Saturday, 10 July 2021

PM Says Croatia Preserves Its Financial Reputation

ZAGREB, 10 July 2021 - Croatia has managed to preserve its firm financial reputation, while weathering the COVID-19 pandemic and the consequences of the 2020 devastating earthquakes, Prime Minister Andrej Plenković said in his speech at the 14th edition of Dubrovnik Forum on Saturday.

The fourteenth annual international conference titled "Dubrovnik Forum: (Post)-Pandemic Geopolitics - Together in a World Apart" focused on the impact of the COVID-19 pandemic on the geopolitical relations and global economy. The programme includes three panels: "Unmasking the Geopolitics of a Post-Pandemic World"; "The International Community and the Western Balkans: How to End the Quarantine?"; and, "European Union, Three Seas Initiative and 17+China: How to support Central and Eastern Europe’s economic growth and societal development?".

Addressing the forum, PM Plenković said that Croatia's financial reputation remained firm owing to good results in the pre-pandemic period.

After being hit by the coronavirus pandemic and the devastating earthquakes, Croatia is now learning how to endure the pressure and tap considerable financial funds so as to provide the citizens with the real development that is evolving into two directions: admission to the Schengen Area during 2022, and the full readiness in 2023 for the admission into the euro area, he said.

The Croatian PM underscored the importance of international cooperation, notably joint efforts within the European Union.

The prevailing opinion of European leaders last summer was that we were faced with a huge problem that required the proper solution. The only way to find the solution for that big problem was to make agreement on the EU Next Generation instrument and withdraw a great amount of money for the recovery, Plenković explained.

He recalled that the European Commission had recently given its greenlight to Croatia's National Recovery and Resilience Plan, worth €6.3 billion, which could significantly boost the country's Gross Domestic Product and create 21,000 new jobs by 2026. 

The greenlight from Brussels is an important step towards the EU disbursing funds in grants and loans under the Recovery and Resilience Facility (RRF).

The EU plan for the recovery from the COVID-19 pandemic was described by the Croatian prime minister as the wisest move.

He also recalled that at the onset of the pandemic, Craotia did not have enough equipment and protective clothes to address the crisis. Only one telephone call to Chinese Prime Minister Li Keqiang was enough and the problem was solved, the Croatian PM added.

During his key-note speech Plenković said that the developments in the western Balkans was one of the topics of the Dubrovnik event and he reiterated his support to Balkan countries' striving for EU membership.

He expressed hope that Bulgaria and North Macedonia would find a solution to their bilateral dispute as soon as possible.

The time has ripened for Albania and North Macedonia to finally start their accession negotiations, he added.

PM recalled that Croatia perceived Bosnia and Herzegovina as its most important neighbour in the historical, geographic and cultural sense.

We support the current process that is being conducted with the assistance of the USA and the European Union in relation to efforts to amend the election law in that country. We believe that this issue should be settled and that institutions should include legitimate representatives (of constituent peoples) and that we should comply with the letter and law of the Dayton Agreement, Plenković said.

All the three constituent peoples should be equal, and the moves being taken since 2006 have not made Croatia happy. We do not think that such moves are conducive to the good functioning of Bosnia and Herzegovina, he said.

Croatia also supports reforms being taken in other EU membership aspirants: Montenegro, Serbia and Kosovo.

Plenković conveyed Croatia's readiness for the strengthening of cooperation in the Mediterranean region and announced that in September Croatia and Slovenia could join the informal group of Mediterranean countries called MED 7.

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Thursday, 11 February 2021

EC Expects Croatia's Economy to Rebound by 5.3% in 2021, 4.6% in 2022

ZAGREB, 11 February, 2021 - Croatia's Gross Domestic Product is estimated to have contracted by 8.9% in 2020, while it is expected to rise at a rate of 5.3% in 2021 and 4.6% in 2022, the European Commission says in its latest Winter 2021 Economic Forecast, published on Thursday.

