Thursday, 2 September 2021

FinMin Says GDP Could Grow By 7% This Year

ZAGREB, 2 Sept 2021 - The latest macroeconomic trends indicate the upward revision of forecasts of the growth for this year and we now can expect a 7% rise on the year, Finance Minister Zdravko Marić said on Thursday.

He recalled that the government's current forecast is five percent.

Marić said that tax revenue from 1 January to 31 August was 0.7% higher than fin the corresponding period last year while VAT was over four percent more year on year.

YTD profit tax is a little lower as against the same period last year, but that was to be expected given that that is calculated based on the results in 2020. Contributions for pension insurance were 4% higher and that is on track with what we expected, he said.

The only levy that is mildly staggering is for automobiles which he explained by the reduction in some levies and global stagnation in the automobile industry.

As far as budget revenue is concerned, in August alone the value of fiscalised receipts was almost 21% higher than they were in August 2020.

He underscored a key role of the expenditure side for the sustainability of public finances.

Asked by the press about possible inflation in autumn particularly regarding food prices, Marić said that the latest data calls for caution.

According to the latest information from the national statistical office (DZS), inflation in July amounted to 2.8% on the year, the highest rate since April 2013. Consumer prices are fuelled by industrial producer prices which in July rose by 7.9% on the year, the biggest jump since April 2011.

Marić said that inflation was to be expected given monetary concessions on the global level and the amount of money released in the system which resulted in a drop in its price which then impacted inflation pressure.

He added that he isn't sure that the price hike on food and construction material can be entirely attributed to global trends and disruptions in the supply chain.

He warned there are very few prices that can be regulated as they are mostly regulated by the market and that market development and competitiveness are a must.

He recalled that when VAT was reduced on eggs, fresh meat, fish, fruit, and vegetables, tax policies had a limited impact because even after VAT was reduced the price of these products did not decrease significantly.

He mentioned the recurring rise in the debt by hospitals and that payment deadlines are now about 180 days for hospitals, 200 days for pharmacies and that the health insurance fund had transferred about HRK 5.9 billion to settle liabilities.

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Tuesday, 17 August 2021

Finance Ministry Issues Treasury Bills Worth HRK 983 Million

ZAGREB, 17 Aug, 2021 - The Croatian Ministry of Finance sold HRK 983 million worth of treasury bills at an auction on Tuesday, which was slightly less than planned.

Ahead of the maturity of treasury bills worth HRK 1.23 billion, the Ministry offered a billion kuna in treasury bills for subscription at the first auction since the last one held on 23 June.

Financial institutions submitted offers worth nearly 1.3 billion, and the Ministry accepted HRK 983 million.

The latest treasury bills were issued with a maturity of one year and at an interest rate of 0.01%, which is by one base point lower than at the previous auction on 23 June when the bills were issued with a maturity of one year and at an interest rate of 0.02%. This low interest rate is a result of surplus liquidity in the local financial system.

After today's auction, the balance of kuna-denominated treasury bills subscribed decreased by HRK 245 million to HRK 14.19 billion.

(€1 = HRK 7.490484)

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Friday, 30 July 2021

Finance Minister Zdravko Maric Planning to Slash VAT on Food

July the 30th, 2021 - Finance Minister Zdravko Maric has announced that he does indeed intend to slash VAT on food during a recent guest appearance on RTL Danas (Today).

As Poslovni Dnevnik writes, before we take to the subject at hand, it's worth noting that Finance Minister Zdravko Maric did not accept the proposals of the National Association of Caterers on lowering VAT on beverages and respecting labour costs as a tax deduction. Let's look at precisely why didn't he satisfy this association's wishes.

"We always end up talking about VAT somehow..." stated Maric.

"It's not just a question of satisfying or not satisfying people's desires. I mean, we always end up talking about VAT whatever the topic is. I do emphasise all the time for the hospitality sector, as well as for all other activities, this government in the past and this term, despite the pandemic, has conducted several rounds of tax relief to stimulate activities, employment, the raising of wages… Of course, in the wake of all this we're continuing to work hard, and caterers always come up with this suggestion that the only exclusive variable is VAT. One of the interlocutors in this regard was the co-owner of a restaurant. Let's just sit down and demystify a few things now. So... complete accommodation in tourism, complete food and service is already at a reduced rate. We're only talking about bars here,'' Maric said.

What would those numbers look like?

"We're talking about approximately half a billion kuna. Now, looking at the data we have from the past year, it's certain that the pandemic had a significant share in the hospitality sector, however, you know that the hospitality sector has been recognised with our measures since day one. At a time when it was horizontal for all sectors, and to this day the hospitality industry is one of the few that is the recipient of measures to preserve jobs and cover fixed costs.''

