Monday, 6 June 2022

FinMin: Everything Should Be Done So Euro Doesn't Trigger Price Hike

ZAGREB, 6 June 2022 - Finance Minister Zdravko Marić said on Monday that everything will be done so that the introduction of the euro as legal tender does not trigger a price hike.

"We will do absolutely everything, regardless of inflationary pressure and our efforts to relieve it, to prevent euro introduction from becoming an additional trigger (of price hikes) for individual market stakeholders," Marić said, adding that this was why the dual display of prices would start on 5 September.

Addressing the conference "Croatia in a New Economic Environment", organized by the 24sata daily, Marić recalled that the law on the introduction of the euro foresees 12 institutions that are responsible for the implementation of the law, including the Croatian Financial Services Supervisory Agency (HANFA), State Inspectorate, Croatian National Bank and the Finance Ministry.

These institutions will monitor the situation closely, and civil society organizations will join in the process as well so that any unfair conduct is reduced to a minimum, said Marić.

Marić recalled the recent European Commission Convergence Report, which said that Croatia was the only candidate country that had fulfilled all the accession criteria and was prepared to introduce the euro on 1 January 2023.

If Croatia joins the euro area on that date it will have spent the least time in the European Exchange Rate Mechanism (ERM II) of all member states, added Marić.

He said the final decision on Croatia's accession to the euro area will be adopted by the Council of Finance Ministers in Brussels on 12 July.

"If everything goes as we expect... and Croatia's entry to the euro area is formally announced for 1 January next year, the rate of conversion will be defined," he said but could not say whether the exchange rate would be the same as when Croatia entered the ERM II.

He underscored, however, that in the majority of cases it stayed the same, and if there were to be any change that will not be significant.

In July 2020, when Croatia joined the ERMII, the exchange rate was €1 = 7.53450.

Marić added that joining the Schengen area of passport-free movement was also very important for Croatia.

Croatia meets all the criteria to join the Schengen area, however, its admission depends on a number of other factors, including the political will of the member states, he said.

"Croatia has proven that it knows how to protect EU borders," he said, expressing the belief that the country would achieve the goal of Schengen area membership as well.

For more, check out our politics section.

Thursday, 26 May 2022

FinMin Says Gov't Considering New Set of Measures to Counter Inflation

ZAGREB, 26 May 2022 - A new package of measures to help Croatians to address inflationary pressure is very likely to be prepared, we are working on it, Finance Minister Zdravko Marić said on Thursday after a meeting of coalition partners, however, he stopped short of saying when those measures could enter into force.

The new package of anti-inflationary measures is being discussed in the government and in the coalition, Marić said.

"We will see when it is ready, we are working on it," he said.

According to Marić, the new package "is very likely given the development of events," and it will include state aid in the form of guarantees to gas suppliers, primarily the HEP national power supplier, in order to facilitate the provision of gas supplies for the next season.

The priority is to cushion the effects of inflation and ensure energy supplies and food products, said Marić.

Asked whether the price hikes in stores were justified, Marić said that it is difficult to make general assessments because prices are impacted by a series of elements.

Commenting on complaints by the hospitality sector related to the recent "tax massacre," Marić said that these were regular activities by the Tax Administration that "protects the interest of taxpayers who meet all their tax liabilities in an orderly manner."

During the pandemic, the state showed solidarity with the services sector, primarily in hospitality and now it "expects the same at least from the other side."

He said that supervision revealed certain irregularities with a smaller number of hospitality providers. He warned that increased turnover was recorded where supervision was stepped up and significant disproportion was identified with entry (supplies) compared with exit data. As such the Tax Administration can react and that is what it is doing. Marić underscored that this is a regular activity conducted by the Tax Administration.

For more, check out our politics section.

Tuesday, 24 May 2022

Finance Ministry Denies Claims by Franak Association

ZAGREB, 24 May 2022 - The ministry of finance on Tuesday dismissed the accusations made by the Franak association about the authorities having betrayed Croatian consumers.

Over the past few years, the government has continued, both on its own and in cooperation with the State Attorney's Office (DORH), to dismiss all attempts aimed at the questioning of the constitutionality of so-called laws on the conversion of CHF-pegged loans and their adjustment with the EU acquis, the ministry said in a press release.

