Sunday, 30 January 2022

Biggest EBRD Croatian Investment: 176 Million Euros for Projects

January the 30th, 2022 - An enormous EBRD Croatian investment took place last year, with the investment of a massive 176 million euros in various private sector projects which were primarily focused on supporting domestic companies affected by the global coronavirus pandemic.

As Poslovni Dnevnik writes, according to the final results, the European Bank for Reconstruction and Development (EBRD) recorded its largest investment in Croatia in three years in 2021.

The total amount of EBRD Croatian investments to date stands at a huge 4.1 billion euros, and the current value of the portfolio is 850 million. During 2021, 200 million euros were withdrawn, which shows that EBRD funds are being used to provide active support to the Croatian economy.

"The EBRD is very active in Croatia, but the EBRD isn't only there to finance projects. Our team based in the City of Zagreb raised more than 100,000 euros for earthquake victims in Sisak-Moslavina County thanks to the initiative of its employees and the EBRD's Community Initiative programme,'' said Victoria Zinchuk, the EBRD Director for Croatia.

The funds raised will support the equipping of the Vrbina Sisak Children's Home, the construction of a new "Miracle Room" for children with special needs in the region, and the construction and renovation of several private homes for vulnerable families.

Renewable energy sources

The EBRD's focus throughout the year 2022 will be on developing and stimulating the renewable energy market. This approach is in line with the priorities of the Government of the Republic of Croatia, which recently introduced a new programme of support for investments in renewable energy sources, which is expected to attract new investments in the sector and contribute to achieving renewable energy goals, including objectives set out in the National Recovery and Resilience Plan.

It is crucial for Croatia to take the steps necessary to improve its overall electricity network in order to enable the best possible connection of renewable energy sources to the national network. In partnership with the Croatian Economic Renewable Energy Association (OIEH), the EBRD has developed an action plan identifying priority investments and activities to enable the smooth integration of renewable energy sources into the country's existing energy network.

The EBRD and OIEH have also developed a comprehensive guide for investors in the sector, which is available on the OIEH website. The study was financed by the Bank in the amount of 150,000 euros. The EBRD has also identified three renewable energy projects that it plans to finance soon, making it a leading investor in this particular sector.

Entrepreneurs and companies are also getting a look in

The EBRD's SME Business Advisory Programme has also had a very dynamic year.

With the support of the European Investment Advisory Hub and the EBRD's Small Business Impact Fund, more than 32 advisory projects were launched during the year. In addition to that, several training sessions were organised for female entrepreneurs, women on supervisory boards, small and medium enterprises in the tourism and hospitality sector which were negatively affected by the crisis caused by the ongoing coronavirus pandemic, as well as a webinar for start-ups on "Sources of funding".

The European Commission (EC) has selected the EBRD as its partner who will work closely with the Ministry of Physical Planning, Construction and State Property to work closely on legal and regulatory reforms.

Back in 2021, the EBRD invested a total of 10.4 billion euros, the second best result in a row, and this bank's support remains an important factor in the recovery of new markets from North Africa to Central Asia.

For more on this EBRD Croatian investment and much more, check our our dedicated politics section.

Sunday, 30 January 2022

Weaker Kuna During Croatian Eurozone Accession Could Pose Issues

January the 30th, 2022 - A weaker Croatian national currency (kuna) during Croatian Eurozone accession could cause more issues than solve them.

As Poslovni Dnevnik/Ana Blaskovic writes, with Croatian Eurozone accession rapidly approaching, set to occur at the very beginning of 2023, one of the main issues will be the rate at which the kuna will be exchanged for the Eurozone's single currency. There isn't really much room for maneuver as the rules require targeting around a central parity of 7.5345.

For years, critics have been making negative remarks about the Croatian kuna for being too strong, arguing that it makes the currency uncompetitive when it comes to exports, and the idea of ​​depreciation was once supported by former president Kolinda Grabar-Kitarovic.

The Croatian National Bank (CNB) once calculated that the depreciation of the kuna by ten percent would currently increase the debts felt by residents, companies and even by the state, whose contracts have a currency clause of 50 billion kuna. All of the aforementioned now comes a detailed review of the likely repercussions.

