Minimum net wage for 2021 to be 3,400 kn

The minimum net wage for 2021 will be 3,400 kn, or 4,250 kn in the gross amount, which is 150 kn or 4.61% more than the average minimum net wage for this year, it was determined by a decision on the minimum wage adopted by the government on Thursday.

Prime Minister Andrej Plenković said that as of 1 January 2021 the minimum wage would be 1,130 kn higher in the gross amount, or 904 kn higher in the net amount, compared to 2016.

The minimum wage increased by 36.21% over four years, Plenković said.

The minimum net wage for 2020 was 3,250 kn, or 4,062.51 kn in the gross amount, and at the moment when it was proposed it amounted to 46.49% of the average gross wage in legal entities in Croatia from January to July 2019, according to the national statistical office.

Currently it  is at 44.25% of the average gross wage in the first seven months of 2020, the state secretary at the Ministry of Labour, Pension System, Family and Social Policy, Dragan Jelic, said.

An expert committee in charge of monitoring and analysing the trend in the minimum wage proposed that the minimum gross wage for 2021 be in the range of the current minimum gross wage to 4,407.82 kn.

2021 budget to pave way to pre-crisis trajectory of public finance

Speaking of the budget proposal for next year, Plenković announced further subsidies for the healthcare system, the enterprise sector, agriculture and social welfare, citing the financing of measures for shorter working time, job retention, post-earthquake reconstruction, the Krk LNG terminal project and support for local development projects.

The government has projected a GDP growth rate of 5% in 2021 and growth rates of 3.4% in 2022 and 3.1% in 2023.

Plenković said that the government also counted on EU funding, recalling that over €24 billion would be available to Croatia over the next seven to ten years.

Speaking of the revision of the 2020 budget, the prime minister said that this year's budget deficit would be HRK 29.5 billion, or 8% of GDP, adding that figures for the third quarter indicated a slow economic recovery.

He mentioned a successful tourist season this year, much better than expected, saying that this was thanks to the prompt response to the coronavirus outbreak, the timely preparation of the season and the increased influx of EU funds.

Revised budget tabled with revenues at HRK 131.1 bn, expenditures at HRK 155.9 bn

The government sent to the parliament a draft revised budget for 2020 envisaging budget revenues of 131.1 billion kn,  9.2 billion more than in the previous projection made in May, and expenditures amounting to 155.9 billion kn, an increase of 8.6 billion kn.

As a result, this year's budget gap will stand at 24.8 billion kn, or 6.7% of the country's Gross Domestic Product.

When extra-budgetary beneficiaries and the local authorities are added, this year's budget deficit will total 29.5 billion kn in accordance with the ESA 2010 methodology, which represents eight percent of GDP.

Addressing the government's session, Finance Minister Zdravko Marić said that public finances and the budget in 2020 were used predominantly for job retention efforts and for overcoming the situation caused by the COVID-19 pandemic and the consequent crisis.

Maric said that the latest revision was based on projections made in September, when it was assessed that this year, Croatia's economy could contract by eight percent, while in May, projections were more pessimistic and a contraction of 9.4 percent was expected.

According to the latest revision, tax revenues are likely to amount to 72 billion kn in 2020, which is 5.9 billion kuna more than in the May projections.

VAT revenues are set to be 46.7 billion kn or three billion more than planned in May.

Contributions, which are "the best indicator of the state of affairs on the labour market", make the finance minister happy, as their latest projection is by HRK 1.5 billion higher, amounting to HRK 22.7 billion.

Expenditures 8.6 billion higher than previously planned

The total expenditure side of the revised 2020 budget will be 155.9 billion kn, 8.6 billion higher than the initial plan of 147.3 billion kn.

The outlays of the Finance Ministry have increased by 2.3 billion kuna, for exchange rate differences, interest on borrowing, higher contributions to be paid to the EU and more funds for the Croatian development bank (HBOR).

For instance, under the revised budget, the Health Ministry's outlays have increased by HRK 1.76 billion kuna, including HRK 1.34 billion for the payment of liabilities to drug wholesalers.

The outlays of the Labour and Pension System Ministry have increased by 1.4 billion.

Public debt in 2020 at 85.3% of GDP

Minister Zdravko Marić commented on the share of public debt in GDP and said that during the government's last term it decreased by 12 percentage points.

At the end of 2019 it was 72.8%, or 292 billion kn. Maric said that from 2015 to 2019 the government had managed not only to decrease the share of public debt in GDP but also to maintain the public debt in nominal terms at approximately the same level as in 2015.

The impact of the coronavirus epidemic is visible in the one-time increase in the share of public debt in GDP this year, so it is expected that the share will be 87.3% at the end of 2020.

"If we hadn't been doing what we have been doing for the past four years, the upward trend in public debt would have continued. Croatia would today have a public debt at above 100% of GDP, and that would not only have a significant effect on our credit rating, but the conditions of borrowing and the price of capital, as well as its availability, would be in quesiton," Maric said.

Despite the shock and the effect of COVID, with the proposed 2021 budget and projections, the government is ensuring the continued sustainability of public finances, the minister said.

He said that in the next two years it was estimated that the share of public debt in GDP would drop by an average 2 pp year-on-year, in 2021 to 85.3%, in 2022 to 83.4% and in 2023 to 81.2% of GDP.

