ZAGREB, March 15, 2019 - A decision on the ailing Uljanik Group will be partly political, but primarily economic and financial in nature, Finance Minister Zdravko Marić said on Friday after devastating financial reports about the group prompted him to wonder about the current importance of the shipbuilding industry for Croatia.

"There is a political element in the decision making in the whole process, however, I primarily see it as an economic and financial decision, considering that we have so far paid 3.1 billion kuna through enforced guarantees, and you can add all that has been paid for the entire shipbuilding industry in the past 25 years ... The amount climbs to 35 billion kuna. I ask myself and you what importance the shipbuilding industry can then have," Marić said.

Asked by the press while coming to a government meeting when an analysis of Uljanik's business might be unveiled, Marić said that some segments of the analysis would be presented today and some next week. He recalled that 2.45 billion kuna was allocated to pay Uljanik's enforced guarantees in 2018.

Unfortunately, more guarantees will be enforced this year. First, there was mention of 2.8 billion kuna, and now 3.1 billion kuna, Marić said, adding that the amount could rise further.

Economy Minister Darko Horvat told reporters while coming to the government meeting that claims that an additional seven billion kuna would be necessary for overhauling the Uljanik Group is "a spin".

He confirmed that the total cost for assistance in overhauling the group was seven billion kuna, and that the government had already paid 3.1 billion of that amount.

More news on the Uljanik shipyard can be found in the Business section.

ZAGREB, February 28, 2019 - Finance Minister Zdravko Marić said on Wednesday the government had anticipated the slowing down of economic growth in the last quarter of 2018, adding that industrial production and high imports gave cause for concern, while the growth of consumption and investment reflected good economic sentiment.

Speaking to Hina, Marić said the government had expected the slowing down of economic growth in Q4 to 2.3%, as had the central bank and leading analysts given the available analyses of macroeconomic indicators, notably industrial production and net exports. "The total growth in 2018 of 2.6% is in line with our expectations," he said, recalling that the last government projection was that the economy would grow 2.7% last year.

Marić said the 2.5% annual decline in the manufacturing industry and the 1.3% rise in exports in Q4, slower than in the previous quarters, were cause for concern. He said "that's not just due to shipbuilding... but other industries and the export of commodities."

He said the dependence on imports remained high. In Q4 2018, they went up 6.6%, with the import of commodities rising 9% and the import of services falling by 2.8%. "We have to do everything in our power to additionally boost the domestic economy so it can perform better and reduce its dependence on imports."

As for the good indicators, Marić said personal consumption went up 3.9% on the year thanks to the positive sentiment among citizens and in the economy. He said the latest tax cuts had managed to increase citizens' disposable income, resulting in higher consumption.

GDP was also supported by a 6.1% rise in investments, which points to good economic sentiment thanks to tax cuts and better absorption of European Union funds, he said, adding that both the private and public sectors had done their share.

"The total real annual growth rate in 2018 of 2.6% is mildly higher than the potential growth rate, which is not satisfactory in the middle term. We should all strive for higher growth rates which will contribute to sustainable growth, which the European Commission too highlighted today in its European semester report."

The Commission said Croatia was no longer recording excessive economic balances but economic imbalances. "We expected to come out of the group of countries with excessive imbalances because we are working on reducing and eliminating them," said Marić.

The Commission too says domestic demand is the main economic growth driver in Croatia but that there are certain challenges to be dealt with, first and foremost domestic production, he said. On the other hand, one should take into account the neighbourhood as some countries, primarily Italy, do not have the best economic results, yet are major trade partners to Croatia, he added.

Those are objective circumstances one should consider and the Commission too concludes that it is necessary to improve the domestic business climate and conditions for doing business so that the economic growth rate could be higher, Marić said.

"I'm glad this report too concludes that we are pursuing a sensible fiscal policy, which means that it acknowledges everything the government has been doing for three years in a row to reduce the public debt, to reduce interest rates, to improve borrowing conditions, to successfully reschedule the debts of the road sector, to step up reforms."

He voiced hope and confidence that the Commission's latest report would send a positive signal to financial markets and rating agencies, also in light of plans to reschedule the domestic and dollar debts due in November.

More news on Croatia’s economic growth can be found in the Business section.

The trend of the Republic of Croatia's foreign debt falling on an annual basis has been going on since the end of 2015, according to RBA analysts in light of their review of the recently published data of the Croatian National Bank (CNB/HNB).