"The negative effect of kuna depreciation on the balance sheets of Croatian sectors outweighs the positive foreign trade effect of depreciation," concluded research author Ozana Nadoveza Jelic, an advisor at the Modeling Directorate, and Rafael Ravnik, an economic analyst from Macrode.

In their paper entitled "Dependent on the Euro: The Macroeconomic Effects of Exchange Rate Changes in Croatia", the duo concluded that in the medium term, net exports would benefit relatively slightly from the kuna's depreciation, but that all domestic sectors would end up paying a much higher price.

The change in the exchange rate of the kuna against the euro would be reflected through the trade channel, ie foreign trade, in which a short-term decline would occur first, followed by an increase in net exports.

The second effect is on the balance sheet of the sector of companies which, thanks to their open exchange rate position (where debt relief also depends on the exchange rate) are faced with an increased burden of loan repayment. Consequently, they'll reduce investment, which spills over to the rest of the economy, causing a reduction in capital accumulation in the medium and long term, and thus an effect on potential GDP.

At the same time, households will also be dealing with the burden of repayment, as well as having their financial wealth denominated in euros, and there will be a further reduction in real disposable income due to rising consumer basket prices.

The state doesn't go through quite the same effect thanks to the ability to borrow in foreign currency, but the repayment burden will grow for it as much as it will for regular citizens (as ultimately it is all the responsibility of taxpayers), and the higher debt burden will consequently raise the country’s whole risk premium.

In this vicious circle as Croatian Eurozone accession comes knocking, the next step would be the growth of all interest rates in the country, one of the factors of which is the riskiness of the state.

For more on Croatian Eurozone accession, check out our politics section.

Tuesday, 18 January 2022

Plenkovic Talks Croatian Eurozone Entry: Cash At Home? Bank It!

January the 18th, 2022 - Plenkovic has discussed the impending Croatian Eurozone entry and told people who have kuna in cash at home or wherever else to bank it to make their lives easier when the transition happens.

As Poslovni Dnevnik writes, Plenkovic also reminded people of Croatia's entry into the EU back in July 2013 and the referendum by which the Croatian people confirmed their desire to enter the bloc.

"The Schengen zone and the Eurozone are the only two deeper integrations that Croatia needs to join at this point. The year 2022 is the year of decisions on both," said the Prime Minister.

"Back in 2017, we launched a public debate on the introduction of the euro in Croatia, and a few months later the government adopted this strategy. Why is Croatian Eurozone entry happening? Because we're already a very highly euroized economy,'' he said, noting that 70 percent of tourism revenues come from tourists from EU member states which typically have the euro as their main currencies. He also mentioned that most savings and loans in Croatia are tied to the euro, as N1 also reported.

"Both savings and loans and trade and tourism revenues are linked to the Eurozone," Plenković said. He also spoke about the law on the introduction of the euro as the official currency in Croatia. "The goal is for the adjustment to go smoothly and to enable the economy to function, for people to be informed of things in good time and for Croatian Eurozone entry to be done in a fair and proper way."

In just one year, the only means of payment in Croatia will be the euro, and the kuna will enter the history books.

"This time in one year, the only means of payment in Croatia will be the euro. It's very important to understand the speed of completion of this process, with the introduction of the euro, everything in kuna in the banks will automatically be converted into euros,'' Plenkovic said.

He also spoke about highlighting prices in both euros and kuna.

"Prices will be highlighted in kuna and euros for another year, and for the whole of 2023," he added, noting that the double price highlighting will start in September this year and will continue throughout next year.

"Everyone will be able to exchange kuna for euros in banks, at Fina and at the post office. The transition process will take another year after Croatian Eurozone entry. An additional element is that after that deadline, people will be able to bring their kuna into the CNB and exchange that money for euro banknotes,'' noted Plenkovic.

"I'd like to invite people who have kuna cash at home to come and deposit it at the bank, because the money in kuna will automatically be converted into euros," he concluded.

For more, check out our politics section.

Saturday, 15 January 2022

EC Tells Government: No Deadline Extension for Spending on Reconstruction

January the 15th, 2022 - The European Commission (EC) has told the Croatian Government that there will categorically be no deadline extension for spending on reconstruction projects for post-earthquake procedures.