The economy's contraction in 2020 "is mainly attributable to the impact of the COVID-19 pandemic on service exports, particularly tourism, which suffered greatly due to the fall in demand for air travel and the imposition of travel restrictions in many countries."

Croatia's private consumption also fell, reflecting the accumulation of involuntary and precautionary savings.

Following a better-than-expected third quarter, the country's GDP is estimated to have contracted again towards the end of the year as pandemic suppression measures were reintroduced in December.

This contraction is lower than the previous projections of -9.6%, as stated by the EC in its Autumn Economic Forecast. However, the latest forecasts about the rise in 2021 are smaller in comparison to the previously projected recovery at a rate of 5.7%, while the projected growth for 2022 has been revised upward from 3.7% to 4.6%.

"Real GDP is forecast to bounce back by 5.3% in 2021, as domestic demand should rebound once pandemic containment measures are phased out and more people are vaccinated.," the EC says.

"Pent-up demand, coupled with a gradual recovery in the labour market, is expected to boost private consumption. Investment should rebound on the back of the already strong dynamics in the construction sector, supported by rebuilding efforts following the strong earthquakes in the Banija region and Zagreb.

"A gradual pick up in longer-term investment projects, is also expected. The recovery in external demand, however, is expected to be uneven. Goods exports are expected to increase strongly on the back of the improved global outlook but services exports are projected to remain subdued in both 2021 and 2022 compared to their 2019 levels.

"This is mainly because the recovery in the travel and hospitality sectors are likely to take several years. This forecast does not include any measures expected to be funded under the Recovery and Resilience Facility, posing an upside risk to the growth projections.

"HICP inflation rate dropped to 0% in 2020 on the back of a strong decline in energy prices, while core inflation remained broadly stable at around 1%. As the effect of last year’s fall in oil prices dissipates, inflation is expected to pick up slightly in 2021 but should remain subdued throughout the forecast horizon (1.2% in 2021 and 1.5% in 2022)," reads the Croatia section of the EC Winter Economic Forecast.

Croatia ranks 3rd in terms of expected rise in 2021, fourth in terms of fall in 2020

For the sake of comparison, Spain is expected to have the most robust recovery in 2021, at  a rate of 5.6%, France follows (5.5%), and Croatia ranks third among the 27 EU member-states.

When it comes to the economic downturn in 2020, Spain again tops the ranking (-11%), Greece is  the runner-up (-10%), and Malta ranks third (-9%), while Croatia comes as fourth with a negative growth rate of 8.9%.

Sunday, 22 November 2020

Analysts Say Croatia's GDP Dropped by About 10% in Q3 2020

ZAGREB, November 22, 2020 - Despite the fact that Croatia's economy somewhat recovered from the record decline in the second quarter, thanks to activities after the lockdown, analysts estimate that in the third quarter it also fell at a double digit rate compared to the previous year.

The national statistical office (DZS) will release at the end of next week the first estimate of gross domestic product (GDP) for Q3, and seven analysts who took part in Hina's survey expect a drop in GDP of 10.4% on the year.

Their estimates of the decline range from 9.5% to 11%.

Economy in recession

That will be the second quarter in a row that the economy declines on the year, which means it has entered a recession, but the decline will be milder compared to the record 15.1% drop in the previous quarter.

The record decline in Q2 was a consequence of the coronavirus pandemic and restrictive measures aimed at curbing the spread of the virus, which paralysed economic activity from the second half of March to the end of April.

"When the measures were relaxed in June, and especially during the summer months, most activities already started to recover. First high-frequency indicators confirm that Q3 will see a growth compared with the period from March to June, but a relatively steep decline in GDP on the year is inevitable," one of the analysts said.

Personal consumption continues to decline

The decline is mainly due to weak personal consumption, which is the largest component of GDP. Data from the national statistical office show that retail trade turnover fell by 7.6% in Q3 compared to the same period last year.

"That is mainly a consequence of trends in hospitality services, which didn't manage to compensate for losses caused by the closure of the economy even during the summer months, and tourist spending was markedly lower compared to the previous year," it was said in the survey.

