European Commission Forecasts Higher Economic Growth for Croatia

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This correction is a good starting point, but it is not a growth rate which we can be satisfied with – says new Finance Minister Marić

In its latest economic forecast published on February 4, 2016, the European Commission expects that Croatian GDP will grow by 2.1 percent both this and next year, which is higher than what the EC predicted in its previous forecast in November last year. Then the Commission said that Croatia would grow by 1.4 percent in 2016 and 1.7 percent in 2017. The European Commission expects that GDP growth in 2015 was 1.8 percent, which is also more than its earlier forecast when the Commission expected GDP would grow by 1.1 percent in 2015. GDP growth will reduce the unemployment rate, but “the pace of recovery would remain limited due to high debt in both the private and public sectors”.

The most recent forecast is not based on plans of the new government led by Prime Minister Tihomir Orešković because the budget for 2016 has not yet been drafted so the forecast was prepared according to the policies of former government. “It is expected that the unemployment rate has fallen to 16.2 percent in 2015 due to the continuous reduction of the workforce, but also due to the increase in employment. By 2017, it is expected that the unemployment rate will continue to fall thanks to the wave of sustainable job creation”, says the today’s forecast of the Commission, which also adds that the unemployment rate will remain high.

Finance Minister Zdravko Marić commented on the latest forecast for Večernji list: “When you compare it with all the other EU member states, this is the largest increase in growth estimate. This correction is a good starting point, but it is not a growth rate which we can be satisfied with. Therefore, the government will do everything to further speed up economic growth”, said Marić.

Reporters asked him whether the positive forecast was partially the result of the last government’s work. “It is difficult to quantify, but it certainly has a lot to do with announcements and program of the new government”, said Marić. He said that next week he would have his first meeting with the European Commission and will go to the first meeting of the EU finance ministers.

Marić is determined to reduce the budget deficit to 3 percent of GDP as early as this year, regardless of the fact that the European Commission expects a deficit of 3.9 percent. “I have been very clear, it is our intention to reduce budget deficit to a lower level. We will this year target the deficit level of 3 percent of GDP. The European Commission’s 3.9 percent forecast was made on the assumption that there will be no changes in policies, but we are here to make changes and adopt measures which will further reduce the deficit. We want to stabilize public debt, and later to reduce it. Our aim is to bring the public debt to a level of 80 percent of GDP in the next three to four years”, said Marić.

Since he previously said that there would be no changes in taxes this year, journalists asked him what would happen with the abolition of tax on dividends, since that was agreed by both MOST and HDZ during coalition negotiations. “I have told you my opinion, we will focus on the spending side of the budget”, said Marić.


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