As Index vijesti writes, the European Commission has refused to extend the deadline for the Republic of Croatia to use the funds from the Solidarity Fund and added that there is no consideration whatsoever being given to the proposed deadline extension of eighteen months to use the funds from the day the money was paid to the country, Jutarnji list unofficially reported.

Another Croatian publication, Telegram, has since published accurate quotations from a letter from the European Commission sent to the Croatian Government. It is clear from the letter that Croatia cannot receive a deadline extension for the spending of a massive 5.1 billion kuna from the Solidarity Fund.

"It was clarified that the EU Solidarity Fund Regulation doesn't provide for an extension of eighteen months for its implementation, and my colleagues explained that the costs of the first damage as a result of the original event (Zagreb earthquake) back in March 2020 are acceptable. Given its limited amount and timeframe, the EU Solidarity Fund should be used for emergency rehabilitation, while other means are more appropriate for significant and long-term reconstruction,'' reads the European Commission's letter signed by Sofia Alves of the Directorate-General for Regional and Urban Policy of the EC.

This means that the Republic of Croatia will need to return part of the amount totalling 5.1 billion kuna because it will not be able to spend it until June the 17th, when the deadline is set.

Croatia will have to finance these projects contracted so far from other EU sources

The European Commission also requested that the Croatian Government's decision to establish special departments within the Ministry of Construction and Physical Planning, which were established exclusively for work on the Fund, be sent.

Special services within the Ministry were established only in December last year, one entire year after initially receiving the funds. They also noted that the funds of the Solidarity Fund are intended for emergency operations after damages, while the funds of other funds can be used for other projects.

On December the 27th, Prime Minister Andrej Plenkovic said he hoped that the European Commission would accept Croatia's argument for a deadline extension. It seems that there will be none of that, which means that the country will have to finance the projects agreed so far from other EU sources, which means less money for development projects.

Plenkovic's ministers: Nobody sought postponement

Plenkovic's ministers, Obuljen Korzinek, Bozinovic and Horvat all claimed that no one had actually asked the European Commission for a deadline extension, nor that this letter published by Telegram (linked above) was rejected.

"These are incorrect allegations, the merits of the letter were to confirm what was discussed at the meeting, and the implementation of the projects financed from the Fund was discussed, as was the method of reporting. The letter reads the follow-up of our technical meeting with the EC during December and at which we agreed on the dynamics of further work. The aim of the letter was to confirm what was agreed at the meeting,'' claimed Obuljen Korzinek.

For more, check out our politics section.

Friday, 14 January 2022

By European Union Standards, Croatian Charging Stations Must Increase

January the 14th, 2022 - There needs to be many more Croatian charging stations dotted around the country to meet EU standards, despite the fact that the purchase of electric cars in the bloc is still somewhat modest.

As Poslovni Dnevnik/Darko Bicak writes, although the number of electric cars in some European Union countries has already reached an enviable level, the fact is that in most others it is modest, to say the very least. The main reason, with the still relatively high purchase price, is the insufficient charging infrastructure for such vehicles across the bloc.

There are around 600 Croatian charging stations located up and down the country, suitable for about 2,000 electric cars. It may seem to those not in the loop that this is enough, because, by comparison, for the 2.8 million registered Croatian petrol and diesel motor vehicles, we have 800 fuel stations.

However, e-mobility technology is somewhat different and requires longer and more frequent charging and as such a denser network of charging stations, which in turn entails the adjustment of a country's electricity network and overall capacities. This could soon be applied here in Croatia because, according to the Croatian National Association for e-Mobility Circuit, which is part of the European Association for Electromobility - AVERE, the new EU plan is for member states to create e-charging capacities at level the level of 10% of the total fleet, which means that within the domestic, framework we would theoretically need to have have tens of thousands of Croatian charging stations that could theoretically serve 280 thousand vehicles.

National goals

''For the last six months, we've been working hard on the new regulation for alternative fuel infrastructure (AFIR), which is a strategic document of the European Union that defines the use of alternative energy sources, namely electric vehicles. The difference between the previous directive and the new regulation is that this regulation is mandatory, and the directive serves solely as advice to member states. We're currently working on regulations that will oblige Croatia to adhere to these new rules. With the arrival of these regulations, we can expect an even greater number of super fast vehicle chargers, not only for personal transport, but also for truck traffic on the stretch from Varazdin to Rijeka and Zagreb to Ljubljana in Slovenia,'' explained Hrvoje Prpic, President of the Circuit.

