Croatian Government: Three main goals of national reform programme

ZAGREB, April 30 (Hina) – The government on Thursday adopted a national reform programme for 2020 and a convergence plan for 2020 and 2021 comprising three goals – ensuring sustainable economic growth and development, connecting the education sector with the labour market, and maintaining the sustainability of public finance.

To achieve these crucial goals, 25 economic policy measures were defined and grouped into 10 reform priorities – improving the business environment, promoting a forward-looking investment policy, improving the management and use of state property, streamlining public administration, improving the efficiency of the judicial system, promoting education and training in accordance with labour market needs, strengthening the framework for the management of public finance and the implementation of fiscal consolidation, promoting demographic revitalisation, upgrading the social welfare system and ensuring the financial stability, sustainability and quality of the healthcare system.

75 activities for implementation of measures

These measures will be carried out through 75 activities.

The programme also defined 10 measures to achieve the national goals in five areas of the Europe 2020 strategy – employment, research and development, climate change and energy sustainability, education, and reducing poverty and social exclusion.

Prime Minister Andrej Plenkovic said that the programme reflected the continuity of government policies and the work in the present circumstances caused by the coronavirus pandemic.

GDP forecast to fall by 9.4%

The convergence plan projects a GDP fall of 9.4% for this year, while next year it is expected to recover at a rate of 6.1%.

All GDP components other than state spending, driven by allocations to the healthcare system and grants to the enterprise sector, will fall this year, Finance Minister Zdravko Maric said.

The general government budget is expected to run a deficit of 6.8% of GDP, or HRK 24.8 billion, in 2020 and of 2.4% in 2021.

The public debt to GDP ratio is forecast to increase by 13.5 percentage points from 2019 to 86.7% of GDP, mostly due to increased needs for borrowing as a result of the negative fiscal impact of the coronavirus pandemic.

In 2021, as a result of the expected reduction of the general government budget deficit to 2.4% of GDP and strong growth, the public debt to GDP ratio is projected to reach 83.2% of GDP, a decrease of 3.5 percentage points from 2020.

Consumer prices are forecast to fall slightly in 2020, by 0.3% year on year.

The government expects that the provision of job retention support by the national employment bureau (HZZ) will considerably alleviate the shock to employment, predicting that the number of people in work will decline by 3.3% in 2020, while the average survey unemployment rate is expected to reach 9.5% in 2020 before decreasing to 9% in 2021.

Direct budget support, including deferral and write-off of taxes and contributions, job retention grants and grants for the procurement of medical and protective equipment to fight the COVID-19 outbreak, is projected at HRK 14.9 billion.

An additional HRK 15 billion has been secured for favourable loans to businesses through various schemes of the Croatian Bank for Reconstruction and Development (HBOR) and the HAMAG-BICRO agency for small and medium-sized enterprises, and HRK 17 billion will be ensured for the moratorium on loan repayments.

Croatia much better prepared than in 2008

Minister Maric said that the national reform programme for 2020 and the convergence plan for 2020 and 2021 were being adopted in the context of the destructive economic effects of the global coronavirus pandemic, but noted that Croatia was now much better prepared than it had been for the global crisis of 2008.

He recalled that Croatia has run a surplus in the balance of payments account for several years, its external debt is on the decline, it has generated a budget surplus for three years in a row and its public debt to GDP ratio has been decreasing.

In addition, Croatia has provided swift and strong support to the private sector and achieved a very good epidemiological picture, Maric said.

(€1 = HRK 7.552616)