As Poslovni Dnevnik writes on the 30th of April, 2020, on Thursday, the Croatian Government approved the National Reform Programme for 2020 and the convergence plan for both 2020 and 2021, which, in terms of economic policy, contains three key objectives – sustainable economic growth and development, linking education to the needs of the labour market and the sustainability of public finances.
To achieve these goals, 25 economic policy measures have been identified, grouped into 10 reform priorities.
These priorities are aimed at improving the business environment; future-oriented investment policy; improving the management of state property; improving public administration; improving the efficiency of the justice system; tweaking education and training in line with labour market needs; strengthening the framework for managing public finances and implementing fiscal consolidation; stimulating demographic revitalisation; improving the welfare system and ensuring the financial stability, sustainability and quality of the Croatian healthcare system.
The implementation of the measures is foreseen through 75 activities.
The programme also defines ten measures to achieve national targets under the Europe 2020 strategy in five different areas: employment, research and development, climate change and energy sustainability, education and the reduction of poverty and social exclusion.
Prime Minister Andrej Plenkovic said at the cabinet session that the programme was a reflection of the continuity of the Croatian Government’s policy, but also a reflection of functioning in these new circumstances caused by the coronavirus pandemic.
Croatia’s GDP is expected to fall by 9.4 percent.
The Croatian Government’s convergence programme projects a GDP decline of 9.4 percent for this year and a recovery of 6.1 percent for next year. All components of Croatia’s GDP, except government spending, will be slashed this year, said Finance Minister Zdravko Maric.
The general Croatian Government’s budget is expected to record a deficit of 6.8 percent of GDP, or 24.8 billion kuna, in 2020, and in 2021, a general government budget deficit is projected to fall to 2.4 percent of GDP.
Based on the fiscal balance of the general government budget, public debt to GDP is expected to grow by 13.5 percentage points in 2020 when compared to 2019 and will amount to 86.7 percent of GDP, largely due to increased demand for borrowing due to the negative fiscal impact caused by the ongoing coronavirus pandemic.
In 2021, with the general government budget deficit narrowing to 2.4 percent of GDP and strong economic growth, public debt is expected to reach 83.2 percent of GDP, down by 3.5 percentage points when compared to 2020.
Consumer prices are projected to fall slightly in 2020, by 0.3 percent year-on-year.
The Croatian Government estimates that the introduction of the Croatian Employment Service’s support for job retention will significantly reduce the impact of the negative shock on employment, with a 3.3 percent drop in employment expected throughout 2020, with an average unemployment rate of 9.5 percent in 2020, and of about 9 percent in 2021.
With respect to fiscal developments, direct budgetary aids are estimated at 14.9 billion kuna, which include the deferral of direct taxes and contributions, the write-off of direct taxes and contributions, the deferral of the 2019 annual income tax liability, aid when it comes to the maintaining of job positions and the procurement of medical and protective equipment to combat COVID-19, a price tag of 14.9 billion kuna has been estimated.
In addition, over 15 billion kuna was secured for favourable lending to entrepreneurs and businesses through HBOR and HAMAG BICRO programmes, and there is currently a 17 billion kuna moratorium on loans.
Croatia is much more prepared than it was back in 2008.
Minister Maric emphasised the fact that the main context of the adoption of the national reform programme for 2020 and the convergence plan for 2020 and 2021 are the devastating economic effects of the global coronavirus pandemic, but stressed that Croatia has dealt with the current crisis much more readily than it did when the global economic crisis of 2008 hit the country.
He recalled the fact that Croatia has had a surplus in its balance of payments account for several years, that its foreign debt was in a downward trajectory, and that it had achieved a budget surplus for three consecutive years, as well as a reduction in the share of public debt in GDP.
In addition, Croatia has introduced rapid and strong support to the private economic sector and achieved an enviable epidemiological picture, Maric added.
Make sure to follow our dedicated section for more on coronavirus in Croatia. For more on the domestic political scene, follow our politics page.