Even though the summer tourist season was slightly better than expected at the start of the coronavirus crisis, the decline in tourist turnover was sharp.

According to the DZS's data, there were 6.6 million tourists in commercial accommodation establishments in the first nine months of 2020, which is a drop of about 63% from the same period last year, while the number of tourist nights dropped by 54% to 39.7 million.

The decline in industrial production also had a negative effect on GDP. In the past quarter, production dropped by 1.3% on the year.

That is a consequence of weak domestic demand, as well as foreign demand, as indicated by the decline in exports since the start of the year.

According to the DZS's data, the value of exports of goods in the first nine months of 2020 totalled about HRK 80 billion, which 4.8% less compared to the same period last year, while imports dropped by 10.1%, to approximately HRK 126 billion.

"High levels of uncertainty and worsening expectations also curbed stronger investment, while government spending is the only GDP component that is mitigating the negative trends on the demand side with its growth," one of the analysts said in Hina's survey.

Second wave of corona crisis

Because of the second wave of coronavirus spreading in Croatia and Europe, analysts also expect an economic decline in Q4 compared to the previous year.

It is expected that holiday spending and tourist activity will weaken due to epidemiological measures.

In addition, a further decline in exports and imports is expected, given the new restrictive measures introduced in most European countries due to the second wave of coronavirus, as is recession in Croatia's largest trading partners, Italy and Germany.

Deep, but brief recession?

Because of all this, a record decline in economy is expected in the entire 2020.

According to Hina's survey, seven analysts on average estimate that in the entire 2020 the economy could decline by 9.2%. Their estimates of the decline range from 8% to 10%.

The estimates of the decline have slightly decreased since three months ago analysts on average expected a drop of 10.5%.

According to one analyst, some of the reasons for that include a somewhat salvaged main tourist season, the resilience of construction (more) and industry (less) to negative trends, reduced gap in trade in goods (goods exports more resilient than imports) and, finally, the government's fiscal impulse through wage subsidies and maintaining household income levels, as well as the moratorium on loan repayment.

Despite being mitigated, this year's economic downturn could be greater than during the 2009 financial crisis, when the GDP dropped by a record 7.4%.

The government itself expects a greater drop in economy than in 2009, so it estimates that the GDP will decline by 8%.

The Croatian National Bank also expects a drop of about 8%, while the European Commission estimates that Croatia's economy will decline by 9.6% this year.

While the drop in GDP in 2020 will likely be deeper than during the global financial crisis, it is expected that this recession will be shorter. Then, the recession lasted for six years, while this time the economy is expected to grow as soon as next year.

Tuesday, 7 July 2020

Croatia Among Three Worst Hit Economies by Corona in EU


ZAGREB, July 7, 2020 - The coronavirus pandemic has impacted all European Union countries but not equally and the most affected countries are those that largely depend on tourism, notes the European Commission's summer 2020 economic forecast released on Tuesday.

Croatia is among the three most affected countries in the European Union. The commission forecasts that Italy's GDP will contract the most (-11.2%) followed by Spain (-10.9%) and Croatia (-10.8%).

Poland's economy is expected to decrease the least (-4.6%), and is followed by Denmark (-5.2%), Sweden (-5.3%), while Romania and Malta are with a fall of 6% respectively.

The greatest EU economy Germany can brace itself for a 6.3% decrease in GDP.

"The shock to the EU economy is symmetric in that the pandemic has hit all Member States. However, both the drop in output in 2020 and the strength of the rebound in 2021 are set to differ markedly. The differences in the scale of the impact of the pandemic and the strength of recoveries across Member States are now forecast to be still more pronounced than expected in the Spring Forecast," the commission said in a press release.

The average drop in the euro area economy in 2020 is estimated at 8.7% while it is expected to grow by 6.1% in 2021.

The EU economy is forecast to contract by 8.3% in 2020 and grow by 5.8% in 2021.

