Croatian portal compares the economic manifestos of the two main parties.
Pre-election economic manifestos of the main parties are quite similar due to the fact that no mention is made of painful cuts, while the economic growth is planned based on a number of incentive measures which will be paid for from the state budget and EU funds. The following are the main similarities and differences in five economic areas, reports Tportal on October 13, 2015.
1. Fiscal Policy: Taxes and Government Finances
Fiscal policy as the most important segment of economic policy is mainly based on reducing tax burden and increasing state subsidies with various consequences – from employment growth to increased investments and demographic renewal.
Both parties are promising the reduction of VAT. SDP plans to reduce VAT from 25 to 13 percent for selected agricultural and food products in order to improve competitiveness and strengthen agriculture and food industry. In addition to the reduction in VAT, SDP promises further tax relief of wages in order to stimulate personal consumption.
HDZ promises tax reform which will be based on a significant reduction of various fiscal charges for businesses, and simplifying and reducing taxes, in particular for small and medium enterprises. Also, in the first two years of the term, they promise to create conditions for the reduction of the VAT rate from 25 to 23 percent, while in the short term they promise to reduce VAT on baby food to five percent.
When it comes to reducing the deficit and public debt, it appears that both parties believe that this problem will solve itself with implementation of measures to accelerate economic growth. HDZ does not even mention the issue, while SDP notes that they will reduce the deficit and stop the growth of public debt primarily on the basis of the growth of budget revenues.
Instead of reducing the budget expenditures, we can expect further increases since the measures related to other economic areas are largely based on financing from the public purse.
In order to encourage employment, SDP promises abolition of salary contributions over five years for people older than 50, and increased support for the employment of women and young people.
HDZ promises a total of 100,000 new jobs, mostly in agriculture and forestry. The goal is to create a new concept of developing agricultural production by linking farms with scientists.
3. Pension System
SDP promises to introduce a option for pensioners, in the event of the death of a spouse, that the other spouse could continue to receive a certain percentage of late spouse’s pension, as well as the introduction of social pensions for citizens older than 65 who do not meet the conditions for retirement, and the change in the formula for determining the basic pension which would increase pensions for retirees.
When it comes to pensions, HDZ promises to increase pensions by five percent, as well as a long-term indexation of pensions to the growth of wages, GDP and cost of living, with the goal of the average pension reaching 60 percent of the average salary.
Pro-natalist policies are the foundation of HDZ’s plans for economic development. In addition to economic policy measures which should lead to revitalization of Croatia, the policy provides for financial incentives, with five percent higher maternity benefits and a thousand euros paid for each newborn child.
SDP promises the abolition of monetary limit on the amount of parental benefits for two additional months, up to the amount of 5,000 kuna.
5. Investments and Incentives for Entrepreneurs
When it comes to investments, SDP expects that the package of laws and measures will attract 30 billion kuna of private investments in industry and 38 billion kuna in tourism. Government investments will for the most part focus on irrigation projects, transport infrastructure and energy infrastructure, with 70-80 percent of investments financed by EU funds.
HDZ promises that Croatia will become the most attractive country for direct domestic and foreign investments among transition countries. They promise to prepare an investment catalogue with a list of investment costs, permits which are required and incentives which are offered. Special attention will be given to investment tax relief.
Both parties plan to increase investments in the construction of broadband networks, with HDZ not specifying whether it would be private or public investment, and SDP promising the development of national access infrastructure financed from European funds.
We can conclude that the economic manifestos of the main parties are more like a list of wishes than a serious strategic document. The most worrisome fact is that we cannot find any serious reforms which would lead to long-term structural changes and the removal of critical macroeconomic imbalances (budget deficits and high public debt). Therefore, we can only hope that behind the manifestos there are detailed implementation plans which contain a wider range of economic policy instruments which take into account economic realities.