denominated bonds subscribed increased by HRK 1.39 billion to HRK 17.9 billion.

The next auction is scheduled for April 28 via the Bloomberg Auction System.

More budget 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 11, 2020 - Finance Minister Zdravko Marić said on Friday budget revenues in the first ten days of April were one-third of those at the same time last year and reiterated that at first Croatia would tap the domestic market to finance aid and deal with the fallout of the COVID-19 crisis.

Speaking on the public broadcaster HTV, he said the general assessment was that the measures the government had taken so far to help the economy were satisfactory and that Croatia was near the top in the EU in terms of their GDP share.

He said the implementation of the measures was good and that 95,000 employers had applied for aid for over 550,000 workers.

He also mentioned moratoriums on loans, programmes for exporters and new credit lines totalling €1.8 billion.

Speaking on RTL television, Marić said bilateral arrangements worth HRK 6 billion had been signed with six domestic banks with an average interest of a little over 1%. He told HTV that pension funds and other instruments would also be utilised.

Asked how much the crisis would cost, Marić reiterated that according to projections, the next three months would cost the state budget about HRK 45 billion only to ensure the functioning of the state and the economic measures.

He could not say what the budget revenues would be. He said that aside from the budget reallocations the government made yesterday, Croatia would have to borrow and that this would increase the public debt.

"If we stay the course we have taken, then the jump won't be high," he said, adding that the period after the crisis would be even more challenging.

Marić said a budget deficit could be expected this year as well as a GDP decrease, announcing that the government would present its projections soon. He added, however, that no projections, including those from world financial institutions, contained data on how long and how deep the crisis caused by the COVID-19 pandemic would be.

On Thursday, the World Bank estimated that Croatia's GDP will contract 6.2% this year, that the budget deficit will reach 8% of GDP and that the public debt-to-GDP ratio will be nearly 84%.

Marić welcomed Thursday's agreement by EU finance ministers on an economic response to the pandemic crisis.

All member states agree on short-term measures: a credit line of the European Stabilisation Mechanism (ESM), a European Investment Bank (EIB) guarantee fund, and a programme for pan-European support for short-time work arrangements (SURE), all totalling €540 billion - €240 billion from the ESM, €200 billion from the EIB and €100 billion for SURE.

Marić said Croatia could not count on ESM funds as it was not a member of the euro area. "Croatia can count on SURE, an instrument to help measures that we too are implementing to preserve jobs," he said, adding that those were no longer grant schemes but loans.

He said the finance ministers also reached a political agreement which, to come into effect, must pass certain legislative procedures. He announced that Croatia, as the country chairing the Council of the EU, would do its best to expedite the legislative part.

More budget news can be found in the Business section.

ZAGREB, April 9, 2020 - The government on Thursday redistributed budget funds in the amount of HRK 2.1 billion to address the consequences of the outbreak of COVID-19, and the most of those funds would be used for the government's measure to help employers to retain their workers.

Finance Minister Zdravko Marić informed the cabinet that a new round of the redistribution of the funds would soon ensue.

The lion's share, that is HRK 1.87 billion of the reallocated funds, will be set aside for the government's measure designed to keep jobs and ensure funds to employers whose businesses are hard hit by the corona crisis.

The Croatian liquidity guarantee scheme for export-oriented companies, which has been prepared by the Croatian Bank for Reconstruction and Development (HBOR), can count on 80 million kuna.

For instance, the government also has set aside 53 million kuna to fund the procurement of new equipment for microbiological diagnosis of the infection with coronavirus.

The funds have been ensured through austerity measures made by the ministries.

The infrastructure and transport ministry, for instance, has ensured 305 million kuna through cost-cutting plan.

The education and science ministry has provided HRK 294.8 million through its austerity measures, and the regional development and EU funds ministry 152.9 million. Other ministries have also made savings by cutting their costs.

More budget news can be found in the Business section.

ZAGREB, April 8, 2020 - Finance Minister Zdravko Marić said in an interview with the N1 commercial broadcaster on Wednesday that in the current circumstances, the state's outlays in the next three months were estimated at 65-70 billion kuna. He said that during the government's meeting on Thursday, the cabinet would discuss how to redistribute the budget allocations in order to ensure funds for addressing the consequences of the coronavirus epidemic.

Marić recalled that some of the austerity measures had been already taken.

He added that for the monthly functioning of the expenditure side of the state budget, it was necessary to provide 13-15 billion kuna, including HRK 3.5 billion for pension allowances.

