ZAGREB, May 3, 2018 – Prime Minister Andrej Plenković said on Thursday that the European Commission’s forecast of Croatia’s economic growth at a rate of 2.8% matched the projections by the government and the Finance Ministry, adding that the EC’s forecast was motivating.
The EC on Thursday confirmed its forecast of three months ago, estimating that the Croatian economy will grow at a rate of 2.8% this year and 2.7% next year. The government based this year’s budget on a forecast of 2.9% growth.
“The Commission can see that we have made significant progress in fiscal discipline and ensuring continuity of growth. As for public debt reduction, they are even more optimistic than we are about the speed at which the public debt will be reduced, which is one of the criteria for introducing the euro, and that is one of our objectives,” Plenković told reporters.
The EC’s spring outlook forecasts that once again this year, similarly to last year, Croatia will record a general government surplus of 0.7% of GDP. That should lead to a further decrease in the debt to GDP ratio, after it fell to 78% last year and is expected to fall to 73.7% this year and to 69.7% in 2019.
“It seems to me that their forecast is motivating. I think that as far as Agrokor is concerned, we reacted excellently. We established a legal framework and I believe that we will complete that process within the legally defined deadline. I also believe that a further increase in employment, a further decrease in unemployment, and opportunities created by better absorption of EU funds will be motivating for the government to create a positive business environment for further growth, production and exports,” the prime minister said.
The EC says that risks related to the forecast stem from a settlement with Agrokor’s creditors, which is yet to be achieved. “A successful outcome could increase production and investment in the group and its suppliers, while a failure to agree a final settlement could result in financial and operational disruptions,” the Commission noted in its forecast.
It also projects that emigration could slow down due to the strong growth in employment and increased earnings.
Reporters asked Plenković whether he was satisfied with the direction the new multiannual financial perspective for the 2021-2027 period was heading as proposed by the Commission on Wednesday, which among other things intends to reduce funding for cohesion policy and agriculture by 5%.
Plenković said he believed Croatia would be satisfied with its envelope. “Real negotiations are still ahead of us. The Commission has come out with numbers. Croatia has a task force following that process. Our priorities are tied to cohesion policies, that is, a balanced regional development, economy, entrepreneurship, youth, education, innovation and demographic revitalisation, but also traditional policies like agriculture. We think that some of that, which is essential to us, will be dealt with through issues like security and protection against illegal migration,” he said.
He recalled that Croatia has expressed its willingness to pay more into the EU budget than it has until now. “We will without a doubt continue to be one of those countries that will profit from the EU budget,” he said and added that the next perspective “should be a time when we keep in step with those who are ahead of us.”
This is the first time the EC’s multiannual proposal recommends tying EU funds to the rule of law. “As far as conditionality is concerned, we have certain reservations. We have to see what that refers to precisely and how, because it’s not the same if those who were in the Union before us were granted funds regardless of whether they respected the criteria, and now that is being introduced as a novelty. We will be very cautious in formulating our final conclusions,” he said and recalled that in the end the budget would be adopted in consultations between the Council of Ministers, where the Croatian government has a representative, and the European Parliament.
