Saturday, 29 August 2020

Finance Minister Zdravko Maric Comments on Record Croatian GDP Drop

As Poslovni Dnevnik writes on the 28th of August, 2020, the Minister of Finance, Zdravko Maric, commented on the decline in Croatian GDP in the second quarter, which amounted to 15.1 percent and is the largest decline since statistics have been recorded over the last 25 years.

"This is the biggest quarterly drop ever recorded in the Republic of Croatia, which I don't think should come as big surprise considering the coronavirus pandemic. Government spending is the only category that has recorded growth, which is expected given the circumstances and what we've done. The 14 percent drop in personal consumption is the largest drop in personal consumption ever recorded. We didn't expect such a big drop in investments,'' Zdravko Maric commented.

''Of the total investments in the Republic of Croatia at the annual level, 52 percent refers to construction, and that recorded a slight plus. We believe that the procurement of equipment led to the fact that total investments fell more than we expected them to. We also had a physical barrier regarding the procurement of equipment due to the pandemic,'' noted the Minister of Finance.

When asked whether a large number of dismissals would follow, Zdravko Maric said that no one could guarantee anything, nor can anyone really be very specific on that issue.

"Challenges remain. We all need to do everything we can to save jobs as much as is possible, that's the most important thing now. In some segments, such as construction, it can already be seen that things are getting better, while in others, such as catering and hospitality, things are more difficult,'' stated Maric.

"The decline in the second quarter is at the level of the Eurozone. When looking at individual countries, there are countries that have a higher rate of decline, Italy, Spain, Portugal… We also did an analysis with the first quarter included, and that marked a decline of 7.8 percent, concluded Zdravko Maric.

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Wednesday, 26 August 2020

FinMin: Q2 GDP Drop Expected To Be Larger Than During Financial Crisis

ZAGREB, Aug 26, 2020 - Finance Minister Zdravko Maric said on Wednesday the GDP drop in this year's second quarter was expected to be larger than the largest drop during the global financial crisis.

The national statistical office is expected to issue a report on GDP in Q2 on Friday.

Responding to questions from the press, Maric said the government would present new forecasts for the whole year in the first two weeks of September.

The largest GDP drop to date, of 8.8%, was recorded in Q1 2009, at the start of the global financial crisis.

Six analysts polled by Hina expect GDP to drop 13.9% year on year. This will be the first drop since mid-2014 and the largest since 2000.

Maric said everyone realized how much the state-supported the economy this year via job retention measures, but added that this could not be done indefinitely.

New programs are opening up, such as the EU's SURE program, from which Croatia is expected to receive €1 billion in favorable loans which will most likely be used to finance a shorter working week.

Maric said Croatia fared even better with the Next Generation EU instrument, the coronavirus recovery plan in which Croatia will have €9.4 billion at its disposal. He said the big challenge now was to draw the highest amount possible as quickly and as effectively as possible.

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Saturday, 22 August 2020

Minister Zdravko Maric Announces Cuts: Only Pensions are Safe

As Poslovni Dnevnik writes on the 21st of August, 2020, Finance Minister Zdravko Maric was a guest of Dnevnik Nova TV on which he revealed where the Croatian Government is planning cuts in order to "patch" the budget back up again, that is, which categories it will not touch.

At the beginning, the Minister of Finance, Zdravko Maric, commented on the deficit in the state treasury of 17 billion kuna when compared to last year and said that the deficit due to the coronavirus crisis is actually even bigger.

“This is a mid-year result that applies to both the period before the arrival of the coronavirus pandemic and after the fact. We'll try to see how much coronavirus is actually going to cost us. On the one hand, we have a decline in revenues, both due to the decline in economic activity and due to the anti-epidemic measures, delays and the write-offs of taxes, but increased needs on the expenditure side of the budget. We paid only six billion kuna in job preservation support. When some other measures are added to that, we're at almost 12 billion kuna, and then when we add it all up, we come to 21 billion kuna, and that's at the moment,'' explained Minister Maric, pointing out that cuts are being considered, and only pensions will be safe from them.

"Pensions will certainly not be touched, all other things are subject to our considerations," he said. He said that the government is fully aware of the situation with the crisis, but pointed out that in the past four years they have proved that they will return public finances to balance as soon as possible.

"Reforms are one of the two key levers for using funds from the European Investment Recovery Fund," he said, but Zdravko Maric was reluctant to talk about concrete cuts and reforms and avoided those issues several times.