As Poslovni Dnevnik writes on the 5th of February, 2019, at the end of October last year, Croatia's gross foreign debt amounted to 38.4 billion euro, which is less by as much as 4.1 percent when compared to one year before, meaning that the country's foreign debt fell to its lowest level since back in September 2008, according to a new analysis carried out by Raiffeisenbank Austria (RBA).

RBA pointed out, in addition to the fact that the falling of Croatia's foreign debt has been a trend since 2015, that the fall of this debt in October in particular is the result of a decline in the debt(s) of other financial institutions, which fell by 13.1 percent, as it also did in other similar sectors.

Thus, the gross foreign debt of other Croatian (domestic) sectors dropped to 13.5 billion euro at the end of October, or by 5.3 percent year-on-year, continuing the trend of depreciation dating from January 2016, as was stated on Tuesday.

The gross foreign debt of the state amounted to 13.7 billion euro at the end of October, which was 0.4 percent less than it was one year earlier. The growth of Croatia's gross foreign debt at an annual level was recorded only in direct investments, by 4.4 percent, to 6.3 billion euro.

"We expect the data for the last two months of 2018 to point to the continuation of similar developments, and at the end of 2018, the relative indicator of external borrowing should be below 75 percent of GDP," RBA analysts point out.

They expect that this year's debt to gross domestic product (GDP) will decline, thanks to the growth of the domestic economy and further diversification of all of Croatia's key sectors. "Further reductions in debt in the corporate sector are expected as a result of the discrepancies in the cost of financing on domestic and foreign financial markets," analysts from RBA have stated.

However, a tightening monetary policy and worsening funding conditions in regional and global financial markets could warn of a potentially negative impact.

"[This is particularly concerning] in the case of Croatia's modest progress in the implementation of structural reforms, which leads to an increase in risk perception and, consequently, the risk premium of the country itself," concluded RBA's financial analysts.

Make sure to follow our dedicated business and politics pages for more infromation on Croatia's financial situation, doing business in Croatia, and the overall business and investment climate.

As Poslovni Dnevnik writes on the 26th of January, 2019, the low rate of taxation and the simplistic way of ''doing the books'' has apparently led to a large increase in people setting up obrts and freelancing in Croatia. Minister Zdravko Marić announced that the Croatian Finance Ministry will "consider this segment in particular and see how it will be treated in the future".

Judging by the discussions that took place at the 2nd Tax Conference, the next round of tax changes could be concentrated primarily on obrt owners and other freelancers, with the possibility of further lowering the tax burden on wages.

Minister of Finance Zdravko Marić announced that the Croatian Finance Ministry intends to alter a few things for Croatia's numerous freelancers, but didn't really specify in what direction those changes will go and when these changes will happen. It is to be expected, however, that the Croatian Finance Ministry will prepare the changes during the course of this year, according to a report from prviplan.hr.

At the Taxation Conference, organised by the Faculty of Economics in Zagreb and Deloitte, and was attended by representatives of the scientific and business community, representatives of the Croatian Finance Ministry and the Tax Administration, Minister Marić reported on the effects of the previous changes in the Croatian tax system.

Minister Marić reported that about 150,000 taxpayers in Croatia are paying tax on their earnings.

He said there are about 35,000 j.d.o.o's, 106,000 registered self-employed businesses, including 37,000 obrt owners. When it comes to private renters who pay a flat tax, there are about 95,000.

Commenting on the rapid growth in the number of obrts paying taxes on a flat-rate basis, Minister Marić said that the Croatian Finance Ministry has made a big step forward and simplified the management of the books, but that "this segment needs to be considered and it should be seen how things will look in the future."

Marić's announcement came after the introduction made by dr.sc. Hrvoje Šimović from the Faculty of Economics in Zagreb, who said that the growth of those paying flat tax now looks good, especially because of encouraging levels of those who are self-employed.

"But in the future, obrts will prove to be the biggest problem in regard to the tax aspect. The potential for abuse will increase due to taxpayers' efforts to make sure their net income remains as much as possible,'' said Šimović.

Minister Marić emphasised that the Croatian tax system needs to be fully understood and that the essence of tax reform is to make the system simpler, more predictable and consistent, offering a better sense of understanding and security for everyone.

"We're doing the same for all taxpayers. It's not true that we're only good for those who pay a lot of tax, and that we're purposely trying to make it more difficult for those who pay less. It's precisely in the segment of small and medium-sized entrepreneurs that the biggest reform has been made in the first round of [tax] reforms. The profit tax rate has dropped from 20 to 18 percent, or 12 percent for companies with up to three million kuna of revenue. A lot has been facilitated,'' Marić noted.