First and foremost, this government is committed to protecting consumers, and to this end, it has provided arguments proving that the above-mentioned laws are in line with the Croatian Constitution and also in accordance with the EU acquis communautaire, which was conducive to efforts to keep those laws in effect, with an emphasis on their being adopted to redress imbalances in the rights and responsibilities of the parties to the relevant contracts, said the ministry.

The ministry states that after the Court of the European Union delegated rulings on the consumers' rights to national courts and given that several relevant trials are ongoing in Croatia, the government will refrain from any further comment that can amount to interference in those processes for the time being.

For more, check out our politics section.

Friday, 20 May 2022

FinMin: Measures to Buffer Inflation, Must Not Neglect Economic Growth

ZAGREB, 20 May 2022 - Finance Minister Zdravko Marić said on Friday that in addition to all the measures to buffer the impact of inflation, we must not neglect and need to maintain economic growth and do everything for that growth to be 3% this year and higher if possible.

Addressing the 25th Financial Market conference in Pula, Marić said that he cannot comment on the question of possibly freezing prices, recalling the package of measures to ease inflationary pressure on citizens' standards, saying that it would be adapted.

The minister added that there is a lot of uncertainty and it is difficult to forecast price trends, adding that the most vulnerable groups were the most threatened because the price of food and energy is the most prevalent in their shopping basket.

Asked what the monetary policy can do in the fight against inflation, Marić said that the measures until now were exclusively fiscal policy.

Asked if kuna currency appreciation would be worthwhile, Marić said there was room to maneuver in that regard but that is up to the Croatian National Bank (HNB).

The HNB's main task is to maintain price stability and it should have something to say in these circumstances.

It is more than likely that this year will we have a higher inflation rate than the increase in wages, he said, adding that in the past few years wages increased faster than inflation.

Inflationary alarm already sounding

Asked about the inflation threshold that would signal a "red alert" to the government, Marić said the alarm has already sounded. We have the highest inflation rate and we have already reacted. The measures will be adapted but it isn't possible to completely remove the pressure.

He added that an additional HRK 3.5 billion has been allocated to repay the debt to drug wholesalers, however, that is not the solution because new debts are occurring. The healthcare system needs an overall overhaul.

He confirmed that a new international bond matures at the end of May and in July he plans to issue new domestic bonds.

For more, check out our politics section.

Wednesday, 4 May 2022

What Are Government's Next Steps if Croatian Inflation Continues?

May the 4th, 2022 - If Croatian inflation continues and becomes worse, posing more issues for the pockets of the country's already struggling residents following coronavirus-induced lockdowns and restrictions, just what does the government have up its sleeve to combat it? Finance Minister Zdravko Maric has claimed that there is still ''munition'' to be released in this sense.

As Poslovni Dnevnik writes, Finance Minister Zdravko Maric also answered the question as to whether the Croatian inflation rate will end up reaching double-digit figures: "I wouldn't go that far. Lithuania, Latvia, Estonia, the Netherlands and the Czech Republic all recorded double-digit rates back in March. Some of them even nearly 16 percent. Croatia hasn't done so yet,'' he said.

Maric spoke on Dnevnik Nova TV about problematic fuel prices, the situation on the gas market, Croatian inflation, the impact the current situation is having on the Eurozone, which Croatia is on schedule to join in 2023, as well as the current state of the Croatian budget.

Minister Maric first commented on whether the acceleration of Croatian inflation is going to continue to pose a very serious threat to the country because of everything that is unfolding globally, with the ongoing Ukraine war included.

"According to the latest projections, the average rate this year is 7.8 percent. Considering that the last published data said it would be 7.3, and before that the inflation rates were slightly lower, unfortunately my answer to your question is yes," he stated, before going on to discuss the aforementioned topic of potential of double-digit Croatian inflation.

Inflation has suddenly become a key variable on Croatia's path to the Eurozone, which it is due to enter early next year.

"We've been talking about the budget for years, and in the end, neither the public debt nor the budget deficit is a topic. Croatia has been exactly between the Eurozone and the EU average for the last 12 months," he said.

