Monday, 11 October 2021

FinMin: There's Room for Stronger Economic Cooperation Between Croatia and France

ZAGREB, 11 Oct 2021 - There is room for stronger economic cooperation between Croatia and France, notably in energy, transport, and environmental protection, Finance Minister Zdravko Marić said after meeting with a high-level delegation of French companies in Zagreb on Monday.

Some of these French companies are already present on the Croatian market, while some are interested in investing in the Croatian economy, in particular in energy, renewable energy sources, the green, and digital transition, transport, and environmental protection, Marić said.

He said that there was an interest in various aspects of cooperation, with emphasis on the use of EU funds and the areas covered by the National Recovery and Resilience Plan, such as environmental protection and water management.

The meeting also focused on political aspects of cooperation, including the planned purchase of fighter jets for the Croatian Air Force, and "hopefully, a forthcoming visit by French President Emmanuel Macron." 

The French are the ninth-largest investors in Croatia, Marić said, citing the Istria motorway project and the Zagreb airport project.

Marić said that they also discussed the investment environment in Croatia. He said that since the beginning of its term in office, the government has focused on economic issues. He said that the government has embarked on tax reform and consolidation of public finance to improve the business climate.

Marić said that great emphasis was also on the National Recovery and Resilience Plan and Croatia's aspirations to join the Schengen area and eurozone, which he said would also help increase the interest of investors.

Asked to what extent the purchase of military aircraft from France would help attract French investors to Croatia, Marić said that this was difficult to say, but that today's visit showed that Croatia was recognized in the right way.

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

Wednesday, 19 May 2021

Financial Stability Council Meets to Discuss Risks to Stability of Financial System

ZAGREB, 19 May, 2021 - Timely and full reporting on the impact of the coronavirus pandemic on business operations and the materialisation of credit risk in financial institutions is important as some sectors of the Croatian economy are still strongly affected by physical distancing measures, the Financial Stability Council said.

The Financial Stability Council is an inter-institutional body that designs Croatia's macroprudential policy. It consists of representatives of the Croatian National Bank (HNB), the Croatian Financial Services Supervisory Agency (HANFA), the Ministry of Finance and the State Agency for Deposit Insurance (DAB).

The Council met on Tuesday under the chairmanship of HNB Governor Boris Vujčić to discuss main risks to the stability of the financial system. The meeting also involved Finance Minister Zdravko Marić, HANFA Board President Ante Žigman and DAB Director Marija Hrebac.

Despite the accelerated recovery of economic activity from the consequences of the pandemic, in the circumstances of continued uncertainty regarding a return to usual social contacts and business, the financial system's exposure to systemic risks remains elevated, the Council said in a statement, citing high public debt, the financial sector's exposure to the government, a possible rise in the number of insolvent companies and fast growing housing prices as main risks.

It noted that housing prices had risen by 7.7% in 2020 year on year and surpassed their level in the period preceding the global financial crisis, adding that housing loans were picking up.

Given that some sectors of the economy are still strongly affected by physical distancing measures, the Council said that a premature cancellation of aid could put healthy businesses at risk and increase the credit risk, while extended maintenance of support could keep companies with unsustainable business models on the market and zombify the corporate sector, which would have adverse implications for growth and financial stability, the statement warned.

The Council said the banking sector was highly capitalised and liquid. The volume of loans covered by the loan repayment moratorium continued to fall after peaking in September 2020 and at the end of March 2021 it covered 8.6% of corporate and household loans. The loans covered by the moratorium were mostly aimed at hotels and restaurants.

The Council said that the recovery of the financial markets, which began at the end of last year, had continued in the first half of this year and that nearly all sectors supervised by HANFA were seeing growth.

The positive mood has also affected the financial services sector, whose assets at the end of March 2021 were 3.5% higher than at the end of 2020, accounting for 32.15% of the total assets of the financial system in Croatia, or 61.7% of the nominal GDP, the statement said.

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Thursday, 31 October 2019

Draft Budget for 2020 Supported by Government

ZAGREB, October 31, 2019 - The Croatian government on Thursday sent to the parliament a draft budget for 2020, envisaging 145.1 billion kuna on the revenue side and 147.3 billion kuna on the expenditure side.

Thus, the government plans 6.7% higher revenues in comparison to the original 2019 budget, that is 5.4% more in comparison to the revised budget which was also tabled to the parliament today.

The expenses in the next year's budget are higher by five percent, that is by seven billion kuna, in comparison to this year.

As a result, the projected budget gap in 2020 is put at 2.15 billion kuna, accounting for 0.5% of Gross Domestic Product.

However, trends in extra-budgetary users' accounts and in local authorities' accounts as well as the consolidation of the necessary adjustments for next year makes way for the projection of a surplus of the consolidated general government at 0.2% of GDP, Finance Minister Zdravko Marić said.

The draft budget has been prepared with the assumption that Croatia's economy will grow 2.5% in 2020, Marić said.

The revision of the 2019 budget, which was sent today into parliamentary procedure, reads that total revenues would increase by 1.6 billion kuna (1.2%) to 137.7 billion kuna, whereas the expenditure side would be reduced by 1.3 billion from 140.3 billion kuna to 139 billion.

As regards the expenditure side, this reduction is mainly on the back of the savings on the interest rates, as 796.9 million kuna has been saved that way.

The biggest rise in the expenditure side has come from outlays for employees, and 849.6 million rise in the outlays for pensions.

The government also set aside 350 million kuna for the first stage of the construction of the future LNG terminal on the island of Krk.

More budget news can be found in the Politics section.