There has been a lot of talk about VAT in the last term of this government as well, it was promised that the general VAT rate would be reduced. In the end, that didn't happen. Is it a topic at all anymore?

"It isn't in the government's programme at the moment. Let me remind you, there was a reduction in the income tax rate, especially for young people, you know that it all came into force and that it has already been done. Young people can testify to that, I'd also say that they were pleasantly surprised with those tax refunds. What follows, when the conditions for that are created, is written in the government's programme that the reduction of VAT will be applied to all food in general, but we'l see when and how we'll implement it,'' stated Finance Minister Zdravko Maric.

Next came the topic of the pandemic-dominated season, and we're not just talking about tourism here. Maric was asked if he was worried about the epidemiological situation and the possible sudden end of the tourist season, to which he responded:

"I think we really do all need to contribute individually to prevent that from happening. We aren't talking only about tourism here but also all other economic activities. The third quarter is generally the strongest in terms of economic activity. Very soon our children will return to school. We really have a lot of segments that we have to take care of in order to finally gain this victory over the virus and to be able to live normally again,'' Finance Minister Zdravko Maric replied.

The European Commission has now officially adopted Croatia's National Recovery and Resilience Plan. What's the next phase? When do the first funds arrive and what will they be used for?

"At the end of August, the government will authorise the signing of a financial agreement with the EU. After that, I expect a 13 percent advance in September of somewhere around 820 million euros. By the end of the year, Croatia must meet the 34 criteria it listed in the document, which is the basis for withdrawing an additional 700 million euros in the first half of next year. By the end of 2022, we need to meet the requirements that will ensure the withdrawal of 46 percent of the total envelope of money, which is very good news because it means that at the beginning of this period, we'll be able to use the most funds,'' concluded Finance Minister Zdravko Maric.

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Tuesday, 27 July 2021

Tax Relief Proposals by Hospitality Sector Reps not Accepted

ZAGREB, 27 July, 2021 - Finance Minister Zdravko Marić on Tuesday did not accept proposals for a lower VAT rate on beverages and to treat labour costs as a tax deduction, while a representative of restaurant and bar owners said they would have to fend for themselves the best way they can regarding future challenges.

"My message to all restaurant and bar owners in the country, notably those who run bars, is that a very demanding period is ahead of us and that they will have to seek new loans and funding, despite the fact that we had yet another constructive meeting with the finance minister today. We can hope that in a couple of years we will have better working conditions because now that is not the case and we have not come across any understanding in regard to our proposals," Jelena Tabak, who heads the NUU association of restaurateurs, said after the meeting.

Marić recalled that a lower VAT rate was already in place in the tourism sector for accommodation, food and for the serving of food and that beverages were the only products for which VAT had not been reduced.

Commenting on the proposal to exclude labour costs from the base amount for the calculation of the VAT rate in the hospitality sector, the minister said that neither Croatia's nor the EU's tax systems recognised such a measure.

"In terms of taxation, labour costs are indeed recognised costs but in systems in which they should be recognised - the income and profit tax systems. We cannot mix direct taxes with indirect taxes such as VAT," he explained.

Marić recalled the government's measures to help the business sector, from lower taxes to the cancellation of individual contributions, as well as expanding the scope of nontaxable income, which, he said, had resulted in a rise in employment and wages, as evidenced by statistical data.

He recalled the government's job-keeping measures and coverage of fixed costs in the hospitality sector, stressing that data on fiscalisation showed that the hospitality sector had solid results and that the real peak of the tourist season was yet to come.

Dražen Biljan of the bar owners' association of the NUU Zagreb branch said that they were not happy that their proposals were not accepted and that lowering VAT on drinks would not cost the state too much, around HRK 400 million. It would, however, mean a lot for restaurant and bar owners, he said.

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Wednesday, 2 June 2021

Finance Minister Zdravko Marić Says Croatia in Safe Financial Zone

ZAGREB, 2 June, 2021 - The budget revision, proposed by the government today, keeps Croatia in a safe financial zone, Finance Minister Zdravko Marić said after the cabinet's meeting on Wednesday.

The proposed budget changes set the general government deficit at 3.8% of GDP, and the government believes that this increase still keeps Croatia in a safe zone in terms of economic and other activities as well as in terms of the opinion of credit rating agencies and the European Commission, he added.

The government is committed to reducing the public debt from 88.7% to 86.6% of GDP, this year, Marić said, announcing one more revision of this year's budget.

The proposed revision, adopted today, will probably be on the government's agenda next week.

The minister said that he was looking forward to a meeting with Zagreb's new mayor Tomislav Tomašević, and that he and his team would be at the disposal of the newly elected local authorities.

"As far as Zagreb is concerned, I am sure that the mayor and I will meet to discuss several things," he said, explaining that with regard to additional borrowing, laws were clear and applied equally to everybody.

