As Frenki Lausic/Novac writes on the 20th of April, 2019, the Croatian Government’s convergence program for the next three-year period has identified the pension and health system as the two largest structural risks, both of which are associated with the country’s worryingly negative demographic trends.
This government assessment came at a time when trade unions are busy organising a referendum on pension reforms, as well as during a somewhat shaky period in which Zdravko Marić, the Croatian finance minister, said that Milan Kujundžić, the minister of health, is an excellent minister but that the Croatian health system with over seven billion kuna’s worth of debt is unsustainable in an interview for N1.
When it comes to Croatia’s concerning demographic trends, the program states that, when comparing the European Union and the Republic of Croatia, in the period 2016-2070, the remaining life span after 65 years of age will be extended by 6.4 years in men and by 6.2 years in women in Croatia, whereas in the EU, it will be 5.3 years more for men and 5.1 years more for women.
It has been stated that the life expectancy at birth in 2016 was 81.1 years for women and 75 years for men, which is less than the average for the EU, where the expected life expectancy at birth for women was 83.7 years, for men 78.3 years. However, data for the Republic of Croatia showed that life expectancy up to 2070 will be 9.4 years more for men and 7.8 more for women, while for the EU, life expectancy is expected to grow to 7.8 years more for men and 6 more years for women.
In this context, the results of the long-term projections for the Republic of Croatia for the period 2016-2070 show that without the calculated effects of the reform which came into force at the beginning of this year, pension expenditures from the first pillar should be reduced from 10.6 percent of GDP, which is what it was back in 2016, to 6.8 percent of GDP to the year 2070.
At the same time, transfers from the national budget to cover the deficit would gradually fall from the current 4.8 percent to about 1.2 percent of GDP by the year 2070. Expenditures for pensions from the second pillar should gradually increase to 1.6 percent in 2070, which means that overall retirement expenditures from the first and second pillars in 2070 would amount to 8.4 percent of Croatia’s GDP.
Thus, looking at the situation macroeconomically, the pension system would remain viable, but with inadequately small pensions. That is why the government states that measures from the latest pension reform will increase pension adequacy and, accordingly, retirement expenditures in the first pillar.
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Click here for the original article by Frenko Lausic for Novac/Jutarnji