He stressed that he remains a big advocate for tax cuts.

Follow our dedicated politics and business pages for much more.

ZAGREB, January 25, 2019 - Finance Minister Zdravko Marić said on Friday the only reason for introducing the possibility of blocking websites was the unfair competition of foreign online betting sites which pay no taxes on their services.

Unlike domestic online betting sites, international ones pay neither a business fee nor profit tax given that they are not registered in Croatia, and players, i.e. citizens, do not pay taxes on their winnings, Marić said at a conference on the impact of the tax policy on innovation and development.

That's why, in the rules on the implementation of the General Tax Act, which is in public consultation, the Finance Ministry has proposed the possibility of blocking access to websites used for prohibited business operations and tax evasion.

"If someone has a certain business operation in Croatia, not paying any taxes and creating unfair competition, the Tax Administration can initiate blocking a certain IP address, Marić said.

Helena Schmidt of Deloitte, one of the organisers of the conference, said amending tax laws was not enough to change the economic situation and that young people would not stay in a country without prospects.

She said that in 2000 Ireland had one million less inhabitants than today and that it now had the youngest population in Europe. The net of a gross Irish salary of 2,000 euro is 1,700, she added.

More news on the internet issues in Croatia can be found in the Lifestyle section.

ZAGREB, January 23, 2019 - Croatia has great expectations from the proposed InvestEU programme, designed to encourage innovation and job creation in the next seven-year period from 2021 to 2027, Finance Minister Zdravko Marić said on Tuesday.

The InvestEU programme will replace the present European Fund for Strategic Investments, established after the financial crisis, and is an extension of the Investment Plan for Europe, also known as the Juncker Plan.

The new programme combines funding from the EU budget in the form of loans and guarantees. Under a European Commission proposal, a 38 billion euro guarantee would be secured from the EU budget to support strategically important projects across the EU. The Commission expects that the InvestEU fund will encourage further EU-wide investments in excess of 650 billion euro from 2021 to 2027.

Currently there are 14 different investment stimulation instruments, the main one being the European Fund for Strategic Investments, launched in June 2015 and extended in December 2017. "Croatia has by now used up about 250 million euro from the Juncker Plan. We can argue whether this is enough or not, but the fact remains that this 250 million will bring along a further 1 billion euro in investments. We certainly have great expectations from the InvestEU programme too," Marić said.

Marić was attending a meeting of EU finance ministers at which one of the topics discussed was the InvestEU programme.

Marić noted that in Croatia the Juncker Plan had also opened up space for the private sector. "Some of the private companies are successful beneficiaries of the Juncker Plan, which is a sort of invitation to others to join," he added.

Marić emphasised the need for both central and local government "to ease the conditions and not to further complicate the procedures" and to help interested parties in putting together their projects so as to ensure better absorption of EU funding. "That is the only guarantee and prerequisite for Croatia to use more funds from the InvestEU programme and EU funds in general."

Under the proposed InvestEU programme, three quarters of guarantees would be provided by the European Investment Bank and the rest would come from national development banks, or in the Croatian case the Croatian Bank for Reconstruction and Development.

More news on Croatia and the EU funds can be found in the Business section.

ZAGREB, January 19, 2019 - The parliamentary committee on finances and state budget on Friday advertised a public call for applications for the post of the president of the Fiscal Policy Commission, and the applications can be submitted in the next 15 days.

The requirements for applicants to qualify for this position are Croatian citizenship, university degree and eight years of experience in the field of public finances, the macroeconomic sector or in other branches of the economic policies.

The seven-member Fiscal Policy Commission is appointed to a five-year term by the national legislature at the proposal of the finance committee.

The new Fiscal Responsibility Act, adopted by the parliament in late 2018, envisaged the professionalisation of the Fiscal Policy Commission, as an independent and standing body without lawmakers sitting on it.

The first Croatian law on fiscal responsibility was adopted in 2010 and was amended upon accession to the European Union in mid-2013.

The new act is fully adjusted to obligations stemming from the Stability and Growth Pact.

The first rule refers to structural balance whereby the targeted value becomes a medium-term budget objective.

The second rule regulates budget expenditure, and general government budget expenditure growth must not exceed the referential potential growth rate of the country's economy.

The third rule does not allow public debt to exceed 60% of GDP.

The main task of the Fiscal Policy Commission is to envisage and evaluate the implementation of fiscal rules.

More news on Croatia’s public spending can be found in the Business section.

ZAGREB, January 17, 2019 - Finance Minister Zdravko Marić said Thursday that in the international framework, Croatia's system of preventing money laundering and terrorism has been recognised, which helped Croatia made the list of the top ten countries with the lowest money laundering risk.