Asked how he intended to cover the budget gap and fund the government's rescue package for the economy in the corona crisis, Marić said that the budget must show its strength in responding to all challenges for the functioning of the state. "In these circumstances, nothing is easy, but mechanisms do exist," Marić said.

Considering the issue of borrowing, Marić said that currently the authorities would tap domestic markets. In parallel, steps are being taken on international markets, including contacts with partner financial institutions such as the European Investment Bank (EIB) and the World Bank.

According to some previous announcements, Croatia could count on tapping more than a billion euros from European Union funds to narrow the budget gap in the coming months.

Asked whether it would be inevitable to cut wages in the public sector, the minister said that it was necessary to pursue a dialogue with the social partners "There are several proposals in the pipeline," he added.

He said that the government was preparing a third package of measures designed to help sustain the economy during this crisis.

The minister underscored that the response of the government that has already prepared two sets of measures that are being implemented was adequate and timely when it came to the corona crisis.

The Fitch credit ratings agency, which on 1 April revised its outlook on Croatia's Long-Term Foreign-Currency Issuer Default Rating (IDR) to stable from positive and affirmed the IDR at 'BBB-', envisaged that Croatia's economy would contract by 5.5% in 2020, from a growth of 2.9% in 2019, due to the impact of the COVID-19 pandemic and that economic activity was expected to rebound in 2021.

Fitch believes the financial sector is in a better position to weather the crisis than in 2008-09, supported by a liquid, profitable and highly capitalised banking sector that is less reliant on cross-border lending. The capital adequacy ratio was 23.2% at end-2019 versus 15.1% at end-2008, while liquid assets to total assets were close to 35% at end-Q319.

The National Bank of Croatia (HNB) has taken a number of steps to support the currency regime, maintain liquidity in the financial system, and provide some relief to the corporate sector, says Fitch.

"The HNB has abundant foreign reserves (USD21 billion in January; 35% of 2019 GDP) and a long-track record of maintaining exchange-rate stability to help the economy withstand shocks. Moreover, inflation is low (1.5% in February) and will remain very low this and next year (averaging 0.7%)," it says among other things.

More economic news can be found in the Business section.

ZAGREB, April 4, 2020 - Efficiency and rationality will be crucial in dealing with the fallout of the coronavirus epidemic, given the limited resources that will be available in the time ahead, Finance Minister Zdravko Marić said in a newspaper interview on Saturday.

"Efficiency must be the first and basic criterion for all our further actions. A rapid response and adjustment to new situations and business conditions will differentiate those who are successful from those less successful, not just in the enterprise sector but in the public sector as well," Marić told Vecernji List.

He said that the present crisis had revealed the necessity to change the structure of the Croatian economy, which currently has a relatively low share of industry and a large share of the services sector in added value and is considerably dependent on imports.

"The national economy will need to be transformed to make it more export-oriented and to better utilise our comparative advantages. This crisis has shown the importance of agriculture and the food industry in securing sufficient supplies for our population because in the event of transport disruptions and closure of the borders it is extremely important to have sufficient amounts of food from domestic sources. It has also shown the importance of the domestic pharmaceutical industry, including the production of medicines, protective agents and medical equipment," the finance minister said.

Marić said that the IT industry and digitisation had turned out to be very important because they made it possible for all the measures, both epidemiological and economic ones, to be implemented quickly and effectively, and the industry's adaptability allowed both the private and the public sector to adapt to teleworking relatively painlessly.

"These examples show the direction in which way the future economic strategy and economic policy measures should be going," Marić concluded.

More coronavirus news can be found in the Lifestyle section.

ZAGREB, March 25, 2020 - The Tax Administration received about 2,000 applications for tax deferral on the day the government put this measure in place, and about 14,000 businesses applied to the Labour and Pension System Ministry for financing of the minimum wage for 71,000 workers, Finance Minister Zdravko Marić said on Tuesday evening.

The two measures, prompted by the coronavirus pandemic, will require at least HRK 5 billion (€65m) for the next three months and this amount was not provided for in the present budget. "But we will secure it," Marić said in an interview with the public broadcaster HRT, adding that reimbursements would start on Thursday.

Asked why the government did not write off tax liabilities, Marić reiterated that businesses would not have to pay their taxes over the next three months, "and what will happen after that, we will discuss in the coming weeks and months."

"We all expect that this will deal a very strong blow to our economy, and given that we don't know how long it will last, we will be adjusting our measures and introducing new ones accordingly," the finance minister said.

More coronavirus news can be found in the Lifestyle section.

