Investors waiting to see the outcome of elections.
Just as Croatia is waiting for the forthcoming parliamentary elections, foreign investors in Croatia are also eagerly waiting for the new government to be formed. They have therefore delayed their investment decisions until they find out whose economic policy will win and what will be the future terms for investments, reports Vecernji List on August 22, 2015.
While prime minister Zoran Milanović is postponing the debate on the election date, even within his SDP, Croatian economy is “on hold”. Economists and analysts explain that investors cannot make decisions about spending money until they find out whether the change in government will affect the profitability of investments. In the last four years, SDP has insisted on tax discipline and mostly did not follow the policy of fiscal consolidation. It promises that in the next term in office it would pursue the policy of moderate austerity, which for the economy means an expensive state, while HDZ’s economic program is based on lower taxes and better business conditions.
“Amendments to just a few laws can very easily turn projected profits into an unprofitable investment. We all hope that taxes after the parliamentary elections will be lower, but in an unstable environment it is not possible to make investment decisions”, said entrepreneur Branko Roglić who tried to explain why there aren’t more investments in the months before the parliamentary elections.
Ante Babić, secretary general of the Association of Foreign Investors in Croatia, agrees and confirms that the investments are put “on hold”. “Many projects are postponed until after the elections, and everybody is waiting to see what our economic policy will be. In the meantime, the investors are focusing on neighboring countries”, said Babić who warns that Croatia has been “on hold” for years and that clearer guidelines are necessary if we want to attract more investments.
Although in the first quarter of 2015 there was a growth of activities in the field of foreign direct investments, it was a consequence of very low results in the previous quarters. In the three months of 2015, 393.4 million euros of foreign capital entered Croatia, but we must not forget that in the years before the crisis foreign direct investments in Croatia amounted to more than three billion euros a year.
Consultant Damir Novotny says that not everything is bad because some local businesses, such as the Tommy retail chain, continue to expand while there are many Austrian companies which are ready to invest capital in Croatia. However, he agrees that tourism and real estate sectors are waiting for the elections, primarily because there are several new laws which have to be adopted after the elections. Novotny said that everybody expects a change in economic policy, because of the pressures from the European Commission on fiscal consolidation and a new cycle of privatization. “We do not have a long-term economic policy and a lot depends on the elections. In those circumstances, you cannot expect major investments in an election year”, said Ivan Miloloža, the owner of the Munja factory.