Plenković: We are among the EU countries with the highest growth rates; the economy is heading in the right direction

Prime Minister Andrej Plenković stated on Thursday that the economic growth of 2.8 percent in the second quarter is confirmation that the Croatian economy is heading in the right direction, mentioning in this context the positive effects of the tax reform.

The Croatian Bureau of Statistics (DZS) published on Wednesday the first estimate indicating that the gross domestic product (GDP) in the second quarter increased by 2.8 percent compared to the same period last year, faster than the 2.5 percent in the previous quarter.

– These are positive news and confirmation of good economic trends, Plenković assessed.

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GDP has been growing for 11 consecutive quarters, which is, he says, extremely positive news, as well as the fact that GDP in the second quarter grew by 0.8 percent compared to the first quarter, which is more than the 0.6 percent growth in the first quarter.

He also emphasized that the growth of Croatian GDP in the second quarter was higher than the average in the European Union (EU).

The EU economy grew, according to seasonally adjusted data, by 0.6 percent on a quarterly basis in the second quarter, and by 2.3 percent year-on-year. The Croatian economy, on the other hand, grew by 0.8 percent quarterly and 3.4 percent annually.

– This places us among the EU countries with the highest growth rates, he said, assessing that this is confirmation that the Croatian economy is heading in the right direction.

He also pointed out that through the government’s engagement and the bold adoption of the law on extraordinary administration in companies of systemic importance, the impact of the crisis in Agrokor on the overall Croatian economy has been limited, which is also shown by the normal course of the tourist season in recent months.

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– Imagine if there had been no law on the introduction of extraordinary administration, what the supply would have been like, for example, in stores on Croatian islands. This should be put in the context of the best tourist season, and we expect Minister Cappelli 100 million overnight stays, Plenković stated.

In this context, Plenković also highlighted the positive effects of the tax reform.

– Since the property tax is part of a broader package of tax reform that we adopted last year, and it was just one of many topics, I believe, 16 acts that the Croatian Parliament adopted in December last year, where it somewhat flew under the radar, considering other significant changes related to income tax and corporate tax, this topic has caused a great stir in the Croatian public and requires further clarification, he said.

He reiterated that the Minister of Finance and the Tax Administration have been tasked with thoroughly explaining this topic once again to see if there is a need for modification.

– If that is necessary, the government and the Parliament exist for that. If it is assessed that we are not ready to introduce that tax, then we will postpone it. We want to find a solution that will also be in the spirit of the principle of fairness, as that was one of the main tenets of the entire tax reform, he said.

He noted that this is not a value tax on real estate, which many EU member states have, but an attempt to replace what is today called a communal fee, monument rent, and tax on weekend houses through the principles of fairness.

– We will thoroughly discuss this issue, submit the appropriate proposal to the Parliament after all effects are professionally and argumentatively explained to the public once again, he said, emphasizing that the revenue from this tax will be non-targeted revenue for local self-government, not the central state.

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Reflecting on the government’s decision to increase the fee for renewable energy sources from 3.50 to 10.5 lipa per kilowatt-hour from the beginning of September, Plenković stated that this fee has not been increased in the past four years.

– These are obligations that have existed previously, which follow the contracts that have been signed and are a continuation of our policy to ensure that as many renewable energy sources as possible are a source of electricity in Croatia, the Prime Minister emphasized, stating that this also follows global trends.

– In this way, there will be a certain increase in bills of about 20 kuna per month, but considering the tax reform, it will still be lower than it was at this time last year, the Prime Minister stated.

He also expressed hope that the government will be in a position by mid-2019 for this topic to no longer be on its agenda and that in discussions with companies dealing with renewable energy sources, other ways will be found to increase revenues for HROTE, which pays these fees.