Saturday, 7 May 2022

Eurozone Entry Will Mean Additional Improvement of Credit Rating, Says FinMin

ZAGREB, 7 May 2022 - Finance Minister Zdravko Marić said on Saturday he was pleased with Fitch's latest credit rating of Croatia, adding that accession to the eurozone will mean that the rating will additionally improve.

Fitch Ratings yesterday reaffirmed Croatia's investment rating at BBB with a positive outlook, estimating that the recovery of the country's tourism industry will support the economy at a time of slowing exports and that eurozone entry will mitigate financing risks.

Speaking to the press, Marić said citizens, enterprises and the government could be satisfied because the credit rating was maintained.

A very positive assessment, a very welcome report in these circumstances which gives us an incentive to continue all that we are doing, with a very likely positive unfolding of events in the remainder of the year as regards Croatia's credit rating, he said.

Fitch revised down its projection of Croatian growth for 2022 from 4.4% to 3.3%, citing base effects, a sharp slowdown in household consumption as high inflation affects consumer spending, as well as the effects of Russia's aggression on Ukraine.

Marić said that was understandable given that about ten days ago the government revised down its GDP growth forecast for this year to 3%.

In the fiscal part, Fitch's report is in line with the government's efforts, achievements and projections, the minister said, underlining that last year the deficit was reduced much more than expected and that this trend would continue this and in the years ahead.

As for potential risks for the rating's trend, Fitch mentioned an increase of the government debt and a significant delay in Croatia's eurozone accession.

"I'm deeply confident that none of that will happen. Actually, I'm sure of that," said Marić.

He recalled that since 2016, the public debt-to-GDP ratio has been decreasing every year except in 2020. "That's one of the basic characteristics and traits of this government's fiscal policy and it will continue."

Speaking of Croatia's eurozone journey, Marić said convergence reports by the European Central Bank and the European Commission were expected early next month. He also mentioned the Maastricht criteria - exchange rate, price and interest rate stability, budget deficit and government debt.

Marić said the deficit and the government debt were the fiscal indicators which opened the prospect of introducing the euro to the greatest extent. "If we hadn't consolidated public finance and done all that we have... we would have waited much longer."

Inflation in April expected to accelerate further

Speaking of inflation, Marić said the data for April would likely show an additional acceleration of the average price rise rate, but without a significant deviation from the average.

In March, inflation in Croatia went up 7.3% and the government has forecast its growth for this year at 7.8%.

Under the Maastricht criteria, Croatia's inflation over the past year should not exceed 1.5 percentage points in relation to the average inflation in three EU member states with the lowest inflation.

Marić said there were clear signals that the lower inflation rates in some member states, for example Greece, would be treated as deviation variables and that Croatia would meet this criterion, too.

He reiterated that Croatia planned to enter the eurozone on 1 January 2023 and that the final decision was expected by the first half of July this year.

At the moment, the introduction of the euro has a virtually negligible impact on inflation, he said, reiterating that in the last seven states which introduced the euro, the inflationary effect in the first year was between 0.2 and 0.4 pp on average.

Reforms as prerequisite for tax relief

Marić was also asked about a reform package proposed by the Croatian Employers Association  which is aimed at raising the net pay and includes raising the non-taxable income and reducing pension and healthcare contributions as well as income tax.

In order to further reduce the tax burden on labour, it is necessary to create the prerequisites by reforming the pension system and especially healthcare, he said, adding that the basic intention of the government's tak reform has been to reduce the tax burden on labour and profit.

For more, check out our politics section.

Saturday, 7 May 2022

FinMin Says Still No Solution For Brodosplit Shipyard

ZAGREB, 7 May 2022 - Finance Minister Zdravko Marić on Saturday denied Brodosplit CEO Tomislav Debeljak's statement that a solution had been found for the shipyard, saying talks are under way and that the situation is very complex.

"Unfortunately... no agreement has been reached," Marić told the press.

He said the Brodosplit situation became even more complex in the past few weeks due to the opening of pre-bankruptcy proceedings. They imply an additional procedural as well as "temporal component" regarding the approval and regime of state aid, he added.

Also, he said, the Finance Ministry has been analysing the technical, legal and financial justification of a protested guarantee request.

Our talks and cooperation with the HBOR (Croatian Bank for Reconstruction and Development) are in line with that, Marić said, regretting that "such conclusions have been made" based on "certain talks, questions asked and answers given."

He would not say if the situation was closer or farther from an agreement being reached, saying it is still not clear if the business model in question is viable.

Marić said the HBOR had a very responsible approach to its job  and that he was sorry it was exposed to "such pressure" only for showing good will.