He added that the new AFIR regulation significantly better defines the publicly available infrastructure for charging electric vehicles, and most importantly, the regulation seeks to ensure the simplest possible increase in the number of charging stations across the European Union. AVERE's proposal is for each country in the EU to install enough infrastructure for at least 10% of the total number of vehicles registered in the country, which in Croatia, for example, would be much more infrastructure than is currently needed for the existing number of electric vehicles.

Circuit believes that this is a great way to motivate future vehicle buyers to consider switching to zero-CO2 vehicles, because in that case they would come to empty Croatian charging stations and not worry about needing to find a place to charge their car, and on the other hand, these charging stations would be co-financed by the EU, so such expansion of such infrastructure would not cost the state all that much.

In addition to that, AFIR would set goals in order to significantly strengthen the infrastructure on the TEN-T corridor - a single trans-European road network that connects all major transport points in Europe.

This means that the number of charging stations for light and heavy electric vehicles would be further increased across Croatia and in its neighbouring countries. AFIR requires that at least one charging station for electric trucks or buses with two chargers up to 350 kW be available, and for light passenger vehicles, there must be at least one charging station with two chargers up to 150 kW on the TEN-T corridor by the year 2025.

By 2030, that number of fuel stations must be doubled. On all additional roads connected to the TEN-T corridor, EU member states must ensure a uniform network of fuel stations every 100 kilometres. According to AFIR, charging for vehicle charging should also be possible with the help of bank cards, so all charging station operators should install card readers at their future Croatian charging stations.

This would greatly facilitate the charging of the vehicles belonging to many electric vehicle drivers, especially for tourists who are unfamiliar with the charger network in the country they are visiting.

For more, check out our dedicated lifestyle section.

Saturday, 1 January 2022

With Croatian Eurozone Entry Approaching, How Will We Exchange Kuna?

January the 1st, 2022 - Croatian Eurozone entry is rapidly approaching, and if all goes to plan, the kuna will enter into the history books early next year. How will we go about exchanging Croatian kuna for the euro, however? There are slightly different rules for coins and for banknotes.

As Poslovni Dnevnik/Ana Blaskovic writes, if anything in the economic field will mark 2022, it will be all of the hurried final preparations for the introduction of the euro and Croatian Eurozone entry in 2023. The green light for a step towards stronger integration into the European Union (EU) should, apparently, be given in the summer of this year when the exact date of the final transition will be revealed.

Replacing the national currency with the European single one is a massive logistical undertaking for which preparations are underway with the assumption that we will be paying for items in euros from the first day of 2023. Credit and other financial institutions have been in talks with regulators for some time about how to change their IT systems and adjust all of their business processes, a cost that, in the case of banks alone, is estimated to stand between 80m and 100m kuna.

According to the experience of other countries that joined the euro in the past, the central bank expects that when exchanging the kuna for the euro, about 36 percent of the amount of coins in circulation will be returned, ie 1.1 billion pieces of kuna coins and 99 percent of the amount of banknotes, ie more than 500 million pieces of kuna banknotes. Banknotes will be able to be exchanged for euros on a permanent basis, but the deadline for coins will be limited to three years from the introduction of the euro as Croatia's official currency.

The experiences of other European Union countries which are in the Eurozone are diverse. Twenty years after the euro emerged as the single currency, it is estimated that there are still around 8.5 billion euros left in the former national currencies, either under people's mattresses, in old jackets or as souvenirs from the past. The largest amount falls on the unreplaced German marks in which the (recalculated) amount stands at a whopping 6.3 billion euros.

It is followed by the Austrian schilling, which accounts for another 505 million euros, and the Belgian franc, accounting for 428 million euros. In neighbouring Slovenia, for example, the former Slovenian tolars account for 80 million euros, according to Bloomberg.

Part of the reason for nostalgia or forgetfulness probably lies in the fact that some countries have left an unlimited deadline to exchange their currencies, like Germany, at least when it comes to banknotes. Spain, France and Austria, on the other hand, have long since closed the door to such a possibility, leaving any pesetas or francs to become collector's items for those nostalgic about pre-euro Europe.