Based on current forecasts the contraction in 2020 is, therefore, projected to be significantly greater than the 7.7% projected for the euro area and 7.4% for the EU as a whole in the Spring Forecast released on May 6.

Growth too will be somewhat weaker than had been forecast in the spring.

"This forecast shows the devastating economic effects of that pandemic. The policy response across Europe has helped to cushion the blow for our citizens, yet this remains a story of increasing divergence, inequality and insecurity. This is why it is so important to reach a swift agreement on the recovery plan proposed by the Commission – to inject both new confidence and new financing into our economies at this critical time,” Commissioner for the Economy, Paolo Gentiloni was quoted as saying.

Executive Vice-President for an Economy that works for People, Valdis Dombrovskis however warned of the second wave of the pandemic.

"The economic impact of the lockdown is more severe than we initially expected. We continue to navigate in stormy waters and face many risks, including another major wave of infections. If anything, this forecast is a powerful illustration of why we need a deal on our ambitious recovery package, NextGenerationEU, to help the economy. Looking forward to this year and next, we can expect a rebound but we will need to be vigilant about the differing pace of the recovery. We need to continue protecting workers and companies and coordinate our policies closely at EU level to ensure we emerge stronger and united,” said Dombrovskis. 

The impact of the pandemic on economic activity was already considerable in the first quarter of 2020, even though most Member States only began introducing lockdown measures in mid-March.

With a far longer period of disruption and lockdown taking place in the second quarter of 2020, economic output is expected to have contracted significantly more than in the first quarter.

On the other hand, early data for May and June suggest that the worst may have passed. The recovery is expected to gain traction in the second half of the year, albeit remaining incomplete and uneven across the EU, the commission's press release said.

Tuesday, 12 May 2020

Opposition: Budget Revision Doesn't Give Answers for Situation after June

ZAGREB, May 12, 2020 - Opposition parties in parliament on Tuesday criticised the 2020 budget revision, saying that it does not give any answers for the period after June when job-keeping measures will expire, and warned of a possible sudden increase in unemployment.

"The revision is gauged for the period until June 15 and does not provide any answers as to what will happen after that. That is when the key measure to preserve jobs expires," said Branko Grčić (SDP), asking what would happen with the 500,000 jobs after June 15.

"Where is the decision to extend that measure for three months? Where is the money to finance that measure? There isn't any..." said Grčić.

He believes that 500,000 people will end up in the Employment Service while money to cover their unemployment allowances has not been included in the budget revision.

Grčić added that all countries in the neighbourhood had introduced measures to help the business sector but also measures for households and that only consumption and demand can maintain any economic activity in the short term.

Nikola Grmoja (MOST) said that it's obvious from the budget revision that the election is at the front door and that budget spending is not being reduced while a drastic drop in revenue is expected. He, too, warned of the possible sudden increase in unemployment once the government's measures expire.

He called out the government and ruling majority for protecting banks because they did not adopt a decision on a loan and interest payment moratorium.

Grozdana Perić of the ruling HDZ party refuted criticism that the government was protecting only certain sectors, noting that it considered all economic activities important.

She added that the budget revision was a consequence of the coronavirus crisis and that Croatia would emerge from the current crisis much sooner than had been the case earlier.

More budget news can be found in the Business section.

Tuesday, 12 May 2020

Number of Receipts up 25% on the Week, Value up 21%

ZAGREB, May 12, 2020 - The number of receipts issued in all activities covered by the fiscalisation system increased by 25% on the week and their value increased by 21%, whereas on the yearly level they recorded a double-digit fall, the latest figures from the Tax Administration show.

In the week from May 4 to 10, when the second round of lockdown restrictions were lifted, allowing hairdressers, beauty salons, barbers and pedicurists to reopen, among others, compared to the week from April 27 to May 3, the number of receipts in all activities increased by 25% to 27.7 million receipts issued and their value increased by 21% to HRK 2.8 billion.