"In the middle of this month, we'll have the data for April, both for Croatia and for all EU countries. This will be the last input that enters the convergence report. At the beginning of June, the European Central Bank and the European Commission will publish this report separately. I really believe we'll get a positive outcome. The official decision should come in early July,'' added the minister. He also said that he wasn't in favour of delaying Croatia's entry into the Eurozone, which some are calling for owing to this dire situation. He believes that the Eurozone shows the best benefits during times of crisis. VAT for certain product categories was planned to be reduced when Croatia switches to the Euro, but the government slashed it beforehand anyway.

"If necessary, we have more ammunition to help people out in this situation," said the minister, before speaking about the healthcare system and whether he sees any room for much needed reforms there."Drugstores write to us periodically, both to my colleague Health Minister Vili Beros and to me. We have a fair relationship. Unfortunately, the payment deadlines for both hospitals and pharmacies have risen again. They've reached a level of over 180 days, and for some hospitals, that level is now over 200 days,'' said the Minister, and when asked how much the healthcare system's debt is and whether he knows how many ''holes'' there are when it comes to that, he answered: ''Unfortunately, I do know because every month that hole increases, meaning obligations grow, and it's been between 400 and 500 million over the last few months.'' he stated.

For more on Croatian inflation, make sure to check out our dedicated politics section.

Tuesday, 3 May 2022

€1.04 Billion Worth of Treasury Bills Sold to Refinance "Old" Treasury Bill

ZAGREB, 3 May 2022 - The Finance Ministry on Tuesday sold €1.04 billion worth of treasury bills at 0.1% interest, which is more than last year when treasury bills were issued at negative interest rates, when financial institutions actually paid the state treasury to hold treasury bills.

Ahead of the maturity of €1.2 billion worth of treasury bills, issued before the previous financial crisis, the ministry today offered €1.2 billion worth of bills for subscription and financial institutions offered €1.39 billion in total. The ministry then accepted the offers totalling  €1.04 billion.

The new treasury bill has a maturity of one year.

The balance of subscribed treasury bills has now been reduced by € 164.65 million to 1.05 billion euro.

(€1 = HRK 7.564582)

Friday, 29 April 2022

Croatian Inflation Wave 3 Times Higher Than Initial Govt Prediction

April the 29th, 2022 - The Croatian inflation wave is currently three times higher than initial government predictions ever thought it would be, which is of course an enormous cause for concern for the vast majority.

As Poslovni Dnevnik/Jadranka Dozan writes, the recently updated macroeconomic projections for this year, presented by the government within the new Convergence Programme, once again did well in confirming just how much various economic forecasts have had their "shelf lives" very much shortened in the face of Croatian inflation.

This is most drastically shown in the revised estimate of the average Croatian inflation rate. The last official projection from the government, made back during the time of the adoption of the state budget for the year 2022, is barely half a year old, and compared to the then projected 2.6 percent, the expected Croatian inflation rate is now three times higher.

To be more precise, the government is currently counting on a rise in consumer prices of as much as 7.8 percent, proving to be much more cautious than the Croatian National Bank has been. The CNB's recently released new forecast of average inflation of 5.4 percent now seems actually quite optimistic.

The war in Ukraine, accompanied by additional supply chain disruptions and the ongoing energy crisis, has intensified inflationary pressures, affecting the prices of energy, transport, food, but also a number of other raw materials and industrial goods.

From next year on, inflation is thankfully expected to slow down, but having in mind the so-called the base effect of this year's large price increase, the projected slowdown to 3.7 percent next year and to 3.5 percent in 2024 certainly doesn't sound all that promising for anyone. As early as this autumn, in addition to lower price growth this year, rates of 2.3 and 2.2 percent have calculated for the first two years following Croatia's transition to the Eurozone.

Given the projections for growth in average gross wages (employees in legal entities), Croatian residents have at least two or three years of falling standards ahead of them, although government projections suggest that a slight recovery in terms of real income could finally begin next year.

According to the calculations from the Ministry of Finance, gross wages are expected to grow by an average of 6.3 percent this year (compared to a 7.8 percent rise in prices). In the first year, the euro should grow by an average of 3.8 percent or slightly above the Croatian inflation rate, and in 2024 by about 3.5 percent, which is one percentage point more than the expected price growth.