Croatia already has experience in exchanging currencies. When the kuna was introduced after the stabilisation programme on May the 30th, 1994, it replaced the Croatian dinar as a temporary currency issued by the Ministry of Finance with the signature of the Minister. The CNB exchanged dinars on a regular basis until the end of 1994 and subsequently until the end of June 1995. With this being a memory, it's hoped that Croatian Eurozone entry will also be that bit smoother for a country that has been very much in transition in many respects since the end of the Homeland War.

"Since the replacement of Croatian dinars hasn't been possible since mid-1995, Croatian dinar banknotes have exclusively numismatic value," the central bank said. According to their data, 37 percent of the total printed 513.6 million dinar banknotes remained unchanged, so it will be interesting to see how much kuna will remain nostalgically in pockets, down the sides of sofas, under beds and in varying collections of old and foreign money that many people keep.

"Given the fact that after three years, kuna coins will no longer be able to be exchanged for euros and will no longer play a role as a means of payment, they will be able to be adequately disposed of without any risk of reappearing on the exchange. Therefore, cooperation has been initiated with the Ministry of Defense in finding adequate, supervised and protected space that the Croatian National Bank will lease for the storage of withdrawn kuna coins,'' the CNB said, adding that they expect a lease agreement with the Defense Ministry in regard to that.

In parallel with their withdrawal from circulation, kuna banknotes will be successively destroyed with banknote processing systems that have the ability to totally destroy them. Four months before the introduction of the euro, banks will be supplied with banknotes, and a month later with euro coins. When the countdown begins in the last 30 days, the euro will be ready in the offices of Fina and Croatian Post (Hrvatska posta), and the indirect pre-supply of companies and shops will begin.

On the very day of the introduction of the euro, ie Croatian Eurozone entry, the "big bang" approach will be applied to savings and loans. This means that all kuna savings and deposits on current, savings and other accounts, as well as all loans will become euro loans at a fixed exchange rate free of charge. The key assumption is that any change in interest rates (in the case of variable interest rates) must not be to the detriment of the client, while fixed interest rates will remain the same.

The first two weeks after Croatian Eurozone entry will be a period of double circulation in which cash can be exchanged free of charge at banks, Fina and post offices, and then only at banks for which they will be entitled to charge a fee. A year later, the Croatian kuna will be able to be exchanged for euros only at the Croatian National Bank, free of charge.

Since one of the biggest fears that accompanies the whole saga surrounding the euro is the fear of rising prices, which is no longer insignificant in the face of accelerating inflation, it will be crucial to dual disclose the prices that will last at least one year starting in August. An information campaign will follow in which people will be encouraged to deposit as many kuna coins and banknotes as possible to banks in order to easily convert them to euros at a fixed exchange rate and free of charge on the day of the introduction of the euro.

For more on Croatian Eurozone entry, follow our politics section.

Thursday, 30 December 2021

German Financial Expert Claims Croatia Isn't Ready for Eurozone Entry

December the 30th, 2021 - One German financial expert has claimed that Eurozone entry for Croatia, which is due to take place quite soon, is still premature. Is the country ready for the changes? Apparently not, according to Otmar Issing.

As Poslovni Dnevnik writes, in addition to joining the Schengen area, Croatia's Eurozone entry has been cited as one of the main goals of Croatian foreign policy for years now. This goal should be achieved at the beginning of 2023, for which Croatia has the support of Brussels.

That said, there are some economists such as former European Central Bank (ECB) Executive Board member Otmar Issing of Germany who believe that Eurozone entry for Croatia would be premature, Deutsche Welle reports.

As he said in an interview with the Frankfurter Allgemeine Zeitungu (FAZ), currently no country is ready to join the Eurozone. "At the moment, I can't see any country that is ready enough to join the Eurozone," Issing told FAZ on the occasion of the recent twentieth anniversary of the introduction of the euro into circulation back on January the 1st, 2002, which those of us who grew up in Europe remember so well.

"It can't be said that every new member of the Eurozone necessarily contributes to the weakening of the euro, but these countries must guarantee some lasting stability. It isn't enough to get ready for the wedding and then return back to your old habits once you're married,'' said Issing, who also played the role of ECB chief economist from 1998 to 2006 and was credited with strategically planning the introduction of the euro as the bloc's single currency.

