Friday, 1 July 2022

President Talks PM, Food Prices, Abortion

ZAGREB, 1 July 2022 - President Zoran Milanović said on Friday he was sorry he did not meet Prime Minister Andrej Plenković at today's conference on the occasion of Croatian Chamber of Trades and Crafts Day, saying Plenković decided against attending when he found out that Milanović would.

Milanović said he was not competing with Plenković. "For me personally, he is zero, but he is the president of the HDZ (party), the prime minister, he won the election, he is responsible for the rampant corruption, deserving for less political radicalism in life, which he succeeded in suppressing in the HDZ because he is a communist."

Food prices, abortion

Speaking of high food prices, Milanović said they were a consequence of the war in Ukraine and that the government could do nothing about it. As for the vouchers announced by the government, he said it was copying Austria.

The president said it was not realistic for abortion rights to be entered into the Constitution, as demanded by the Social Democratic Party and the Green-Left Bloc.

When it comes to abortion, he said "we've had this issue solved in an appropriate way almost 50 years now," better than the Americans who, he said, have been waging a cultural war since 1973.

For more, check out our politics section.

Thursday, 17 March 2022

Opposition Says VAT Cuts Welcome, but Late

ZAGREB, 17 March 2022 - The government's proposal to cut VAT on food and gas is welcome but late and insufficient, the parliamentary opposition said on Thursday, while the ruling HDZ said the cut was timely and that it would help citizens weather the price rises.

"The government's proposal is going in the right direction, but the fact is that it's late and it's not enough," Social Democratic Party president Peđa Grbin said ahead of a debate on amendments to the VAT Act whereby the government wishes to buffer the energy price hikes and protect living standards and the economy.

Grbin said the government should introduce other measures, too, and asked what it was doing to ensure incentives for enterprises so they could work in these crisis times.

Marijan Pavliček of the Sovereignists said they mostly agreed with the government's measures but asked why the amendments to the VAT Act did not go into force on 1 March.

"This blow is unbearable and the government should have reacted much sooner and much stronger," Nikola Grmoja of Bridge said, calling on the government to further cut excises on fuel.

Stephen Bartulica of the Homeland Movement said this was too little too late and that the government reacted only when it absolutely had to.

Marin Lertoić of the Istrian Democratic Party said they supported any relief of households and businesses.

Grozdana Perić of the HDZ said these amendments would help citizens weather the energy price hikes and that over the past six years the government had found solutions to crises and stabilised public finance.

The opposition fears that the VAT cuts on key foodstuffs and gas will not result in lower food prices.

Davor Bernardić of the Social Democrats said that when VAT was cut in 2018, food became more expensive.

He said foreign retail chains would have discounts for a week and then prices would soar, adding that Finance Minister Zdravko Marić would be responsible for millions of kuna ending in the pockets of foreign retailers, just as it was in 2018.

The government has proposed reducing VAT from 25% and 13% to 5% on children's food, edible oils and fats, butter and margarine, live animals, fresh meat and fish, vegetables, fruit, eggs, seedlings, fertilisers and pesticides, fodder for animals, and tickets for concerts, sporting and cultural events.

The government also proposed a 13% VAT rate on natural gas supplies and heating from power stations, firewood, and menstrual products, among other things, and a 5% VAT rate on natural gas deliveries from 1 April 2022 to 31 March 2023.

The VAT cuts are estimated at HRK 2.1 billion.

For more, check out our politics section.

Sunday, 27 February 2022

Croatian Food Prices Increase by Three Percent in Just One Month

February the 27th, 2022 - There has been a concerning three percent increase for Croatian food prices, which also regards certain drinks, in the space of just one single month. What's going to unfold as this situation continues is worrying for many.

As Novac/Jutarnji/Marina Klepo writes, back in January 2022, inflation accelerated further, to 5.7 percent when compared to the same month last year, while it was 0.3 percent on a monthly basis, according to the CBS. As such, the December (2021) record of 5.5 percent was exceeded and inflation reached its highest levels in Croatia since way back in October 2008. As was the case in previous months, the rise in prices is led by energy and food.

Pressure on Croatian food prices began back in the middle of last year due to developments on global markets, and partly due to unfavourable conditions here on the domestic market. In January, food and non-alcoholic beverages were as much as 9.4 percent more expensive than they were a year ago, and in just one month, prices jumped by 2.9 percent.

