Sunday, 5 April 2020

Three-Month Lockdown Will Make Croatia Borrow up to 10 Billion

ZAGREB, April 5, 2020 - The Croatian authorities will have to borrow HRK 75 billion as consequence of three months of lockdown caused by the coronavirus epidemic, and there is enough money on the market, however, it remains to be seen under what terms and conditions the money can be borrowed, the Večernji List said on Sunday.

The Finance Ministry has already taken the first six billion out of 65 billion kuna necessary for the essential functioning of the state in the next three months.

Those 65 billion include the repayment of 20 billion kuna of previous debts plus outlays for monthly wages, pension allowances, social welfare, higher costs in the healthcare system and other public services on the frontline in the fight against the coronavirus infection, the daily newspaper said.

Finance Minister Zdravko Marić said in an interview which the daily published on Saturday that those 65 billion kuna account for 45% of the projected budget for 2020.

Those are high amounts and the sources for the so-called corona credit arrangements will be first sought on the domestic market, through negotiations with banks operating in Croatia, and also the authorities are likely to tap some of the available funds held by the pension and investment funds, according to the daily.

Although 65 billion kuna already seems a huge amount, analyst Željko Lovrinčević of the Institute of Economics in Zagreb told the newspaper that an additional 10 billion kuna should be added to cover the needs of public companies and the authorities at the local level.

Lovrinčević said that Croatia could count on tapping more than a billion euros from the European Union funds in the said period.

More economic news can be found in the Business section.

Friday, 3 April 2020

Opposition Supports Rescue Package, Slams Government for Being Late

ZAGREB, April 3, 2020 - Opposition parties said in parliament on Friday that they would support the so-called April set of measures proposed by the government to mitigate the fallout from the corona crisis, however, they criticised the government that it was late in proposing the measures.

Social Democratic Party (SDP) leader Davor Bernardić said that the proposals with the measures were put forward belatedly since thousands of people were losing their jobs.

He recalled that this strongest Opposition party suggested that the compensation for keeping workers on a company's payroll should be 5,100 kuna instead of the government measure providing for HRK 4,000 per employee per month.

The SDP also calls for dues to be written-off rather than just being deferred, he said.

Croatian Peasant Party (HSS) leader Krešo Beljak agreed with Bernardić's assessment that the government was late in preparing the rescue measures.

Beljak called for the immediate adoption of measures aimed at propping up businesses and farms in the agricultural sector.

"This is an opportunity for Croatia to reset itself and offset the last 30 years when foreign importers and interest groups and retail chains were given preferential treatment," said Beljak.

Emil Daus of the Istrian Democratic Party (IDS) called for more resolute support to the agricultural sector.

Mirando Mršić of the Democrats criticised the government for addressing the problems in a non-energetic manner.

Goran Alekšić of the SNAGA party called for a ban on enforcement procedures, a moratorium on loan repayments, and for all monthly salaries to be reduce to an equal amount.

The MOST party also advocates a moratorium on loan repayments.

Croatian Democratic Union (HDZ) whip Branko Bačić dismissed the accusations of the government being late in addressing the corona crisis issues. He said that on 9 January, the government set up a task force to monitor the developments considering the coronavirus epidemic in China.

On 25 January, the Croatian government introduced some measures in seaports and airports, and soon after that a crisis management team was established, Bačić said.

"The Croatian government was expedient in engaging itself in efforts to curb the epidemic, and has achieved excellent results. Only Japan has had better results than we have in coping with the crisis," he said.

Furthermore, the rescue package aimed at propping up the economy accounts for nine percent of Gross Domestic Product, he added.

More economic news can be found in the Business section.

Thursday, 2 April 2020

Coronavirus Knocks Down Labour Demand

ZAGREB, April 2, 2020 - The Online Vacancy Index (OVI) for March reflects a break in social and economic activities caused by the coronavirus pandemic, with the demand for service-sector occupations falling and the demand for healthcare occupations and construction workers growing, the Zagreb Institute of Economics (EIZ) says.

Compared with March 2019, the OVI fell by 23.3%, while seasonally adjusted index values indicate an 18.5% decrease compared with the previous month.

"This is a strong decline on a monthly level, which still cannot be compared to 2009 when the OVI index registered significantly stronger declines," the EIZ said on Thursday.

The demand for traditionally most sought-after occupations – sales persons, cooks and waiters – fell by 27%, 30% and 29% respectively compared with March 2019.

"Moreover, the majority of sought-after occupations, particularly those from the service sector, registered significant decreases," the EIZ said, adding that the demand for hotel managers had dropped by almost 40% and for other tourism professionals by 50% compared with the previous year.

