Grcic: EC confirms Croatia recovering at accelerated rate

The European Commission's forecast has confirmed what macroeconomic indicators show and that is that Croatia is recovering at an accelerated rate, Deputy Prime Minister and Minister of Regional Development and EU Funds Branko Grcic told a press conference on Thursday.

Speaking of the key growth indicators, Grcic said that industry has grown the most since 2008, this year's tourist season has been the best yet, and exports have also increased, as a result of which Croatia has a positive balance of payments after years of deficit.

The European Commission on Thursday revised upward its projection of Croatian economic growth for this year to 1.1% from 0.3% given in its spring forecast, calling for structural reforms to stop public debt growth. According to the Commission's estimates, Croatia's GDP is expected to pick up to 1.4% in 2016 and to 1.7% in 2017.

"All this confirms that Croatia is recovering at an accelerated rate already this year and that we can expect even better results next year," Grcic said.

He highlighted the Commission's projection of investment growth by 2.4%, saying that this showed that European investors' perception of Croatia had changed for the better.

"Only growth and higher revenues can stabilise the budget deficit and public debt, while possible cuts would mean lower growth," Grcic said. He added that based on all indicators this year's GDP growth rate could exceed the Commission's estimate and reach up to 1.5%, which he said was "a decent rate".  

Labour and Pension Minister Mirando Mrsic said that the Commission had confirmed the positive trends in the area of employment, namely the fall in unemployment and the rise in employment, especially youth employment.

Mrsic said that 14,000 more people were employed than last year and the number of people out of work was the lowest in several years. In addition, 84,000 young people have found employment and over 30,000 of them have been hired on open-ended contracts.

Mrsic said that stories that 100,000 or 200,000 people had emigrated from Croatia did not "hold water", adding that migration to other countries was normal, especially now that Croatia is a member of the European Union, and that even before the economic crisis 10,000-16,000 people left the country annually.

Finance Minister Boris Lalovac said that the Commission had projected this year's budget deficit at 4.9% of GDP, but that in his estimate it could be even lower, namely 4.5% of GDP, as a result of the positive effects of all economic measures on taxes and other non-tax budget revenues, as well as cuts on the expenditure side of the budget.

He noted that VAT revenues this year had increased by 2.5 billion kuna and excise revenues by a billion kuna, and that the deficit was currently about 7.5 billion kuna.

Speaking of public debt, Lalovac said that its growth had slowed down considerably because major restructuring processes had been completed. He noted that the Commission had revised it down from 90.5% to 89.2% of GDP this year and from 93.09% to 91.7% in 2016.

Commenting on the section of the Commission's report concerning the consequences of conversion of Swiss-franc loans into euro-denominated loans, Lalovac said that the conversion would have a positive impact on consumption because it would leave more disposable income, especially to young middle-class people.

He said that the Commission's estimate of HRK 600-700 million lower revenues from tax on banks' profits would not have a major impact on public finance and that the positive effect of consumption would be far greater.

Last update: Thu, 05/11/2015 - 16:53
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