ZAGREB, March 19, 2020 - The price of cigarettes will go up by up to HRK 2 per pack starting April, and there will also be an increase in the prices of alcoholic beverages, soft drinks with higher sugar content and energy drinks, the Croatian government decided on Thursday.

The government adopted regulations governing excise taxes and special taxes on those products. Three regulations were adopted - on excise taxes on tobacco and tobacco products, on excise taxes on alcohol and alcoholic drinks, and on the calculation and variables for special taxes on coffee and soft drinks - to come into force on April 1.

The regulation on excise taxes on tobacco and tobacco products will increase the tax by HRK 35, from HRK 335 to HRK 370 for a thousand products.

The Finance Ministry estimates that the state budget would get an additional HRK 400 million from the increase in the excise tax on tobacco and tobacco products.

The regulation on excise taxes on alcohol and alcohol beverages, the government estimates, would bring an additional HRK 30.3 million.

Excise taxes on beer, wine and other fermented beverages will not change, the government says.

Finance Minister Zdravko Marić said that in the EU Croatia had one of the lowest excise taxes on alcohol, and that it was followed only by Bulgaria.

Underscoring that the regulation on excise taxes had nothing to do with the coronavirus, Marić said that they had been in contact with domestic manufacturers of alcohol and alcoholic beverages.

The government also adopted a regulation on the calculation and variables for special taxes on soft drinks, and the changes were connected to the calculation of the special tax on soft drinks and energy drinks.

Now the excise on soft drinks consists only of a fixed part, HRK 40 per hectolitre, but under the new regulation it will also depend on the volume and sugar content.

The fixed part would remain, but it would be cut to HRK 20 per hectolitre, while the remaining part of the tax would depend on the sugar, taurine and methylxanthine content.

Based on these changes, the state budget should earn an additional HRK 64 million by the end of the year.

More news about taxes can be found in the Business section.

Croatian ministers Zdravko Maric, Gari Cappelli, Davor Bozinovic, Darko Horvat and Josip Aladrovic, as well as HUP, HGK and HBOR leaders sat down to discuss coronavirus' effects on the economy.

As Novac writes on the 11th of March, 2020, the Croatian Ministry of Finance held a meeting with representatives of the Croatian Employers' Association, the Croatian Chamber of Commerce and the Croatian Development Bank to discuss measures to counteract the impact of coronavirus on the economy and finances.

After the meeting, Finance Minister Zdravko Maric said that the meeting was a success and that he was pleased that all sectors had successfully cooperated.

''We all agreed that the first and basic variable that must be taken care of is precisely the preservation of jobs, but also the liquidity of all sectors. We all remember, not so long ago, when we were faced with a huge fall in jobs and how long it took to get things back to normal,'' said Maric, adding that such a scenario should not be repeated.

''We must also ensure an adequate flow of goods so that all companies can function normally. We've started creating framework measures that we will eventually all implement together,'' the minister said.

The Minister of Finance added that the consequences of the epidemic in Croatia are not yet ''catastrophic'', but also that no one can estimate how long this crisis will last or how much of an effect it will ultimately have on the economy.

''We started preparing the measures on time and we all agreed that safeguarding jobs is paramount, both in tourism that is at our door and in other sectors,'' said Cappelli of the meeting of Croatian ministers.

Numerous people in the hotel industry, as well as those in the hospitality sector, according to Cappelli, have already started preparing future staff, and for this reason we must show them that the situation is being monitored and assistance measures are being taken into account.

''We're also sending a message to our foreign partners that we can keep everything under control and that tourists can feel safe with us,'' he added.

HUP Director General Davor Majetic explained that he was pleased that they had found a common language with those in power at the meeting with Croatian ministers.

''The first objective, of course, is to provide adequate care for people's health, followed by car for jobs and business activity. I'm glad we started a very open conversation,'' he said.

Maric emphasised once again that the most important thing was that those in power, as well as the representatives of the private sector, have started to develop a crisis plan on time.

''As the situation develops, we'll adapt as such. We'll try to anticipate all the possible threats that the crisis will cause,'' said Maric once again, adding that the most important thing is to secure wage payments and job retention, and that they don't want to compare Croatia with other countries. Among other things, he said another meeting among Croatian ministers would be held next week.

He also said that already in the existing tax system, they have introduced a delay in the repayment of loans in crisis situations, and that on that same line, they plan to work on measures for all those affected by coronavirus. In addition, he added that there was a possibility of introducing further tax relief to entrepreneurs.

''We hope to have some more concrete proposals for the measures next week,'' Majetic added.

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