Earlier today, Debeljak told N1 television that a meeting was held at the HBOR two days ago, that a solution had been found and that Brodosplit's problem would be solved in three months.

Late in March, the shipyard said €60 million from loans given by the Russian-owned VTB Europe bank it was using to finance the building of two ships had been blocked. The bank is subject to restrictions due to Russia's invasion of Ukraine.

Brodosplit asked the government to support a proposal that the loans be rescheduled with HBOR funds. One loan would be repaid by the end of the year and the other over a longer period of time, which would allow the shipyard to operate normally.

Earlier this week, Debeljak filed a second pre-bankruptcy motion for Brodosplit after the first one was dismissed due to procedural error.

According to unofficial reports, HBOR is willing to lend the money to Brodosplit pending a government decision.

For more, check out our business section.


Tuesday, 5 April 2022

EU Still Without Agreement on Taxation of Multinationals, Croatian FinMin Says

ZAGREB, 5 April 2022 - Croatian Finance Minister Zdravko Marić said on Tuesday that EU member states had again failed to agree on a minimum taxation of multinational companies and that one or more attempts would be necessary to reach an agreement.

He was speaking in Luxembourg, where he attended a meeting of the Economic and Financial Affairs Council.

Croatia has been very constructive from the start and for a good compromise that would mean faster and more efficient implementation, as recommended by the OECD, Marić said. "We hope that we will reach an agreement in the next meetings."

He said today's debate focused on the situation in Ukraine, the enforcement of the sanctions against Russia and an upcoming debate on potentially new sanctions.

Also discussed were refugees, how to provide for them and make it easier for the countries which are more exposed to their influx.

Marić said Ukrainian Finance Minister Serhiy Marchenko addressed the meeting via video, conveying the latest news about the situation in his country

Marić said there were many parallels to Croatia's 1991-95 Homeland War due to the daily human losses, destruction and extensive material damage as well as the stoppage of production and fall of revenues and GDP.

He said the ministers also talked about energy prices and that they were agreed that it is necessary to do everything to reduce the dependence on Russian energy.

The last topic of the meeting was the new financial structure of the EU's key financial institutions, primarily the European Investment Bank and the European Bank for Reconstruction and Development.

Marić said certain steps forward had been made on that front but that it is necessary to work more to affirm those institutions and, more importantly, the EU's role, not just in the EU but globally.

Tuesday, 22 February 2022

FinMin Says New Base Pay Meeting With Unions Next Week, Won't Speculate on Outcome

ZAGREB, 22 Feb 2022 - Finance Minister Zdravko Marić said on Tuesday, after a meeting on base pay with the unions of government and public service employees, that a new meeting had been arranged for next week, but would not speculate if a final agreement would be reached then.

Two meetings were held at the Labour Ministry today between negotiating teams of the government and the unions on the signing of a basic collective agreement for public service employees and a collective agreement for government employees.

Asked by the press about the possibility of progress in the negotiations, Marić said the government would extend the application of the existing collective agreements.

"We'll see if we can agree or maybe not," he added.

The head of the union of Interior Ministry employees, Zdravko Lončar, said the unions were asked at the meeting to revise their demands given the impact of government measures to buffer the impact of energy price hikes on the state budget.

"We are trying to be realistic... and besides base pay, we also expect an agreement on transport expenses," he added.

Members of the press asked Marić if he was looking for a new state secretary at his ministry to replace Stjepan Čuraj, who the media speculate is a candidate for the new construction minister.

Marić said more would be known after the ongoing meeting of the ruling coalition. Čuraj "has gained a good insight into the functioning of the government and certain ministries, including construction from the perspective of (post-earthquake) reconstruction," he added.

Marić said he did not expect the appointment of a new construction minister to slow down reconstruction, but added that the new minister and their team must immediately get to work as reconstruction is one of the more important priorities.

The press remarked that Labour Minister Josip Aladrović, who is allegedly under investigation, did not speak to the press after today's meeting with the unions as he had in the past, Marić said it was nothing unusual and that Aladrović actively participated in the meeting.

"It's necessary to respect the presumption of innocence and I can only say good things about him as a person and colleague. We are cooperating well and will continue to as long as we are ministers," Marić said, adding that the negotiations were not affected but were constructive.

Asked if he himself had been subjected to pressure, Marić said that came with the territory when one was a minister.

"Our job is to prevent such situations and act in line with the law, and when it comes to the state budget, everyone wants a little more," he added.

As for the incentives awarded in 2018 by the then economy minister Darko Horvat, who is now in custody on suspicion of abuse of office, and requests for more money, Marić said the state budget was executed in line with the law and that it could be revised during the year.