The last EU member state to enter the Eurozone in 2015 was Lithuania, and currently Bulgaria is also aiming to join. In fact, according to the membership agreement, all members of the European Union are obliged to accept a common currency when they meet the criteria, the only exceptions to this was the United Kingdom, which kept pound sterling, and Denmark.

Issing believes that the heterogeneity of Eurozone member states and thus different focuses when it comes to interests is already a big problem for the ECB. He believes that the governors of the national central banks should follow a common course and not simply blindly follow national financial policy. Issing also defended the euro against accusations that its introduction has made everything more expensive.

"It can look like that when it comes to purchasing daily necessities, so that's the impression people have. But when we look at spending which occurs in regard to most of the household budget, such as rent or heating costs, those costs have remained stable even after the introduction of the euro,'' Issing told FAZ.

Issing, who previously held the same position at the German central bank before taking office at the ECB, said the decision to print non-national symbols on euro banknotes at the time was a decision that proved correct in the end.

“Imagine if the French wanted to put Napoleon on their banknotes. How would the countries who were occupied by Napoleon react to this? That's why we decided on the symbolic motif of the bridges,'' Issing concluded.

For more, check out our politics section.

Tuesday, 7 December 2021

Seven Billion Euro Investment in Croatian Agriculture Possible

December the 6th, 2021 - There could be a big cash injection for Croatian agriculture, which the vast majority of people working in that sector would readily explain is dearly needed...

As Poslovni Dnevnik writes, the Republic of Croatia will send a strategic plan to the European Commission (EC) by the end of this year, which will define the direction of spending money on Croatian agriculture, according to an analysis by the consulting company Smarter from which they point out that this is a document that will largely determine the direction of development of agricultural production by the end of the decade.

"The CAP Strategic Plan is the most important document for the medium term, which determines the financial envelopes, measures and interventions that will be implemented and how the financial resources for Croatian agriculture will be directed," the analysis points out.

Smarter reminds that in five years, from 2023 to 2027, Croatia, not counting state funds, will have a massive 3.25 billion euros at its disposal, with slightly more than 1.5 billion euros intended for rural development, and 1.87 billion for direct payments.

For 2021 and 2022, a total of 1.75 billion euros has been provided for Croatia on the basis of a regulation extending the application of the rules from the previous period, but in such a way that money from the new multiannual financial framework will be distributed under the same rules.

The total funds from the EU budget from 2021 to 2027 amount to 5.17 billion euros, and in addition, through the National Recovery and Resilience Program for Agriculture, 131 million euros are intended, according to Smarter.

Thus, significant investments exceeding 5.3 billion euros from EU funds can be expected for Croatian agriculture.

"It's realistic that more than seven billion euros or over 52 billion kuna will be invested in Croatian agriculture from 2021 to 2027, which gives us an opportunity to make a serious turn towards that and implement the activities necessary to make agriculture more competitive, productive and fulfill its full portential,'' reads Smarter's analysis.

For more, check out our dedicated politics section.

Saturday, 13 November 2021

Brussels Expects Enviable Croatian GDP Growth, Though Risks Remain

November the 13th, 2021 - Croatian GDP growth has been a topic on the lips of many ever since the coronavirus pandemic struck and caused untold and unprecedented negative trends on a global scale. Predictions and expectations have been shared by many and have been varied, but Brussels has some encouraging expectations indeed, with only two EU member states ahead of Croatia in this regard.

As Ana Blaskovic/Poslovni Dnevnik writes, the European Commission's (EC) recent forecasts for economic developments for the Republic of Croatia have brought growth expectations closer to most local expectations. Brussels expects 8.1 percent Croatian GDP growth this year (their expectation previously stood at 5.6 percent), which is close to the Croatian National Bank's expectations of 8.5 percent, but still more cautious than the Croatian Government's 9 percent. This prediction, if it materialises, would also make Croatian GDP growth the third fastest in the entire bloc.

The European Commission's autumn forecasts generally predict a faster pace of recovery from the coronavirus crisis than the spring one did, after all, corrections leaning towards higher percentages as the year draws to a close were also given by numerous Croatian experts. The European leader with the highest GDP in 2021 will be Ireland with a projected 14.6 percent, followed by Estonia with 9 percent.

