Croatia Focusing on Political Stability

By 14 February 2018

ZAGREB, February 14, 2018 - Political stability is the main prerequisite for the country's economic growth and development and was therefore a priority in the Croatian government's first year in office, Parliament Speaker Gordan Jandroković said on Wednesday at this year's first business lunch of the American Chamber of Commerce in Croatia.

He recalled that in 2016, due to political instability, there was an overall standstill and a social crisis, adding that the incumbent ruling coalition was "slim and heterogeneous, so it should be guarded."

"Without a firm parliamentary majority, Croatia has problems in everyday functioning," Jandroković said, adding that Croatia was not a traditional democracy lasting decades but a very young one.

He said the current world situation was very complex, in turmoil, with Southeast Europe not yet stabilised, while Croatia had faced with the crash of the Agrokor conglomerate and the situation in neighbouring countries. "The world is no longer predictable. But even in such circumstances, the 14 months of this government show that Croatia is going in a better direction and achieving better and better results. In 2017, we achieved economic growth of about 3%, growth in industrial production, investments, exports, and also recorded growth of employment, salaries and social outlays."

He said the European Commission had forecast that Croatia's economy would grow 2.8% in 2018 and 2.7% in 2019, while the government's forecasts were about 3%. He said 2017 also saw the lowest unemployment to date, 12.4%. "For the first time since we gained independence, the state budget ended the year with a surplus. At the beginning of the term in office, the public debt was 85% of GDP and now it's 78% of GDP."

Jandroković said last year's tourist season was successful with 18.5 million arrivals, up 13% on the year. "Tourism revenues went up 10%."

Speaking of the tax reform, he said it was launched to make doing business easier and the tax system stable and stimulating after being subject to numerous changes which led to instability and weak investment. "After a tax relief of about 2.5 billion kuna in 2017, the forecast for 2018 is that the tax relief for citizens and businesses will amount to about 1.2 billion kuna."

Speaking of the 2018 budget, Jandroković said it had a development and a social solidarity dimension.

As for the challenges Croatia would have to respond to, he mentioned the restructuring of the heavily indebted Agrokor food and retail group, structural reforms and infrastructure projects. "Regarding Agrokor, the worst consequences for the economy have been prevented," he said, adding that a settlement was expected to be reached to preserve the group but in a different form.

He said structural reforms were aimed at reducing macroeconomic imbalances. "A health care reform package is under way, reforms of education and public administration are ahead of us, and a pension system reform is also necessary."

Speaking of major infrastructure projects, Jandroković mentioned the Pelješac bridge and an LNG terminal on the island of Krk, for which he said Croatia had strong US support.

He said the main strategic goals were introducing the euro and entering the Schengen Area. "With that, we would round off this European story and equate Croatia's status with the other EU member states."

This year the American Chamber of Commerce in Croatia is marking its 20th anniversary. It is the biggest international business association in the country.