However, there was also a strong increase in the demand for certain occupations, such as those involved in dealing with the coronavirus pandemic and the consequences of the March 22 earthquake in Zagreb.

Compared with March 2019, the demand for doctors and/or dentists increased by 38%, for pharmacists by 24% and for nurses by 10%. Also, the demand for bricklayers rose by 67% and for construction workers by 7%.

"However, it should be borne in mind that occupations for which there is a growing demand do not have a large share in the overall demand, as a result of which the decrease in the demand for service-sector occupations, which have a larger share, sets the overall OVI dynamics," the EIZ said, adding that all regions recorded significant declines, except for Eastern Croatia, which had an almost identical demand for labour as in March 2019.

The OVI is a monthly index of online job advertisements developed by the EIZ in cooperation with the MojPosao job search website. It aims to provide timely information on current labour demand.

More coronavirus news can be found in the Business section.

Thursday, 2 April 2020

Plenković Presents New Economic Measures against Coronavirus Crisis

ZAGREB, April 2, 2020 - Prime Minister Andrej Plenković on Wednesday unveiled additional measures to save jobs and help the economy amid the coronavirus crisis, which will be on the government's agenda on Thursday, including increasing the net minimum wage to HRK 4,000 (€725) and partly or fully exempting some businesses from taxes for April, May, and July.

The measures are aimed at further alleviating the impact of the crisis caused by the coronavirus pandemic, the worst global, European, and Croatian crisis in the last few years, Plenković said at a press conference after a session of the inner cabinet, which discussed the new set of measures designed to prop up the economy.

"We have no doubt whatsoever that this is the most severe crisis since the (1991-1995) Homeland War, and I believe that we will, after a while, remember March 2020 as the most difficult month we have lived through in this millennium," the prime minister noted.

He repeated that "we are at war with the coronavirus, with panic and with the socioeconomic impact of the pandemic on jobs, companies and the economy as a whole." He said the situation was grave, adding that the biggest problem was uncertainty, because no one could estimate how long the situation would last.

"Following the developments, and starting from the assumption that we cannot with any certainty foresee how long the crisis will last, we will present another package of measures," Plenković announced, adding that the government would firmly support Croatian workers and the economy.

Plenković announced that the government would propose increasing the amount of the net minimum wage per employee from HRK 3,250 to 4,000 in March, April, and May as part of the existing minimum wage payment scheme used by 65,000 companies for 400,000 workers.

Also, the state will cover contributions, which amounts to around HRK 1,460 for a net wage of HRK 4,000. In total, the state will pay HRK 5,460 per employee. In April, May, and March, the state will fund the measure with HRK 8.5 billion, Plenković stated, noting that employers are only eligible to apply if they keep their employees.

The second measure is aimed at companies that either cannot do business, or it is very difficult for them to do business. They will be partially or completely exempt from their tax liabilities for April, May, and July, namely from paying profit tax, income tax and contributions.

The companies that have seen their revenues fall by 20% to 50% will be entitled to a deferral and payment in instalments for 24 months without interest. The companies whose revenue has decreased by less than 20% are stable enough to weather the crisis, the prime minister said.

"However, the companies that generate a turnover of less than HRK 7.5 million, which is 93% of all companies in Croatia, and whose revenue has decreased by more than 50%, will be completely exempt from their tax liabilities, profit tax, income tax and contributions," Plenković said.

The companies that generate more than HRK 7.5 million, the 7% of big companies, will be exempt from their tax liabilities in proportion to the decrease in their revenue in April, May, and July. If their revenue has decreased by 20% to 50%, they are entitled to a deferral and interest-free payment in instalments, those whose revenue has decreased by 50% to 100% will pay proportionately, and if their revenue has decreased by 75%, they will only pay 25% of their tax liabilities.

The third measure applies to VAT payments. Plenković said that it would be possible to defer such payments until the billing of invoices issued, as is now the case with small businesses.

The deadline for the submission of financial statements for 2019 is extended until 30 June this year and businesses are exempt from paying the Financial Agency a fee for the publication of financial statements.

The prime minister said that the government would be as frugal as possible and would execute only the necessary expenditures.

In the agriculture sector, public procurement procedures will benefit domestic producers, the plan being that at least 60 percent of agricultural and food products are made in Croatia. Emergency aid will also be extended to small dairies through purchases of all of their surpluses.

Relevant laws will be amended to help the tourism sector.

Plenković announced talks with the social partners, notably the trade unions, to see how to make further savings given the current situation. He said that there was enough money for March wages and pensions, which will be paid in April.

"We will discuss wages and pensions for April, which are paid in May, and how to respond to these challenges," the PM said.