The number of receipts issued in retail, vehicle and motorcycle repairs increased by 24% and their value increased by HRK 19.95 million, or 18.4%, to HRK 2.21 billion.

At the same time, receipts issued in hospitality and tourism increased by 33.7% or just over 720,000, and their amount went up 23% to HRK 44 million.

A comparison of the period from May 4 to 10 with the same period last year indicates that the number of receipts issued in all activities was down by 37% and their value by 20%.

Receipts issued in retail were down 23% and their value was 7% lower on the year.

In the accommodation and food preparation segments, the number of receipts issued decreased by 90% on the year, with a decrease in value of 89%.

Since the start of the coronavirus crisis in Croatia, in the period from February 24 to May 10, the number of fiscal receipts dropped by 38% and their value by 23% compared to the same period last year.

In that period, 293.2 million receipts were issued with a value of HRK 27.7 billion, while last year at the same time 469.6 million receipts were issued with a value of HRK 36.2 billion.

More economy news can be found in the Business section.

Thursday, 7 May 2020

Everyone Will Feel Budget Cuts, Expenditures Stay as Planned

ZAGREB, May 7, 2020 - A revised budget should be ready for the government's meeting on Thursday, Finance Minister Zdravko Marić said on Wednesday, adding that everyone would feel the cuts and that despite the difficult circumstances, budgetary expenditures would stay as planned.

Asked by the press ahead of an inner cabinet meeting how much the budget would be reduced, Marić said that despite additional expenses for the health system and outlays to keep jobs, budgetary expenditures would stay as originally planned.

He said savings would be made wherever possible so that the expenditure side of the budget that is financed from taxes and contributions stayed as originally planned.

Asked who the biggest "victim" of the revised budget was, Marić said "everyone, depending on their budgets."

"The most important thing is that everyone contributes. In today's circumstances, you can't expect the Health Ministry's budget to be reduced significantly when you have constant demands for outlays for equipment or masks, or the Labour and Pension Ministry's budget for pensions and support to the economy," said Marić.

The key message of the revised budget is that we are managing to keep expenditures as planned, he added.

This year's budgetary revenues are planned in the amount of HRK 145 billion and expenditures in the amount of HRK 147 billion.

The decrease in revenues is evident due to the bailout measures for the economy and, even more so, the decline in economic activity, Marić said, adding that the revenues side of the budget would certainly "suffer."

Asked if Croatia would borrow on the foreign market soon given the possibility of a caretaker government, he said the international market was "in our focus" but that it is necessary to prepare well for that and to "wait for the right moment."

Commenting on the European Commission's latest economic forecast, Marić said the steep decline in all of the EU would not be fully compensated for in 2021 and that it is necessary to work on making the decline as small and recovery as quick as possible.

The fiscal position and estimate of the public debt-to-GDP ratio are similar to the government's projections, which means the government's projections are credible, he added.

Asked if there was money to keep jobs after June, when a three-month period of government aid for that purpose ends, Marić said the money for May had been ensured through a bond issue and that aid for June and other months would be worked on.

As for tax payment deferrals, he said they were possible for a period of six months and that this measure might be reviewed, depending on the circumstances.

More budget news can be found in the Business section.

Wednesday, 6 May 2020

HGK: Five Years for Trade Sector to Recover

ZAGREB, May 6, 2020 - It will take five years for the Croatian trade sector to recover from the impact of the crisis caused by the coronavirus epidemic, the Croatian Chamber of Commerce (HGK) said on Wednesday.

"The public must be aware that the trade sector has borne a heavy burden on its shoulders, without increasing margins or prices, which helped all the citizens in this crisis," the HGK vice-president for trade, Josip Zaher, said at a meeting of the HGK's trade association.

Zaher said that retail trade had dropped by 25% in April.

The association's president Ivica Katavić said: "We've been through two difficult months. There have been problems in business, including inspections, shorter business hours and limited entry into the shops. But we managed to keep our heads above water."