As food makes up a quarter of the average Croatian consumer basket, its impact on the overall level of inflation is also significant - amounting to 2.44 percent. Accelerated growth of energy prices continued, meaning that transport, which is primarily related to fuel, recorded double-digit annual growth of 10.8 percent, with a contribution to inflation growth of 1.59 percent.

In third place is the category of furniture and home furnishings with an annual growth of five percent and a monthly growth of 1.3 percent. Prices in Croatian restaurants and hotels, on the other hand, were 4.7 percent higher back in January and 0.4 percent higher than they were in the previous month of December.

According to the harmonised consumer price index used by Eurostat, inflation here in the Republic of Croatia back in January stood at 5.5 percent. At the same time, the average for the Eurozone was 5.1 percent, and for the European Union (EU) stood at 5.6 percent. The highest inflation rates are still being recorded in the Baltic countries: Lithuania with 12.3 and Estonia with 11 percent. The lowest price growth, on the other hand, has been seen France, 3.3 percent, and in Portugal, 3.4 percent.

In order to mitigate the impact of inflation on the cost of living, the government again administratively capped the country's fuel prices in early February, and then adopted a comprehensive package of measures worth 4.8 billion kuna, which will apply from the 1st of April. All hopes were that this rapid inflation would be temporary, that prices would slow down in the second half of the year, but Russia's invasion of Ukraine throws a spanner in the works of all previous forecasts.

"Although price growth is limited by government decisions and administrative restrictions on fuel prices, given recent events in Ukraine and the escalation of the conflict, our projections for this year are exposed primarily to rising risks," said RBA analysts, who expect an average consumer price growth rate in 2022 of 3.1 percent.

However, the Croatian National Bank (CNB/HNB) has previously warned that inflation could reach 4.5 to five percent this year. As things stand, that assessment could also undergo corrections. Initial estimates by global think tanks suggest that the key effects of the war in Eastern Europe will be higher inflation and slower economic growth.

If oil prices rise to $130 a barrel in the next few weeks and European gas prices to 180 euros per cubic metre, the contribution of energy to average headline inflation could increase, instead of falling gradually as was generally previously assumed. In addition to energy, rising Croatian food prices also seem inevitable, albeit with less of an impact on overall inflation, given that Russia and Ukraine export 25 to 30 percent of the world's wheat, and Ukraine is also a major exporter of corn.

As such, in the coming months, during the second quarter, it is estimated that in developed economies, the inflation rate could be at least a fifth higher than previously calculated and exceed six percent. However, according to Global Economics analysts, inflation should fall once again later in the year, partly due to base effects, but average inflation levels in developed economies, they estimate, could stay at around four percent by the end of the year.

For more on inflation and increasing Croatian food prices, check out our lifestyle section.

Friday, 28 January 2022

Food Expensive Also Due to High Trade Margins

ZAGREB, 28 Jan 2022 - Food prices in Croatia in December 2021 continued their growth that had started in July, and year-on-year they were as much as 8.1% higher, while the inflation rate was 5.5%, the highest since October 2008, when it stood at 5.9%, Večernji List says, noting that food is also expensive due to high trade margins.

At the EU level, the price of food, alcoholic beverages and tobacco was only 3.2% higher in December and inflation was 5%, which some analysts justify with a slower first wave of price growth in Croatia while in the wealthier countries, they say, prices grew at a faster rate initially.

Prices started soaring in Croatia only in the past few months, and for some products, such as cooking oil, they went up by more than 20%, which is now also happening in other EU markets with lower living standards such as the Czech Republic and Hungary, the daily says.

Croatia has never been a cheap country, notably when it comes to food, telecommunications services, various technical goods and the like, and this can also be attributed to high trade margins, says the daily.

Tax expert Vlado Brkanić has calculated that since 2010 four retail chains in Croatia have almost doubled their trade margins. In 2010 most trade margins were around 17% and in 2015 they were above 30%.

Some sector stakeholders say that high trade margins are also due to high logistic costs considering the high seasonality of some Croatian regions during several months of the tourism season. However, Martin Evačić, CEO of the NTL retail chain, who heads the retail sector of the Croatian Employers Association, claims the average trade margin in the EU is above 32% while in Croatia it is below 25%.

As for food prices, Evačić says that they are still not following producer prices that are changing on a daily basis, noting that he expects state assistance in that regard, whether through VAT reduction or abolishment, freezing prices of basic foodstuffs or vouchers, which is what some poorer EU countries are already doing, says the daily.

For more, check out our politics section.

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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