The ranking next year, of course if there is no correction, could look even better with growth of 5.6 percent, just behind Malta. "The recovery of the Croatian economy continued in 2021, mostly thanks to strong private consumption and better-than-expected results in the tourism sector. Favourable economic trends have spilled over into the labour market, which is experiencing strong employment dynamics,'' they said from the EC. A good outlook for the economy is expected in the next two years, and essentially, there are no major surprises in Brussels' latest autumn forecasts.

The engine of growth remains domestic demand driven by a good labour market situation. During the coronavirus crisis, the accumulated savings and the growth of consumer lending will give their momentum to the economic momentum. A positive contribution will also come from the direction of public spending, but its momentum will slow down due to the targeting of the deficit and public debt within the introduction of the euro in Croatia at the beginning of 2023, if all goes as planned.

Investment momentum should accelerate on the wings of European Union money as part of the National Recovery and Resilience Plan in addition to the regular EU budget and as payments from the Earthquake Solidarity Fund begin to be paid out. The European Commission expects that over time, these funds will encourage additional private investment in Croatia, which will further facilitate favourable financing conditions.

Finally, NPOO reforms (on which future generous payments depend) should support business confidence, according to the EC.

Exports are an item of GDP that should grow in line with the improving situation in major trading partners. After this year's surprising jump in the export of services, primarily tourism, the continuation of solid trends is expected, the preconditions for which are favourable conditions in emitting markets and the final total normalisation of travel.

Although the Croatian economy is projected to grow strongly in terms of exports of goods, its import dependence will result in a gradual deterioration of the trade balance, a picture that essentially reflects the vulnerabilities and competitive weaknesses of the domestic economy. Finally, an unavoidable factor in the uncertainty of these forecasts is the low vaccination rate of only 44.9 percent of all residents of Croatia. Such figures "could lead to tougher measures to combat the pandemic and delay in post-earthquake recovery."

Positive ''risks'' are Croatia's possible entry into the Schengen area and the Eurozone. Inflation is expected to accelerate due to rising energy and food prices, reaching 2.2 percent this year, after which it should then gradually stabilise. The budget deficit should drop down to 4.1 percent of GDP in 2021, and to 2.9 percent next year, and a downward trajectory is also projected for public debt; from 82.3 percent this year to 79.2 percent next year. Employment should return to pre-crisis levels this year, and the unemployment rate should drop to a record low of 5.8 percent in 2023.

For more information on Croatian GDP growth and much more, check out our politics section.

Friday, 12 November 2021

Croatian Fuel Prices Still More Affordable Than Current EU Average

November the 12th, 2021 - Croatian fuel prices have been a thorn in the side of every road user in the country for a period stretching weeks now, and although the government has stepped in to cap any further rises in price for another month, the situation is still far from pleasant for most. That said, Croatian fuel prices are still better than the EU average.

As Poslovni Dnevnik writes, the Croatian government will, as stated, extend the measure of capping Croatian fuel prices for another month. Tportal checked whether, after the price freeze, Croatia became cheaper than its surrounding countries.

The aforementioned government decree halted further price growth and the burden fell directly onto the backs of distributors and they then had to reduce their margins as a result. Other European Union member states, meanwhile, have also introduced various measures to stabilise their own respective fuel prices. In addition, over the past two weeks, oil prices have stagnated, so the pressures on the growth of derivative prices have decreased.

Therefore, the relative ratios of Croatian fuel prices in relation to the surrounding countries haven't really changed significantly. Fuel in Croatia is still slightly cheaper than the EU average, but much like before and rather unsurprisingly, it is still more expensive than it is sold for in most countries in the immediate region.

When converted into euros, the average price of a litre of petrol in the EU is 1.55 euros or approximately 11.63 kuna, which is about five percent more than it costs here in Croatia. The difference in the price of diesel is smaller, and one litre of diesel in the EU costs an average of 1.48 euros, while in Croatia it costs 1.46 euros.

When we look at nine countries from Croatia's more immediate environment, the regulated price of Eurosuper 95 of 1.48 euros is higher than in the six observed countries. Only in Italy and Germany do consumers pay a higher price than we do in Croatia, as was reported by tportal.

For more, make sure to check out our dedicated lifestyle section.

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