Among the topics to be discussed with Tomašević is a limit on borrowing, he said in a comment on the topic of possible new borrowing, explaining that the amount needed to service debts and cover loan guarantees this year must not exceed 20% of last year's revenue.

With regard to the purchase of fighter jets for the army, Marić said that the government would be guided by pragmatic criteria only. Therefore, a certain amount could be paid as an advance this year, he added.

For more about politics in Croatia, follow TCN's dedicated page.

 

Wednesday, 26 May 2021

Members of Parliament Hope For Revival of Capital Market

ZAGREB, 26 May, 2021 - Amendments to the Capital Market Act, which are aimed at further aligning Croatia's regulatory framework with the EU acquis, were supported on Wednesday by both the Opposition and the ruling majority in the parliament, who expressed hopes for the revival of the capital market. 

This is one of the most complicated laws that summarises what kind of capital market Europe wants, said Social Democrat MP Boris Lalovac, warning that Croatia's capital market was far less developed than the European.

"The value of the capital market in Croatia is HRK 276 billion, 140 billion are stocks and 130 billion securities, the annual turnover of the Zagreb Stock Exchange is around HRK 3 billion while the turnover on the OTC market is HRK 27 billion," Lalovac said.

That shows that outside of the stock exchange and capital markets, which have strict rules, trading is ten times greater, Lalovac said, expressing hope this would change.

Grozdana Perić of the HDZ said that better oversight and regulation would enable further development of the capital market in Croatia.

She warned, however, that the coronavirus crisis had caused an outflow of funds from investment funds and that their value had dropped by more than 35% or HRK 8 billion.

That is one of the reasons for amending the law, said the State Secretary at the Finance Ministry, Stjepan Čuraj, who presented the amendments to MPs.

"If we take as an example the Zagreb Stock Exchange alone, during the pandemic in 2020 it dropped by more than 35%, from 2,000 to 1,300 basis points," Čuraj said, noting that there was room for improvement.

For more about politics in Croatia, follow TCN's dedicated page.

Tuesday, 25 May 2021

Employers Propose Continuation of Government COVID Subsidies

ZAGREB, 25 May, 2021 - The Croatian Employers' Association (HUP) has proposed measures for maintaining liquidity and launching private investments which include retaining jobkeeping measures and covering a portion of fixed costs, ensuring favourable loans and prolonging loan maturity.

In expectation of COVID measures and lockdown of businesses being lifted, HUP addressed Finance Minister Zdravko Marić and underscored that maintaining liquidity is not only relevant during the lockdown period but should be extended for a longer period, and that recovery can only be possible if investments are boosted.

HUP proposes that jobkeeping measures be extended even after busines restrictions are lifted until such time that  all enterprises generate at least 90% of their pre-pandemic revenue in 2019. HUP believes that abolishing support measures for the economy should be gradual, depending on the epidemiological situation, but also on the circumstances in each individual sector so that Croatia is not faced with a wave of bankruptcies and layoffs.

HUP also calls for a portion of fixed costs to continue to be covered, taking account of the percentage revenue has decreased, and for facilitating access to loans for liquidity and working capital, including guarantee schemes for micro, small and medium-sized enterprises.

HUP advocates possibly transforming a portion of loans into grants and for the moratorium on loan maturities to be extended for existing loans, along with state guarantees, at least until the end of this year and longer if need be, based on transparent criteria.

HUP proposes additional support loans for exporters and enterprises investing in the 4.0 industry, and support for investments by large companies through increased support for EU co-funded projects.

It also recommends the possibility of deleveraging debts between companies to prevent a chain reaction, and for non-recoverable loans to be identified faster, as well as speeding up bankruptcy procedures, and introducing additional tax cuts.

"We believe that government subsidies to cover the disrupted economic activities due to the COVID crisis should continue until such time that enterprises can do business normally and save jobs without that support," HUP said.

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Tuesday, 18 May 2021

Finance Ministry Issues Treasury Bills on Favourable Terms

ZAGREB, 18 May, 2021 - The Croatian Ministry of Finance sold HRK 880 million and €11 million worth of treasury bills at an auction on Tuesday.

Ahead of the maturity of treasury bills worth HRK 300 million and €12 million, the Ministry offered HRK 300 million and €10 million in treasury bills for subscription. Financial institutions submitted offers worth nearly HRK 880 million and €11 million, and the Ministry accepted all of them.

The treasury bills worth HRK 880 million were issued with a maturity of one year and at an interest rate of 0.02%, the same as at the previous auction of kuna-denominated treasury bills held on 20 April.

The treasury bills worth €11 million were issued with a maturity of one year and at a negative interest rate of 0.05%, the same as at the previous auction of euro-denominated treasury bills held on 3 May. 