Katavić said that the restrictions that had done the greatest damage were shortened shop opening hours and e-passes allowing travel. "With the lifting of these restrictions, the situation has improved considerably. The situation was most difficult at the start of April, but considering the circumstances we must be satisfied. We are also satisfied with our communication with the HGK, who were at our service," he added.

The CEO of the Konzum retail chain, Slavko Ledić, said that the sharpest declines had been recorded in large stores. "The key move was to extend opening hours, it was even more important than Sunday trading. The most important thing for us was to have opening hours extended and that we could pay wages," Ledić said.

The CEO of textile distributor Tekstilpromet, Hrvoje Šimić, drew attention to problems faced by the non-food trade sector, which has 90,000 employees.

"Over a period of 50 days our turnover was zero, while at the same time banks showed no sympathy. Some of the shopping centres also did not prove to be good business partners to Croatian traders because, for example, they sent their invoices for May already in mid-April," Šimić said.

More economic news can be found in the Business section.

Wednesday, 6 May 2020

Consumer Sentiment, Expectations Indices See Significant Drop

ZAGREB, May 6, 2020 - A consumer confidence survey conducted in April by the Croatian National Bank (HNB) shows that consumer confidence indices have seen their strongest monthly and annual decreases since the bank started monitoring them.

The consumer confidence index in April was -32.2 points, which is its lowest level since May 2014, while the consumer expectations index was -42.1 points, its lowest level since August 2009. The consumer sentiment index was -23.5 points, the same as in June 2017.

The composite consumer confidence index in April dropped by 22.3 points from March and in relation to April 2019 it was 27.4 points down.

These are the strongest monthly and annual changes in consumer confidence indices since the HNB started monitoring them, analysts of Raiffeisenbank Austria have said.

The composite consumer expectations index, which mostly refers to worsened expectations regarding the overall state of the economy in the next 12 months, dropped by 30.4 points on the month and by 39.5 points on the year. Both decreases are historically the greatest.

The composite consumer sentiment index, which points to fluctuations in the financial status of households in the last 12 months and changes in expectations regarding the economic situation and investments, dropped by 12 points on the month. The last time the index dropped this much was in April 2002, when the monthly decline was 19.6 points. Compared to April 2019, the index dropped by 8.6 points, for the first time since February 2013.

Raiffeisenbank analysts say that the Croatian economy, too, has been affected by the coronavirus pandemic and is facing a period of lower economic activity and recovery.

More economy news can be found in the Business section.

Monday, 4 May 2020

Relaxing Restrictions Leads to Increased Turnover in Retail and Hospitality

ZAGREB, May 4, 2020 - The first wave of relaxing epidemiological restrictions since April 27 has led to an increased turnover in the retail and hospitality sectors compared to the week before, but annual figures are significantly lower, according to data from the Tax Administration.

Comparing the week from April 27 to May 3 with the week from April 20 to 26, the number of fiscal receipts in all activities increased by 3% while their overall amount increased by 6%.

A total of 22.1 million receipts were issued in all activities from April 27 to May 3, with a total value of HRK 2.3 billion.

The number of receipts issued in retail increased by 4% and their value rose by 8%.

Activities of providing accommodation and serving food increased by 6% on the week with regard to the number of receipts issued, the Tax Administration said.

The first wave of relaxing restrictions to contain the spread of the coronavirus epidemic took effect at the start of last week, allowing the retail sector, except for stores in shopping centres, to reopen.

As of Monday May 4, other activities such as hairdressers, barbers, pedicurists and the like were also allowed to reopen their businesses.

In the period from April 27 to May 3 there was a decrease of 49% in the number of receipts issued year on year and a decrease of 33% in value.

Since the outbreak of the coronavirus crisis in Croatia, from February 24 to May 3 the number of fiscal receipts issued decreased by 38%, with a 24% drop in value y-o-y.

This year 265.5 million receipts were issued in that period with a value of HRK 24.9 billion, whereas last year there were 425.5 million receipts issued with a value of HRK 32.6 billion.

More economic news can be found in the Business section.

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