A minor surprise came from the government's revision of expected economic growth, although it is currently proving more conservative than the central bank. Instead of growth at the rate of 4.4 percent, which was estimated at GDP growth last autumn, expectations have been reduced down to three percent in real terms this year, with an acceleration forecast of 4.4 percent next year.

With the traditionally significant contribution of personal consumption in the structure of the nation's overall GDP, it remains to be noted that expectations of consumption growth compared to the original projections for this year decreased from 3.2 down to a mere 1.4 percent.

At the same time, following a package of anti-inflation economic measures, estimated at almost five billion kuna, then increased material and costs for Ukrainian refugees, and finally this week's agreement with the unions of state and public services, government spending is expected to grow more than planned for in the state budget. Instead of the then projection of just over two percent, it now counts on a 3.3 percent increase in government spending.

Although the projected growth rate of investment has now been halved (from 12 down to 5.8 percent) this year, over the next few years, public and private sector investment should be the main drivers of growth. Their contribution to Croatian GDP growth this year, at least according to the Ministry of Finance, is estimated to stand at 1.2 percentage points.

Individually, however, following the expectation of 7 percent growth in terms of the exports of goods and services (slightly less than 5 percent for goods and more than nine percent for services), the contribution of exports to Croatia's GDP should be significantly higher than that of investment (about 3.5 percentage points). However, given the rather high import dependence of the Croatian economy, Finance Minister Zdravko Maric explained that "the net contribution of net exports will be slightly positive this year, and slightly negative or neutral over the next three".

For more on Croatian inflation, check out our dedicated politics section.

Tuesday, 4 January 2022

Marić Comments on Record-Breaking Consumer Spending in 2021

ZAGREB, 4 Jan 2022 - Consumer spending in Croatia reached a record-breaking level in 2021 as Croatians spent HRK 17.5 billion in December alone.

"The data on record-breaking spending in December partly surprised us, but that's what we expected. You could see that the whole of last year was really good, notably, the 5% increase in the value of fiscalised receipts compared with 2019," Finance Minister Zdravko Marić said in an interview with HTV public television on Monday evening.

Marić said that the record for last month was set on 23 December when nearly 8 million fiscalised receipts were issued and their value reached nearly HRK 900 million. He noted that 13 August 2021 holds the record since the fiscalisation system was introduced when nearly a billion fiscalised receipts were issued in a single day.

Marić said that the government's original growth forecast for last year was 5%. "The last projection was 9%, and by all indications, we have reached the border of the two-digit growth rate. This indeed is a very good result and we will be among the top three (EU) countries with the highest growth in 2021," he predicted.

Speaking of challenges ahead, notably those concerning the COVID pandemic, Marić mentioned inflation and disruptions to global supply chains. "In my opinion, these are the two biggest risks to our macroeconomic projections. However, there is a great deal of or at least several strong positive factors, first and foremost the implementation of the National Recovery and Resilience Plan and our path towards the eurozone and Schengen."

Marić said that the government has moved from the job retention phase to the job creation phase, noting that the labor shortage is one of the main issues that need to be addressed. "That's why all these measures concerning active employment policy, which should lead to higher employment and higher wages, should be fully supported."

2022 inflation projected at around 3.5%

Speaking of inflation, Marić said that inflation has picked up in recent months and that for the most part it has been imported, citing prices of raw materials and oil and supply chain disruptions. This has resulted in inflation spilling over to a wide range of items, notably food and fuels, he added.

"As for our projections, we will have data for December in the coming days. We expect that inflation will continue to accelerate as it did in the first half of the year. Based on the available data, average inflation for 2022 is projected at around 3.5%," the finance minister said.

Marić said that based on this estimate, it could be concluded that prices in 2022 would grow somewhat faster than wages, but added that there were several strong drivers that would push wages upwards.

"On the one hand, there is a labor shortage, so employers will be forced to increase wages, while on the other hand, active employment policy measures will make their contribution. In case of price growth is higher than wage growth, which is still not certain, but if that happens, the difference will not be such as to substantially endanger the living standards of Croatian citizens," Marić said.

For more, check out our politics section.