2021 budget projected with deficit at 2.9% of GDP

After the economic contraction of 8% in 2020, the government has forecast a positive economic growth of 5% in 2021, 3.4% in 2022 and 3.1% in 2023.

"From these figures we can conclude that according to our estimates full economic recovery can be expected at the end of 2022 for certain components of GDP, some will spill over into early 2023," Marić underlined.

This is the baseline scenario while the downward risks to achieve it are related to the further developments with the pandemic and a vaccine being found and the consequent effects to the economy and budget, said Marić.

Based on individual components of GDP, the government has forecast a growth in personal consumption of 2.6%, government spending of 0.5%, gross fixed capital formation by 0.8% and a 9.8% increase in the export of commodities and services. At the same time it expects the import of commodities and services to fall by 8.9%.

Increase in budget revenue by 12.3% and expenditure by 1.3%

Total budget revenue for 2021 is planned at 147.26 billion kn, which is 12.3% more than what has been planned during the proposed budget revision for this year.

Tax revenue next year could be 79.5 billion kn or 10.4% more than this year while contributions could rise 8.4% to 24.6 billion kn.

A marked growth is expected in the grants which should increase by 29.4% to almost 25 billion kn.

Total expenditure will amount to 157.7 billion kn or 1.3% more than this year so the budget deficit is estimated at 10.66 billion kn.

The general government deficit according to ESA 2010 methodology will amount to 11.56 billion kn which is 2.9% of GDP after this year's deficit of HRK 29.5 billion or 8%. The government plans to continue narrow the government budget deficit in the next two years to 2.1% and to 1.6% respectively.

Maric underlined that in 2021 HRK 2.1 billion is planned from EU funds for COVID measures,while sources that impact government spending from the budget will amount to HRK 100 million, as an outlay for that purpose. This year HRK 8.1 billion in expenditure is planned for COVID  measures, 5.4 billion kn of which has come from the sources that  impact the general government budget.

Identity Card Act to be amended

The government has sent the final bill amending the Identity Card Act to the parliament, and a novelty is that biometric identifiers in the form of a facial image and two fingerprints will be stored in the storage medium of the new ID cards.

The visual appearance of the identity card will also change -- on the front, there will be a two-letter country code of the Republic of Croatia (RH), printed in negative in a blue rectangle and encircled by 12 yellow stars, Interior Minister Davor Božinović said.

The bill ensures that the new ID cards are in line with the European Parliament's regulation on strengthening the security of identity cards of EU citizens and residency documents issued to EU citizens and their family members, he said.

In line with the regulation, the age required for issuing an identity card with a longer validity has been raised from 65 to 70, and identity cards without a validity period which do not meet the minimum security standards will no longer be valid.

Technical prerequisites are also being created for the use of electronic functionalities of the ID card on mobile phones and tablets and not just computers.

The law should enter into force on 2 August 2021.

Croatia to establish diplomatic relations with five more countries

Croatia is establishing diplomatic relations with South Sudan, Somalia, the Central African Republic, Tonga and Bhutan, Croatian Foreign Affairs Minister Gordan Grlić Radman said, noting that this will contribute to "the realisation of Croatia's foreign policy goals".

Diplomatic relations with those countries will be established through a permanent mission to the United Nations (UN) in New York.

Grlić Radman said that Croatia thus "completes the process of establishing diplomatic relations with all modern and internationally recognised countries in the world", of which there are 194.

Gov't to participate in auction sale of vessel being built by 3. May dock

The vessel No. 514, which is being sold at an electronic auction conducted by the Financial Agency in the period from August 12 to November 3, is part of the Uljanik d.d. company's bankruptcy estate. The ministry can possibly submit a bid in the maximum amount of its claims, totalling HRK 174.2 million.

Once purchased, the vessel would be transferred to the Physical Planning, Construction and State Assets Ministry for management.

The State Secretary at the Economy and Sustainable Development Ministry, Mile Horvat, said that the Economy and Sustainable Development Ministry, together with the Physical Planning, Construction and State Assets Ministry and the Finance Ministry, would propose measures, activities and procedures for the completion of construction work on the vessel after it assumes full ownership of it.

The Economy and Sustainable Development Ministry will in turn, together with a selected shipyard, take part in negotiations with the potential ship owner on a contract for the completion and sale of the vessel.

The government previously approved HRK 150 million collateral for a loan to 3. Maj to launch production and complete work on vessels under construction with the aim of reducing existing losses for the state.

The money was intended, among other things, for the completion of the vessel No. 733 worth €26 million. The handover of that vessel was completed on September 29 whereby the government collateral was returned to the state budget and the total loan granted by the Croatian Bank for Reconstruction and Development (HBOR) was repaid.

Negotiations with the original buyer of the vessel No. 514 are entering their final stage and a letter of intent has been received. HRK 100 million would be returned to HBOR from the sale of the vessel No. 514.

There were no interested bidders for that ship at the first electronic auction.

The government today also adopted changes to the Conclusion on the expression of interest on the part of the government in creating preconditions for launching shipbuilding in Pula through the Uljanik Brodogradnja 1856 d.o.o. company.

Text: Hina

 

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