He said that sources of financing were being sought in coordination with the central bank, adding that he was confident that they would be found despite all the obstacles. "We must find the necessary funding to ensure the functioning of the state and all its segments."

The government adopted the first set of measures to help the economy hit by the fallout of the coronavirus epidemic at its session on 17 March. The package, worth HRK 30 billion (€4bn), included 63 measures aimed at those that were already feeling or were yet to feel the consequences of the crisis.

The measures included the deferral of income and profit taxes and wage contributions for three months, with the possibility of the time limit being extended for another three months, and 100 percent coverage of the cost of the net minimum wage for the next three months, also with the possibility of extension.

Finance Minister Zdravko Marić said on Tuesday that 52,000 applications for tax deferral had been submitted, while the Ministry of Labour and Pension System told Hina that 65,291 employers had applied for the payment of the minimum wage, covering about 400,000 workers.

Employer associations have described the first set of government measures as insufficient, calling for a write-off, rather than deferral of taxes and contributions, and for exemption from various fees and parafiscal levies.

More coronavirus news can be found in the Lifestyle section.

Wednesday, 1 April 2020

Analyst: Contraction of Economy Depends on Duration of Epidemic

ZAGREB, April 1, 2020 - If the epidemic is over relatively soon, the impact on the national economy will be weaker, however if all this lasts longer, Croatia's Gross Domestic Product could contract by 10%, says economist Danijel Nestić.

Nestić, a senior research fellow at the Institute of Economics in Zagreb, told the RTL commercial broadcaster on Tuesday evening that one should hope that the government measures for mitigating the impact of the crisis could temporarily halt a rise in the number of the jobless.

Businesses have stopped working, people are spending less and less, one in three workers is paid a minimum wage, 12,000 people were fired in the last 14 days, due to the outbreak of the coronavirus disease.

The economist said that that one should hope that the number of the jobless would not rise on an exponential curve in the remainder of the year.

"The economy is stronger now than it was in 2008, the government measures are here, funds from the European Union are available, and I do not believe that the number of the unemployed would again reach record highs of 400,000 which was in the previous crisis," Nestić said.

He admitted that the decline in BDP was inevitable. The contraction of GDP will depend on the duration of the epidemic risk, he explained.

This crisis has one good thing, it is a crisis brought from abroad and the cause is not in the economy itself, the expert said adding that in the event of that the epidemic lasts rather long, the country's GDP could fall by 10%.

More economy news can be found in the Business section.

Tuesday, 31 March 2020

Industrial Turnover in January Down 2.4%

ZAGREB, March 31, 2020 - Total industrial turnover in Croatia in January 2020 was 5.6% up from January 2019, while according to seasonally adjusted data, it was 2.4% down year-on-year.

In January, total seasonally and working-day adjusted industrial turnover on the domestic market was 8.9% higher while on the foreign market it was 1.5% higher than in December 2019, according to data from the national statistical office.

Year-on-year, total seasonally adjusted industrial turnover on the domestic market dropped by 0.1% and on the foreign market by 5.9%.

The sale of durable consumer goods dropped by 16%, the sale of non-durable consumer goods by 7.5% and the sale of capital goods by 1.2%. The sale of energy rose by 16% and that of intermediate products by 1%.

More economic news can be found in the Business section.

Monday, 30 March 2020

New Economic Measures Will Be Comprehensive and Robust

ZAGREB, March 30, 2020 - A new package of measures to boost the economy is expected by the end of this week and it will be comprehensive and robust and directed towards protecting entrepreneurs, workers and the private sector, Prime Minister Andrej Plenković said on Monday after meeting with Zagreb Mayor Milan Bandić.

Plenković advised that the second package of measures for the economy is being prepared and that it should be ready for this week's cabinet meeting.

The April package of measures will be comprehensive and robust, he said, and "will continue to be directed towards entrepreneurs, workers, protecting the private sector, and it will have a complete message about what we can expect in the economic and social sense in the months ahead of us."

"When that package is entirely completed, when we agree on it first in the government and then through the process of consultations, we will present it to the public by the end of this week," the prime minister said.

He assessed that the government had reacted promptly with its economic measures.

The first package, he said, was presented this month, "a month we will probably remember for a long time in the political sense, the economic sense and, unfortunately, in terms of the earthquake in Zagreb which pretty much turned around everything the government had planned and done."

"The government reacted very quickly and many of those measures are already being implemented and have had a very good response by those they refer to," said the prime minister.

He rejected the idea of establishing an economic crisis authority similar to the national civil protection authority and said that the government would establish a group of economic experts, people from the business world who can help the government and perhaps correct any possible measures that the ministries themselves did not come up with.