Sunday, 7 November 2021

Finance Minister and Bridge Party Leader Test Positive for COVID-19

ZAGREB, 7 Nov 2021 - Finance Minister Zdravko Marić has been found to be positive for COVID-19 after undergoing a test at the weekend, the government announced in a press release on Sunday.

Marić underwent a test after a member of his family had developed symptoms of the infection. His test returned positive, after which epidemiologists have ordered him to stay in isolation for ten days.

The minister "is feeling well and for now, he has no symptoms of the COVID-19 disease. He will stay in isolation and perform his duties from home while following orders from his doctor and epidemiologists," the press release said.

Marić, as well as other cabinet ministers, were vaccinated against COVID-19 early this year, and would soon receive a booster dose, following recommendations by the Croatian Public Health Institute, government spokesman Marko Milić said, adding that several cabinet ministers had already received the third dose of vaccine.

Milić appealed to all citizens to get vaccinated if they had not done so yet because the vaccine protects against serious forms of the disease. He also appealed to people who had received their second shot six months ago or longer, especially the elderly or those immunocompromised, to get a booster dose as soon as possible.

He recalled that Deputy Prime Minister Boris Milošević and Labour Minister Josip Aladrović, who had become infected even though they had been vaccinated, had overcome the infection with very mild symptoms.

Also, the opposition Bridge party leader, Božo Petrov, said in an interview with Nova TV on Saturday evening that he was positive for COVID-19. "Two or three days ago I found out I was infected. I had symptoms, I called my doctor and did a PCR test, which showed I was positive," he said.

For all you need to know about coronavirus specific to Croatia, make sure to bookmark our dedicated COVID-19 section and select your preferred language.

For more on politics, follow TCN's dedicated page.

Friday, 5 November 2021

Zdravko Maric Reveals Staggering Cost of Croatian Fight Against Covid

November the 5th, 2021 - The Croatian fight against the spread of the novel coronavirus, SARS-CoV-2, and the economic/job preservation measures which were introduced, have cost the country a pretty penny. Finance Minister Zdravko Maric revealed the exact, eye-watering figures.

As Poslovni Dnevnik writes, most of the costs relate to government measures which were introduced in an attempt to preserve jobs, both directly and indirectly, and these are taxes, contributions, everything that the state decided to take into its own hands, said Finance Minister Zdravko Maric, who presented to Croatian Parliament the rebalance of this year's state budget.

The supplementary budget increases total budget revenues by 3.3 billion kuna to 153.6 billion kuna, and expenditures by 6 billion kuna to 173.3 billion kuna. The state budget is expected to record a deficit of 19.7 billion kuna or 4.7 percent of GDP, while the general government deficit will be 18.9 billion kuna or 4.5 percent of GDP.

The Minister reiterated that the estimates of GDP growth for this year have been revised from the originally planned 5.2 percent to about nine percent, writes

When we look at all components of domestic GDP, except for investments in the private segment, we have a significant increase in all categories, Zdravko Maric explained, before pointing out that, in terms of investment, in the coming years, they will be the main drivers of overall economic growth.

Average annual inflation is 2.4 percent

Zdravko Maric also gave an estimate of price movements, meaning inflation.

''Regardless of the last few months and the accelerated, visible inflation, our estimate for this year is 2.4 percent for average annual inflation,'' he said. He also stressed that a reduction in public debt in GDP to 83.1 percent is planned.

"Although we're revising the deficit from 3.8 to 4.5 percent, this year we expect, given the much higher growth rate than initially expected, a further reduction in the share of public debt in GDP to 83.1 percent," he said, before noting that for four years in a row now, public debt has been reduced "cumulatively by almost 12 percentage points of GDP".

''The coronavirus pandemic and to a degree, the earthquakes of 2020, once raised the share of public debt in terms of GDP to 87.3 percent and once erased all the effect of those four years,'' said Maric, adding that those 4.2 percentage points, according to estimates that have been seen in other countries, will place Croatia among the top three.

This result, Zdravko Maric added, should be emphasised not only in numbers, but also in the fact that we have done and are doing everything possible, and according to the growth rate and reduction of the share of public debt in GDP, it can already be concluded that the effect of the pandemic, without no matter how strong, he was a one-off.

For more, check out our politics section.

Page 1 of 4