- Published: 27.09.2017.
PM Plenkovic: Past year one of stability, year ahead one of reforms, further growth
Prime Minister Andrej Plenkovic said on Wednesday that the past year was one of stability for Croatia during which a domino effect of the Agrokor crisis on the economy was prevented, while the year ahead would be one of further economic growth and reform.
"Behind us is one of the most challenging years since the mid-1990s on the economic, political social and international fronts," he said at the Big Plans Day conference, adding that the past year was one in which stability was preserved, while the year ahead would focus much more on growth and reforms.
Plenkovic said this year a tax reform which benefited entrepreneurs was implemented, the absorption of European funds was accelerated, the administrative burden was alleviated, and a domino effect of the Agrokor group's possible crash on the economy and the financial system was prevented.
Also, "we spared citizens a third election in less than two years," he said.
He said the first year of the implementation of the tax reform envisaged reducing the tax burden by HRK 2.5 billion and that the positive results of higher personal consumption on economic activity were already visible.
Plenkovic said orderly public finances were the foundation of macroeconomic stability and economic growth. "In a relatively short time we managed to turn around the public debt trends."
Thanks to that, Croatia exited the European Union's excessive deficit procedure and the fiscal results in the first half of this year are better than expected, he said. "For the first time in recent history, the general government budget had a surplus and the reduction of the public debt is continuing."
As a result of all that, the three leading rating agencies, Fitch, Moody's and Standard&Poor's, have upgraded their outlooks on Croatia's credit rating.
The government will continue to implement structural reforms, responsibly manage public finances and stick to the plan for the consolidation of state finances, which will keep up the economic recovery and result in a higher credit rating, Plenkovic said.
Since Croatia pays more than HRK 11 billion annually on public debt interest, the government's strategic goal is to reduce the debt to GDP ratio by more than 10 percentage points by 2020.
Next year's budget will be based on that principle and our future steps will be aimed at keeping budget expenditures in check and using any surplus revenues to reduce the deficit, the public debt and the tax burden, Plenkovic said.
The absorption of European funds is expected to contribute the most to higher revenues. The absorption has been markedly stepped up thanks to faster tender advertising, contracting and fund allocation, he added. He said the most important co-financed projects were the Peljesac bridge, the Dugo Selo-Krizevci railway, and Dubrovnik airport.
He also announced a score of measures to boost economic competitiveness, including fewer non-tax levies and simpler regulations. The parafiscal burden will be reduced by at least 20% in the 2017-19 period, he said.
Plenkovic said the law on the stimulation of investments would be amended by the end of the year to boost incentives for the IT industry, and that a new law on strategic investment projects would be adopted .
He said the energy sector was one of the more important areas for new investments and that the government was doing everything to use Croatia's geo-strategic position for oil and gas supplies by land and sea. He underlined the importance of the planned LNG terminal, for which European funds had been secured.
Plenkovic said Croatia had already met the EU's goals for ensuring 20% of energy from renewables by 2020. He said two-thirds of electricity production and one-fourth of consumption came from renewables.
He announced measures aimed at employing the domestic work force. He said over HRK 2 billion had been invested in employment and that this resulted in unemployment falling to a record low of 10.8% in July.
Plenkovic said the government had shown over the past year that it would respond quickly, efficiently and responsibly to economic crisis, preventing the Agrokor crisis from causing an economic crash and saving tens of thousands of jobs.
He said the low retiree-employee ratio (1:1.23) had been a structural problem for years and that the pension system reform was aimed at improving its fiscal and social sustainability by discouraging early retirement.
Plenkovic said the quality of healthcare would be improved by adopting of a national plan for the development of hospitals and encouraging young doctors to stay in Croatia.
He said the past tourism season was the best in Croatia's history, with predictions of 100 million nights, 17 million arrivals, and nearly EUR 11 million in revenues, about EUR 700-800 million more than last year. He said the goal was to have EUR 14-15 billion in revenues by 2020. He said over EUR 800 million had been invested in tourism this year and that next year's investments were planned at nearly EUR 1 billion.
Plenkovic reiterated that such a tourism season would not have been possible unless a faster border crossing regime had been ensured. He said the government's strategic goal was for Croatia to enter the Schengen Area, adding that the elimination of border checks on the Slovenian and Hungarian borders would stimulate the free flow of goods, services and people. He said the goal was for Croatia to be ready to fully apply the Schengen acquis communautaire as of 2018.
He recalled that by joining the EU, Croatia signed for joining the euro area and that it must meet four requirements - price stability, sustainable public finances, exchange rate stability, and convergence of long term interest rates.
Croatia has met nearly all the requirements and the debt to GDP ratio trend is positive, Plenkovic said, adding that a road map for the next few years, aimed at Croatia's euro area entry, would be presented very soon.
He said the government's economic policy efforts would focus on helping entrepreneurs, improving the business climate, raising employment, and on exports. He said 2018 could be the most successful business year so far.
The Big Plans Day conference was organised by the Lider business weekly, drawing hundreds of entrepreneurs. Opening the event, Croatian Employers Association president Gordana Deranja said this year employers would make business plans in conditions of economic growth and an excellent tourism season, but noted that the business environment was full of uncertainties and administrative barriers.
She supported the prime minister's decision to postpone the introduction of a property tax, saying the business sector needed the government to announce every move in time so that they can plan their operations. She said they were still waiting for the government's plan for 2018 and that whether the year would be one of a turnaround or of missed opportunities depended on that plan.
Text: Hina