"We will listen, we will have an inclusive approach, but the responsibility and final decisions on moves regarding the economic policy is up to the government," said Plenković.

Asked by reporters whether banks' business would be facilitated via benefits so they can more easily finance and lend to citizens so consumption does not decline, Plenković said that everything that is being done to ensure the state's financial stability and liquidity is not being done solely by the government but by the Croatian National Bank too.

"Respecting the independence of institutions, we will continue to jointly coordinate all activities, taking account of the banking sector too" concluded Plenković.

More coronavirus news can be found in the Lifestyle section.

Monday, 30 March 2020

Retail Trade in February up 4.9%

ZAGREB, March 30, 2020 - Retail trade in Croatia in February 2020 compared with February 2019 was up 4.9% in real terms the Croatian Bureau of Statistics (DZS) reported on Monday.

DZS's report shows that retail trade increased both on the year and on the month.

According to DZS, total seasonally and working-day adjusted retail trade in February increased by 0.2% on the month in real terms whereas on the year it increased by 4.9% in real terms.

Real retail trade turnover has been growing since June 2019. In February this growth, however, was at a slower rate than in January 2020 when it increased by 6.2%.

In February 2020, as compared to the same month of the previous year, retail trade in food, beverages and tobacco increased by 9.9% and in non-food products (except of automotive fuels and lubricants) by 13.1%.

All trade branches realised a growth and the total gross trade turnover increased by 11.2% in nominal terms, as compared to February 2019.

The largest impact on that growth according to source indices were by non-specialised stores with food, beverages with a growth of 13.3%, followed by pharmacies, medical and orthopaedic products, cosmetics and toiletries with a growth of 19.6%.

More economic news can be found in the Business section.

Monday, 30 March 2020

Croatia's Gross External Debt Falls to 41.1 Billion Euro

ZAGREB, March 30, 2020 - Croatia's gross external debt reached €41.1 billion at the end of November 2019, down by 1.6 billion or 3.8% compared with November 2018, but analysts predict a rise in external vulnerability caused by the coronavirus pandemic.

Compared with October 2019, external debt - which includes the external debt of the general government, the central bank, other monetary and financial institutions and other domestic sectors as well as direct investment - fell by 4.5%.

In the debt structure, the largest share, of 41.3%, accounted for other sectors, i.e. companies that had started to generate positive annual growth rates after three years od deleveraging.

The gross external debt of the public sector was €15.3 billion, a decrease of 8% compared with the end of 2018. The largest portion of this amount, €12.9 million, was owed by the central government, although its debt had been reduced by 7.3%. This was due to the maturity of a $1.5 billion bond which reduced the government's external liabilities, analysts at Raiffeisen Bank (RBA) said.

Although the indicators for December will confirm a relative fall in external debt to 75.7% of GDP (by seven percentage points compared with the end of 2018), the new circumstances caused by the coronavirus pandemic will adversely affect relative external debt indicators already this year, RBA said.

It warned that a significant decline in economic activity, coupled with the high levels of external liabilities accumulated over the previous years, will lead to a deterioration in the country's external vulnerability.

More economic news can be found in the Business section.

Sunday, 22 March 2020

Labour Cost Growth in Croatia Significantly Weaker at End of 2019

ZAGREB, March 22, 2020 - Hourly labour cost in Croatia increased in Q4 of 2019 much less than in the quarter before, reflecting a significantly weaker growth in wage costs, a report by the European statistical office has shown.

In the 27-member European Union, calendar adjusted hourly labour costs grew by 2.7% on the year in Q4 2019. In Q3 they rose by 2.9%.

Costs for wages increased by 2.7%, and costs for social contributions by 2.6%.

In the EU, labour costs per hour grew the most in Q4 in the industry and construction sectors, by 2.7%. In the services sector they went up by 2.6%.

In the euro area, hourly labour costs grew by 2.4% on the year in Q4 2019, following a 2.6% increase in Q3.

Costs for wages went up by 2.3%, and costs for social contributions by 2.4%.

There was a significant increase in hourly labour costs in the services and construction sectors, 2.3%. In the industry sector, the increase was 2.2%.

Among EU member states whose data were available to Eurostat, Romania had the biggest growth in hourly labour costs in Q4 2019, 12%. Bulgaria follows with an increase of 11.9%.

Luxembourg had the weakest growth in hourly labour costs, 0.4%.

In Croatia calendar adjusted hourly labour costs in Q4 2019 grew by 3.2% on the year. In Q3 they rose by 5%.

More economic news can be found in the Business section.

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