Although it isn't possible to accurately estimate the upcoming economic downturn, he pointed out that a decline of over twenty billion kuna is unfortunately predicted. The minister also explained that part of the reason for this was the decline in fiscalisation, which declined by more than 35 percent back in April this year.

"It will be the biggest drop for sure, at least since GDP has been being monitored. We didn't have such statistics to go off back during the Homeland War, but this will certainly be the biggest drop,'' claimed Zdravko Maric.

He announced that the government is starting to reduce income tax from 36 down to 30, and from 24 down to 20 percent, and the profit tax for all those who achieved less than seven and a half million kuna in turnover will be reduced from 12 to 10 percent. As for employees, he acknowledged that the new measures wouldn't affect the salaries of those not covered by the reduction, so he appealed to employers when it comes to salary increases.

"De facto, today you can pay an additional thousand kuna a month to a worker, or even more, without needing to pay any additional taxes. Even before the coronavirus crisis hit, one of the key issues was how we were going to be able to compensate for labour shortages and how we can stimulate employers to increase employee wages. We've already said that we can only get out of this crisis if we work at it all together, as a joint force,'' he said.

He estimated that we will return to how thinga were the year before the coronavirus hit, in terms of the Croatian economic picture, only a year later than expected, so in 2022.

"It's a complex issue in which one must always refrain from commenting. We have a consultant doing his job, the process is carrying on, and when all the parameters are clear and when he sits down at the table and sees what that price is, whether the buyer is willing to buy and the seller sells, then we'll have to see, but it's complex and it's difficult go into details,'' Maric explained when discissing the complicated issue of possibility of buying INA.

Still, he admitted that all this has been going on for a long time and that it must end once and for all at some point in time.

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Sunday, 2 August 2020

Minister Maric Responds to Questions on Budget, Tax, Raising Minimum Wage

Finance Minister Maric spoke for Dnevnik HRT about the budget, the economic situation in the rapidly approaching autumn, money for Croatia from the European Union and other topics.

As Poslovni Dnevnik writes on the 1st of August, 2020, the Croatian Government projected a budget deficit of 25 billion kuna and when asked what the latest data was and whether the forecasts would be in those dimensions, Minister Maric said that Croatia had achieved practically all of its financing needs with well-known programmes, reports HRT.

"Our needs, owing to the coronavirus pandemic, have increased from 30.5 billion kuna to 64 billion kuna. In circumstances such as the ones we're currently in, we can state with satisfaction that we've fulfilled all of our obligations for financing in 2020, Minister Maric emphasised. When asked how much the interest rates were in line with the expectations, Maric said that the seven-year bonds, at 0.75 percent, were on good terms.

''The two billion euros that followed in the international financial market mark one of the highest quality bonds we've issued in the international financial market on the investor interest book itself at 1.5 percent for 11 years, and these latest data refer sto maturities of 12-14 , 5 years, and the interest rates are between 0.25 and 0.50 percent. I think that these are good conditions in the given circumstances,'' Minister Maric emphasised.

A 9.4 percent drop is forecast for this year. In a month, the Croatian Government will come out with new projections based on all the information we have. Maric said that all the measures that were put into operation from the first day were aimed at preserving liquidity and preserving jobs.

"We've amortised that first wave in an adequate way, but there are still days ahead of us and the Government will follow the epidemiological picture and continue to do everything to continue the trend of preserving jobs and to start the recovery as soon as possible," said Minister Maric.

Maric said that challenges exist and that Croatia as a country must learn to deal with them, as it did in the first wave of the pandemic. 750 billion euros from EU funds is a great chance for Croatia, but also for the entire EU economy, and it is an opportunity to make a step forward for the domestic economy, but also for society as a whole, Zdravko Maric pointed out.

"Informal and formal consultations with the Commission and other relevant bodies on the programme will start in October. In April, all countries, including Croatia, are obliged to send a National Recovery Plan and in it, among other things, define both structural reforms and investment activities that should be the key determinants of spending and absorption of the part [of the money] related to the recovery plan and resilience,'' he said.

He pointed out that the basic idea at the national level is to create the necessary preconditions for the quality implementation of several strong and recognisable projects, and also not neglect balanced regional development as one of the postulates of the Republic of Croatia.

"As far as the private economy is concerned, we want to make the most of EU funds, so that they reach those who are key drivers of our economy and investments in an adequate way, either in the form of grants or in the form of quality loans," he stressed.