After today's auction, with the maturity of HRK 300 million worth of treasury bills, the balance of kuna-denominated treasury bills increased by HRK 580 million to HRK 14.7 billion. On the other hand, the balance of euro-denominated treasury bills decreased by €1 million to €158 million.

The next auction is scheduled for 23 June.

For more about politics in Croatia, follow TCN's dedicated page.

Thursday, 29 April 2021

Convergence Programme: Croatia's Economy to Rise 5.2% in 2021, 6.6% in 2022

ZAGREB, 29 April (Hina) - The Croatian government expects the national economy to rise at a rate of 5.2% in 2021, which is 0.3 percentage points more than its previous forecast, the government said at its meeting on Thursday when it adopted the 2022-2024 Convergence Programme.

Economic activity is expected to pick up at a rate of 6.6% in 2022.

The Convergence Programme is a document that is adopted on a regular basis in dialogue with the European Union's institutions as part of the European semester.

This year's document also deals with macroeconomic, fiscal and other economic effects of the draft National Recovery and Resilience Plan (NPOO), which was forwarded today to the European Commission for final fine-tuning.

Addressing the meeting, Finance Minister Zdravko Marić said that the effects of the NPOO raised the projected growth rate by 0.3 percentage points. Furthermore, growth of 6.6% and 4.1% is forecast for 2022 and 2023 respectively,

The finance minister said that these rates have 1.5 percentage points of the effects made by the National Recovery and Resilience Plan.

In 2024 the economy is expected to rise at a rate of 3.4%.

Marić pointed out growing commodity and services exports as a positive contribution to the growth.

Domestic consumption and investments will also give tailwinds to the growth.

2021 budget gap at 3.8% to narrow in coming years

The projections from the Convergence Programme, including the fiscal elements, will serve as an input in the preparation of the budget revision, the minister said.

Concerning the expenditure side, the minister pointed out the costs incurred due to the COVID-19 epidemic, which have reached HRK 32 billion.

He said that in 2020, HRK 14.1 billion was used to offset the pandemic and an additional 8.6 billion this year. Of that amount, the  largest portion was used for the job retention scheme, including grants for job-keeping measures, shortened working hours, and the coverage of the fixed costs of enterprises.

In the healthcare system, the COVID-related costs covered the procurement of coronavirus tests and now vaccine supplies, Marić added

Therefore, the initial plan of this year's budget gap of 2.9% has widened to 3.8% of GDP, the minister explained.

In 2022, the budget gap should be within the limits set by the Maastricht criteria (-2.6%), and in 2023 it would narrow to 1.9% and further to 1.5% in 2024, according to the minister's explanation.

Marić recalled that Croatia had left the excessive deficit procedure in 2017 and was no longer in the group of countries with excessive economic imbalances, regaining the status of a creditworthy country. He also underscored Croatia's aspirations to adopt the euro.

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Wednesday, 14 April 2021

Gov't and Drug Wholesalers Reach Deal on Debt Settlement

ZAGREB, 14 April, 2021 - Health Minister Vili Beroš said on Wednesday that the government and representatives of drug wholesalers had reached agreement on a debt settlement scheme.

The issue of the debt made the wholesalers restrict and defer the deliveries of medicines to hospitals in late March.

"Today's meeting is one more step towards the debt settlement," Minister Beroš said adding that only together the two sides could solve this decades-long issue which became exacerbated during the COVID-19 pandemic.

Finance Minister Zdravko Marić outlined the elements of the scheme.

In the next three months we will transfer some funds to the Croatian Agency for Health Insurance (HZZO), and the Health Ministry so as to enable the cash flow in those institutions and enable them to pay liabilities towards wholesalers and providers, Marić said adding that those funds would be ensured through the redirection and reallocation of outlays in the state budget.

The monthly allocation for hospitals will be HRK 600 million and an additional 300 million for pharmacies.

In June, the government is likely to conduct a budget revision whereby an additional cash inflow for hospitals and pharmacies will be ensured so that debt deferment period lasts no longer than 180 days for hospitals and 120 days for pharmacies.

In June alone, 135 million kuna will be directed to pharmacies and HRK 760 million to hospitals, with the plan to respect the deferment periods in the remainder of the year.

Marić hopes that this scheme will remove any need for any new meeting with wholesalers on the debt.

The finance minister also expects reform efforts in preventing any  further accumulation of liabilities and in this context he mentioned the plan to cut the deferment period to 60 days.

The wholesalers' representative Diana Percač thanked the ministers for efforts to provide funds to cover the debt.

She also pledged the continuation of the delivery of drugs to pharmacies until the end of this year.

(€1 = HRK 7.571658)

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