FinMin says expects 2% GDP growth, but there are negative risks

Finance Minister Zdravko Maric said on Saturday that this year the government expected the economy to grow approximately 2%, but that there were negative risks that come with those assessments, primarily due to external factors.

"Our macroeconomic guidelines do not significantly depart from recently released EU projections," Maric told the Jutarnji List daily.

The European Commission has recently increased the outlook on Croatia's economic growth in 2016 from 1.4% to to 2.1%.

Maric, however, warned that primarily due to external factors, there are risks, such as slowing down of the growth of the Chinese and the American economy, possible increase of interest rates in the United States and low prices of oil.

In this situation, the sustainability of the public debt is one of the main challenges, and one should bear in mind three pillars of the adjustment. The first is fiscal consolidation, namely the reduction of the budgetary deficit to reach a sustainable level. The second pillar is the activation of state property so as to reduce the nominal debt and the third is the strengthening of the economic activity.

Croatia is facing the so called "snowball effect", namely a situation in which the cost of financing debts is higher that the nominal increase of Gross Domestic Product (GDP).

"To cover that difference, the state must target a primary surplus ... so as to stabilise the public debt ... We need 13 billion kuna of primary surplus cumulatively in three years," Maric said.

The minister said he expected austerity measures in the form of cutting salaries in the state sector.

Last update: Sat, 20/02/2016 - 11:25
Author: 

More from Croatia

Croatia not ready to introduce dual education

Dual education or connecting the labour market with the education sector considerably reduces youth unemployment,...

Croatia records 16.6m tourist arrivals, 90.7m nights this year

In the first 11 months of 2016, 16.6 million tourists stayed in Croatia, accounting for 90.7 million nights, up 10.2...

EC urges Slovenia and Croatia to implement joint energy projects

The European Commission (EC) has recommended that Slovenia and Croatia implement joint energy projects because their...

Croatia's new car sales up 21% in Jan-Nov

A total of 40,631 new vehicles were sold in Croatia in the period from January to the end of November 2016, which...

PBZ puts Croatia's growth at 2.7% in 2016

Privredna Banka Zagreb (PBZ) has revised upward its forecast of Croatia's economic growth for 2016 from 2.3% to 2.7...