When asked when the minimum wage can be expected to increase and taxes to be reduced, Minister Maric said that work would begin on that after the summer break.

"As Minister of Finance, I advocate the maximum responsibility for taxpayers, which we've done in the past four years, and return to the path of a balanced budget as soon as possible," he said, adding that in parallel there will be greater absorption from the recovery fund.

He pointed out that the details will be known in autumn.

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Thursday, 30 July 2020

FinMin: Almost Entire Amount of This Year's Financing Needs Secured

ZAGREB, July 30, 2020 - Finance Minister Zdravko Maric said on Thursday that of the HRK 63.4 billion necessary for financing this year, almost all had been secured by the summer break.

Although the financing account of HRK 63.4 billion sounded really high and there was a polemic about how to secure the money, almost all have been secured by the summer break, he said in parliament.

A general government surplus was planned for the first time for this year, in the amount of HRK 1.5 billion, but the coronavirus epidemic caused a drop in revenues and an increase in expenditures for healthcare and to help the economy, due to which the state had to borrow on the domestic and the foreign market, Maric said.

Instead of a surplus, we are planning a deficit of almost HRK 25 billion and this has affected the financing account, which amounts to HRK 63.4 billion for 2020, he added.

Maric announced that macroeconomic projections would be revised in late August and early September.

He was speaking during a debate on the ratification of three loan agreements with international financial institutions totalling almost €660 million for dealing with the COVID-19 crisis, the reconstruction of the Zagreb area after a March earthquake, and boosting public healthcare.

Two of the agreements are with the World Bank and one with the Council of Europe Development Bank.

(€1 = HRK 7.5)

Friday, 24 July 2020

Gov't Sends 3 Loan Agreements with Int'l Institutions to Parliament for Ratification

ZAGREB, July 24, 2020 - The government on Friday sent to parliament for ratification three loan agreements with international financial institutions worth €660 million to respond to the crisis caused by the COVID-19 pandemic, for post-earthquake reconstruction and for strengthening healthcare.

One agreement refers to a €275.9 million World Bank loan for crisis response and recovery support and another for a €183.9 million World Bank loan for post-earthquake reconstruction in the Zagreb area and for strengthening public health preparedness.

In early June, the government endorsed reports on negotiations on the two agreements, which were approved by the World Bank Board of Executive Directors at the end of June and signed at the beginning of this month.

Finance Minister Zdravko Maric said at a cabinet meeting that the repayment period for both loans was 14 and a half years with five years' grace and a variable interest rate tied to six-month Euribor plus 0.75% of the fixed interest margin.

The €183.9 million loan envisages the establishment of institutional and coordination capacities for planning and implementing the reconstruction of public buildings damaged in the earthquake, facilitating the restoration of key healthcare and education services after the earthquake, and improving the public health sector's preparedness for communicable diseases in the future, Maric said.

The government also sent to parliament for ratification a €200 million loan agreement from the Council of Europe Development Bank.

Maric said the repayment period was 12 years with three years' grace and a fixed interest of 0.24% or a variable interest rate based on six-month Euribor plus 0.36% of the fixed interest margin.

He said the loan would be used to reduce the contagion and effects of the pandemic and ensure the availability of medical services and supplies as well as drugs and protective equipment, among other things.

Croatian companies could receive €800m from Pan-European Guarantee Fund

The government also decided to initiate the signing of a contribution agreement with the European Investment Bank on the Pan-European Guarantee Fund in response to COVID-19.

The fund is part of the €540 million packages agreed by the European Council to help businesses, together with the SURE programme to help workers and the European Stabilisation Mechanism to help states, said Maric.

The aim of the fund is to ensure liquidity so that eligible businesses, notably SMEs, can deal with the crisis and continue to develop in the medium and long terms.

The target value of the fund is €25 billion and it is formed on the basis of member states' guarantees, while short term liquidity is ensured by the European Investment Bank. These guarantees cover losses and operating expenses, said Maric.

It is estimated that the fund will mobilise €200 billion in additional investment.

Maric said Croatia's contribution to the fund would be €106.7 million and that Croatian companies, notably SMEs, could receive €800 million from it, depending on the absorption by other member sates.

"Participation in the fund will give the economy, notably small and medium-sized enterprises which have been significantly affected by the crisis, access to additional capacities of the EIB group as part of emergency financial aid in the pandemic."

