Grčić: Noticeable slowdown in the decline of the economy

Deputy Prime Minister Branko Grčić commented today on the GDP results for the second quarter, with a decline of 0.7 percent, which is lower than expected. According to him, there is a noticeable slowdown in the decline of the economy.

– This is the best result of the Government in this mandate, and we expect that the gradual recovery will continue. All components of GDP have grown except for imports, which was enough to negate the positive effects, especially the export of tourist services. Trends are changing, as seen in the growth of investments, particularly state investments, which are 30 percent higher compared to 2012 – said Grčić, commenting on the data published today by the DZS.

The Deputy Prime Minister is particularly pleased with the increase in personal consumption, which he attributes partly to higher real wages but also to fiscalization that has moved part of the gray economy into the legal sector.

Grčić remains cautious about announcing whether this is a sign of exiting the crisis, as the economic situation is still very difficult. However, he emphasizes that the third quarter could bring GDP around zero percent or even a slight growth due to a successful tourist season. He is especially satisfied that pre-bankruptcy settlements are progressing despite legal issues, and hopes that companies trying to save themselves will contribute to further GDP growth.

– Eight countries in Europe have a lower recovery rate, and poor import results are a consequence of our entry into the EU. This particularly relates to the import of cars, which increased due to changes in the excise tax system. We expect that privatized shipyards will also awaken, as every ship ordered from us will significantly impact GDP – asserted Grčić.

He assessed that this is a relatively good shift – still insufficient but indicative – that we are on the right track. Grčić added that there will certainly be a correction of the annual GDP estimate, but it is still unknown how much, as the guidelines in the Government are awaited.

As Croatia, with the new decline in GDP, has fallen to the level of 2004, Grčić had to respond to the question of when we will return to the pre-crisis level. Forecasts suggest that this could happen only in 2020.

– Given the depth of the crisis and the decline we have experienced, a rapid recovery is not possible. However, we have grounds to be optimistic. Entry into the European Union through foreign investments and structural funds will have a positive effect after the current short-term problems – said Grčić.

He also commented on the excessive deficit that troubles the Government, as they inherited not only the visible but also the ‘hidden’ minus from their predecessors. He stated that the Government will have to consolidate the data and publish it, which will also mark the beginning of financial consolidation.

– We will not be able to cover the deficit solely through economic growth and revenues, but we will have to save on the expenditure side. It is better that we implement the reforms we have set for ourselves rather than doing so under pressure from the European Union – concluded Grčić, who announced that he will soon publish which reforms are being undertaken, as well as guidelines for the next three years.