ZAGREB, April 26, 2018 – Croatia’s government on Thursday endorsed a National Reform Programme for 2018, and a three-year convergence plan with three main goals: boosting the competitiveness of the national economy, making the education system congruent with the needs of the labour market, and making public finances sustainable.
Outlining the documents at his cabinet’s meeting in Zagreb, Prime Minister Andrej Plenković said that now was the right time for implementing structural reforms. “These goals are based on the government’s political platform and are in line with the recommendations made in the European Commission’s reports. We want this document to trigger many reforms in 2018 and in the first half of 2019,” Plenković said.
The document includes 59 measures for 11 reform areas.
Plenković went on to say that the ministers were aware of strategic priorities and that economic growth and other macroeconomic indicators were favourable. He said that he expected one more excellent tourist season that would give an additional impetus to the national economy.
The National Reform Programme for 2018 is designed to ensure growth, employment and better living standards as the government’s priorities. The convergence plan projects Croatia’s growth in 2018 at 2.8%, and 2.7% in 2019, while a growth rate of 2.5% is expected for 2020 and 2021.
When it comes to the budget for this year, the government is sticking to its original plan that envisages a budget deficit-to-GDP ratio of 0.5%. This ratio is expected to contract to 0.4% and zero in 2019 and in 2020 respectively. In 2021 Croatia plans a budget surplus of 0.5%.
Concerning the public debt, the baseline scenario for its reduction envisages economic growth and state property consolidation and activation. The government is set to cut the debt-to-GDP ratio to 66% by the end of its term, while the government’s programme initially put this ratio at 75%. At the end of 2017, Croatia’s public debt-to-GDP ratio was 78%. In 2018 it is expected to fall to 75.1% and to 72.2% in 2019, further to 69.1% in 2020, while in 2021 it is expected to drop to 66%.
The government is determined to cut the cost of interest on the country’s borrowing to below two percent of GDP. In 2015, the cost of interest amounted to 3.3% of GDP, and in 2017 it fell to 2.7%.
The Reform Programme defines the state of affairs and plans regarding the implementation of the government’s key structural policies, while the Convergence Programme defines the key characteristics of macroeconomic and fiscal policy frameworks. The government must send the National Reform Programme and the Convergence Programme to the European Commission by the end of April. These activities are part of the process of mandatory reporting and adjustment of EU member countries’ fiscal policies to the jointly defined goals and regulations of the EU, and non-compliance with them results in sanctions, including the freezing of EU funds.
The National Reform Programme includes the restructuring of the transport sector, that is, of roads and the state-owned HŽ railway operator, the search for a strategic partner for Croatia Airlines, and regulations on the maritime domain and land for tourism purposes, on which bills are being drafted.
With regard to the restructuring of the railway sector, a comprehensive programme is being prepared to improve the operation of HŽ Infrastruktura and HŽ Cargo. Similarly as for the road sector, a project for the railway sector is being prepared with the World Bank.
The National Reform Programme also envisages a reform of the state administration and a bill on that matter is being fine-tuned, which means that there is a plan to open dialogue with the social partners. The new legislation on the state administration reform that is being worked on envisages also de-politisation of the state administration as well as regulation of government employees’ salaries. The new legislation envisages the introduction of 12 salary brackets and provides for promotion based on performance, which will be evaluated. The new laws also envisage one-off rewards as well as the possibility of demotion.
The government is expected to prepare amendments to the legislation on pension insurance and retirement that envisage increasing the statutory retirement age to 67 for both men and women through gradual but accelerated changes.