Wednesday, 22 July 2020

Wholesale Drug Suppliers Get HRK 500 Mn for Hospitals' Debt

ZAGREB, July 22, 2020 - By the end of July HRK 500 million from the treasury will be paid to hospitals to settle their debt to wholesale drug suppliers, it was agreed on Wednesday by representatives of the government and suppliers, who said this payment should keep hospitals supplied with drugs until autumn.

Government and wholesale drug suppliers' representatives met at the Health Ministry to continue negotiations on hospitals' debt to suppliers, which exceeds HRK 4.2 billion and which has prompted suppliers to say that they will stop delivering drugs and operating supplies.

Although suppliers demanded an urgent payment of HRK 1 billion to make it through the summer, today it was agreed that they would get half of that.

"This will enable us to pay for the drugs which we currently don't have and ensure their delivery until autumn," supplier representative Diana Percac said.

Finance Minister Zdravko Maric said the agreement was that his ministry would find the money and pay it from the treasury to the Croatian Health Insurance Fund by the end of this month, and that the Health Ministry would find a way to transfer the money to hospitals.

Health Minister Vili Beros said the negotiations would continue in the autumn to find a long term solution to settle the debt to wholesale drug suppliers.

(€1 = HRK 7.5)

Sunday, 19 July 2020

Zdravko Maric Announces Major Reforms, First Systematic Tax Debt Write-Off

Finance Minister Zdravko Maric has no doubt been plagued with questions about much needed reforms over the last few years, and even more so as Croatia prepares to eventually adopt the euro as its official currency and as such become a full Eurozone member. But, when will those reforms actually happen?

As Poslovni Dnevnik writes on the 18th of July, 2020, the Minister of Finance, Zdravko Maric, revealed that the reform priorities of this new Government headed by Andrej Plenkovic will involve the reform of the administration, as well as the reform of healthcare, for which, as Zdravko Maric says, the financial situation is unsustainable in its current form.

For the last weekend of July, Minister Zdravko Maric announced the first systematic write-off of tax debts, Jutarnji list reports.

"On Monday, we'll receive the data from Croatia's taxpayers for June. More than 90,000 taxpayers have asked for a tax deferral, so, we'll have a look at the numbers. If you have a drop in income of more than 50 percent in April, May, and June compared to the same period last year, you'll have the option to write off part or all of your tax liabilities either in full or in part. Anyone who has had a 20-50 percent drop will have the option of partial installment payments.

Over the last weekend of July, we're going to conduct the first systemic debt write-off. Of the 90,000 taxpayers who sought a deferral (excluding data for June), about 7,000 of them had a drop of less than 20 percent and as such, they were disqualified for a new deferral. They have already received it and the Tax Administration, as they say, will not immediately be on their backs over that. Such people will have the option of installment payments according to the criteria that existed before the coronavirus pandemic hit,'' Zdravko Maric explained to Jutarnji list.

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Thursday, 9 July 2020

Minister Maric Claims One Million Residents Will Have Higher Wages

As Poslovni Dnevnik writes on the 8th of July, 2020 due to the coronavirus pandemic, the Croatian economy is among the three most affected in the EU, and the European Commission's summer forecasts are that our GDP could fall by 10.8 percent. Minister Maric said that Croatia is sticking to its estimate of a 9.1 percent GDP drop, but also announced higher salaries for about a million residents.

When it comes to government finances, Minister Maric reported that back in June, the decline in the amount of fiscalised receipts compared to June last year was about 16.5 percent. As for budget revenues, VAT in June, he pointed out, saw a plus when compared to June 2019, due to the overflow from May, so this isn't a realistic look at things, but since the beginning of the year, tax revenues have fallen by a total of between 13 and 15 percent.

The Croatian Government plans to achieve wage growth by reducing income tax rates from 36 to 30 percent and from 24 to 20 percent, which is a move residents will immediately feel in their pockets and bank accounts.

When asked by journalists whether this means that, due to the reduction of income tax, about a million residents will have higher salaries in the first year of the new government's mandate, he answered briefly: "That's right."

Economist Zeljko Lovrincevic agrees with Miniser Maric's forecast that the economic downturn should be slightly smaller than the European Commission's currently dire estimates. How the drop in GDP will affect the standard of living of Croatian residents, he says, depends primarily on whether there will be compensatory measures for the economy and employment support, and of course the question is then who will finance them. It also depends on what the wage policy will be. What is certain is that the state doesn't have much room to help the economy at this moment in time.