According to a report by the Basel-based International Centre for Asset Recovery (ICAR) from October 2018, Croatia recorded additional progress and of the 129 countries covered, it made the list of the top ten countries with the lowest money laundering and terrorism financing risk, the minister said in parliament.

All relevant institutions – the Council of Europe, the United Nations, the European Union, the International Monetary Foundation and the World Bank – have said that Croatia's model and its prevention system were contemporary and in most parts adjusted with international standards, Marić said, presenting the bill under which true owners of companies in Croatia would enter the enterprise register, which will be available to the public.

The opposition's Social Democratic Party and MOST party commended the initiative to set up the enterprise register, urging the government to take a step further and remove administrative obstacles to make register browsing easier.

"Let's take this step forward and show that Croatia is truly a democratic country based on the rule of law... Let's enable real access to the register," Peđa Grbin of the SDP said.

More news on the Finance Ministry can be found in the Politics section.

As Poslovni Dnevnik writes on the 31st of December, 2018, Finance Minister Zdravko Marić presented the Croatian Government's new ''demographic measure'' on Sunday for Dnevnik HTV, by which the non-taxable amount of so-called ''newborn allowance'' has been raised to a very handsome 10,000 kuna.

"An employee who has a baby'' said Marić, "her employer has the ability and the right to give her money for the newborn baby. The non-taxable amount is 3,362 kuna, but this amount has been raised three times higher and amounts to 10,000 kuna,'' announced the finance minister during an interview with HTV.

The order by the Croatian Government which regards this measure will be published on Wednesday, January the 2nd, 2019, and will come into force as of Thursday, January the 3rd, but it is already technically applicable today, added the minister.

Looking back, this has been the year in which Marić, who has been serving in the Croatian Government for a while now, stated that he was satisfied with continuing the trend of Croatia's declining public debt, which fell by 10 percentage points in just three years. It is expected that this year,  interest rates will fall below 9 billion kuna.

"Since 2015, we've cut interest rates by more than a quarter, we're paying lower interest rates, and I'm particularly pleased with what we've done for the highways and for the roads," said Minister Marić, emphasising that they continue to remain in "Croatian hands".

Recalling the alarming debts which still very much haunt Croatia's healthcare system, he said that redistributing money to the Ministry of Health can't be a viable solution to that problem.

"I'm happy that we've been able to reduce payment deadlines, especially the state ones, for a year. I'd like to see if these reduced payment periods reflected on the reduced cost of purchasing medication," Marić said.

He emphasised the need for the Croatian Government to apply a combination of measures on the revenue and expenditure side of the health budget.

"We have contributed through the third round of tax breaks, we've raised the budget for healthcare by 1 percentage point, around 1.350 billion kuna, but that won't be enough," he said, concluding that the Croatian healthcare system must be financially sustainable.

Make sure to follow our dedicated politics page for much more.

ZAGREB, December 11, 2018 - Finance Minister Zdravko Marić said on Tuesday it was too early to speak about a lower VAT rate in tourism sector, which was announced by Tourism Minister Gari Cappelli on Monday, given that the latest round of tax changes had only been adopted.

Addressing reporters ahead of a lecture he was expected to give to students at the Rijeka Faculty of Economics, Marić recalled that the parliament had passed nine laws that would go into force on the first day of 2019, and noted that that was the third round of tax breaks. "All the future steps will be analysed and discussed. I would not make any announcements for the time being," said Marić.

In a parliamentary debate on three tourism-related bills, Minister Cappelli said that the government would cut VAT on restaurant services in 2020. He said that when asked by Social Democrat Saša Đujić if there was room to lower the current 25% VAT rate on restaurant services to the previous, 13% rate considering that VAT revenues were growing and the economic situation was generally better.

Marić said that VAT as the most abundant budget revenue that puts Croatia at the very top of EU countries in terms of the share of VAT in GDP, definitely created room "for something more to be done in that regard."

Responding to a reporter's remark that Cappelli mentioned a lower VAT rate and if his statement meant that the tourism minister did not have the Finance Ministry's support, Marić said that the government would discuss the matter and that there was plenty of time for that. "I would not want to make any announcements for the time being, it's too early, we have just adopted the tax laws and they are about to go into force," said the finance minister.

Asked if he feared that individual VAT cuts could bring into question a cut in the standard VAT rate, Marić said that he did not and that the government would eventually take a unanimous position on the matter.

More news on Croatia’s taxes can be found in the Business section.