Marić said he was taken aback by Horvat's arrest on Saturday and that he did not like it, either personally or professionally, when such things happened.

Asked how the government would function given that the anti-corruption office "USKOK is after three ministers and another one who is the subject of serious accusations," Marić said the public would be informed after the ongoing ruling coalition meeting.

Tuesday, 1 February 2022

Croatia Issues €1 bn Bond on Domestic Market

ZAGREB, 1 Feb 2022 - Croatia has successfully issued a €1 billion bond on the domestic market with which it will reschedule two securities from 2017 and 2019, Finance Minister Zdravko Marić told Hina on Tuesday.

The new bond is due in 2030 with a yield of 1.39% and coupon interest of 1.25%.

The issue was arranged by Erste & Steiermärkische Bank, OTP banka, Privredna banka Zagreb, Raiffeisenbank Austria, and Zagrebačka banka.

The new bond will reschedule a bond due on 5 February in the amount of €500 million, issued in 2019 with 0.5% coupon interest, and a bond due due on 7 February in the amount of HRK 3 billion, issued in 2017 with 2.25% coupon interest.

Marić said interest in the new bond surpassed the target issue amount by 40%, totalling €1.4 billion. Among the investors were pension funds, banks, insurance and investment companies.

"The new issues testifies to Croatia's good position on the capital market, which is in line with previous issues, and the success of the new issue also reflects Croatia's upward trajectory among the rating agencies. In two of the three most important agencies we are at the investment grade level, where we belong," Marić said.

The next steps towards introducing the euro will additionally improve Croatia's status, notably regarding the additional decrease of the risk premium, which is especially important in the context of the current pressures on the growth of reference interest rates, geopolitical developments and energy prices, Marić said.

The new issue reflects Croatia's good reputation on the domestic capital market as well as the strength and liquidity of the domestic financial industry, he added.

A €1.25 billion bond issued in 2014 is due in May and a €1 billion bond issued in 2011 in July.

(€1 = HRK 7.529067)

Friday, 10 December 2021

Marić: Croatia's Eurozone Entry to Benefit Economy and Households

ZAGREB, 10 Dec 2021 - There is a strong consensus that accession to the euro area will benefit the Croatian economy and households, Finance Minister Zdravko Marić told reporters in the northern Adriatic resort town of Rovinj on Friday after a conference on this subject organised by the Večernji List newspaper and Istria County. 

That's why Croatia should do all that is necessary to reduce and minimise any negative risks, such as inflation, and take advantage of positive effects, which outnumber negative ones, for the benefit of its economy and citizens, Marić said.

"Over the past few months we have been witnessing price increases, but they have nothing to do with our eurozone entry. That's a global issue caused by disruptions to supply chains and increases in prices of energy and resources," he added.

Noting that inflation was the biggest risk on Croatia's path to eurozone membership, Marić cited statistics showing that inflation had been around 4% in the past several months and around 2.5% for the whole of this year, which puts Croatia "slightly below the EU average."

Croatian National Bank Governor Boris Vujčić said that Croatia was the country that would profit the most from eurozone membership.

"One of the benefits of joining the European monetary union is the reduction of foreign exchange risk, which is biggest in Croatia among all EU countries that have not yet adopted the euro. We have a very high level of euroisation. Most of the debt of all sectors in Croatia, including households, companies and government, is tied to the euro. In kuna, it amounts to over HRK 520 billion, which means that 75% of the debt of all sectors is either in euro or indexed to the euro," Vujčić said.

He added that with entry into the euro area interest rates would start to fall, the sovereign credit rating would increase and Croatia would become more attractive to tourism and investment.

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Thursday, 16 July 2020

Maric: VAT in Tourism Isn't 25% but Generally 13%

ZAGREB, July 16, 2020 - Finance Minister Zdravko Maric said on Thursday that it is not true that VAT in tourism and hospitality is 25%, since it is generally 13%.

Asked whether a VAT reduction was on the cards as called for by some of the entrepreneurs Minister Maric first said that VAT is a neutral item for payers but that he presumes they are referring to the hospitality sector.

He went on to say that that was one of the topics discussed over the past few days with representatives of that sector.

"The only segment in tourism that has a VAT of 25% is delivering beverages to hospitality facilities. Everything else is practically at 13%: from accommodation to delivering and serving food hence if we look at it overall, VAT in tourism is 13%," said Maric.

He announced that the new government would continue with tax cuts at the "same pace" as until now. He recalled that the incumbent government began cutting taxes practically at the start of its term in power.