The aid plan is questionable...

When it comes to aid of 10 billion euros that should come from the European Union itself, Lovrincevic noted that there has been no talk of that from Europe.

''That plan hasn't been agreed. That rabbit is still far away in the forest,'' said Lovrincevic.

Economist Damir Novotny said that, if you look at the economic history after the Second World War, there were incomparably worse situations than the one we're in today. Since the 1990s, he recalls, Croatia has had a bad economic situation for a whole decade, due to the Homeland War. The economic situation, he continues, began to improve in 2002, when wages also rose, and then came 2008. As a result of the financial crisis, 150,000 people in the private sector lost their jobs. The state sector then protected itself, taxes were raised in the then-introduced crisis tax, meaning that the state sector passed practically unscathed.

Government measures are crucial

Novotny states that Croatia has had very anemic economic growth over the last ten years, but admits that the government has responded well with its various measures to try to save jobs. How this crisis will affect regular people, he says, is currently difficult to assess. He agrees that it all depends on how long the government’s measures to help the economy will last.

''The big question is how long they can last, but it's certainly not infinite. What happened back in 2009 could happen again if the government's intervention doesn't continue. Recovery must be accelerated and that's something I hope will happen, because today we're in different circumstances than we were back in 2009 because we're also now a member of the EU, where we have access to the anti-recession measures that are offered,'' noted Novotny.

He also pointed out that European Union money, which is intended to help the economy, will probably be conditioned by the implementation of structural reforms, without which, Croatia won't get its pockets filled.

Lovrincevic and Novotny both agree that the situation for Croatia would be much better if we were a member of the European Monetary Union because we would have even more measures at our disposal to help the economy damaged by the coronavirus crisis.

Andrej Plenkovic doesn't have time to wait around for the economic storm that is on its way to Croatia and he will have to quickly put together a team that will be there to face many challenges. The elections will be repeated at one polling station next week, and only after that will the final results of the parliamentary elections be announced. That's when the deadlines for constituting the Parliament and forming a new government will begin. Andrej Plenkovic can calmly wait for consultations with President Zoran Milanovic because he collected the required 76 hands in half a day. He spoke with President Milanovic on Monday, and after the announcement of the final election results, they'll contact him again to arrange a formal meeting.

It is to be expected that Plenkovic could get the mandate to form the Government by the end of next week at the latest, and then he has thirty days to form his new team. The president should convene a constituent session of the Parliament within twenty days of the announcement of the final election results, and HDZ believes that this won't be delayed and that it will occur by the end of this month.

HDZ and its partners hope that the new government will be confirmed during the first few days of August, ie, before the anniversary of Operation Storm (Oluja), on August the 5th. It was announced earlier that the Parliament, once constituted, will certainly not have a break as it has enjoyed so far, but all of that needs to be discussed and worked out.

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Wednesday, 8 July 2020

FinMin Says Lower Taxes Don't Guarantee Higher Net Wages

ZAGREB, July 8, 2020 - Finance Minister Zdravko Maric said on Wednesday that tax cuts were not a guarantee of higher net wages but that efforts would be made to make that happen because of the idea behind tax cuts was higher wages and higher employment and investments.

Answering reporters' questions outside the government offices about the government's plans to reduce income tax rates from 36% to 30% and from 24% to 20%, Maric recalled that the HDZ party's platform envisaged certain tax changes, adding that the party stood behind that and that they would be an integral part of the government's programme as well.

He said that the government would continue with tax reliefs, but not this year since major legislative changes regarding the taxation system always took effect with the start of a calendar year.

Maric noted that lower taxes were not a guarantee that net wages would grow because that depended on employers, and in that context, he recalled that not everyone had lowered prices when the VAT rate was reduced.

"I will always do what is within my power but we cannot force anyone to do it," Maric said, adding that he expected the media to help create pressure so that lower taxes materialise as higher net wages.

He noted that around 1.8 million taxpayers, more than a half, were not subject to income tax so any change in that segment did not refer to them.

He added that the situation with the state budget was "not great" and that after four years of balanced budgets this year would see a rather large deficit, which, he noted, had been compensated for to a large extent with financing activities on the domestic and international markets.

"The situation is under control but challenges still lie ahead," said Maric, noting that the coronavirus crisis did not have to be only a problem and challenge but rather an opportunity to learn lessons and take steps that would put Croatia back on the right track, to be followed by higher growth rates.

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