Primorac: Next Year Economic Growth Slowdown

Finance Minister Marko Primorac stated on Wednesday that an economic growth of 5.7 percent and an inflation rate of 10.4 percent are expected for this year, while next year will see a slowdown in economic growth to 0.7 percent and inflation to 5.7 percent.

Projections indicate that there will be a significant slowdown in economic growth next year, as it is estimated that one third of the world will end up in recession, which does not give us optimistic expectations either, said Primorac at the conference on Croatia’s economic policy in 2023 in Opatija.

Government estimates also suggest that the share of public debt in GDP will be reduced to 71.3 percent in 2022 and to 69 percent in 2023.

The Finance Minister announced that fiscal policy will continue to be flexible and adaptable in the upcoming period, and efforts will continue to address the aftermath of the epidemic, earthquakes, and the accommodation of refugees from Ukraine.

Croatia is not in a bad position and has no bleak outlook, and the reasons for optimism are the benefits of introducing the euro and utilizing funds from the National Recovery and Resilience Plan (NPOO) and EU funds, emphasized Primorac.

He believes that we can be satisfied with the NPOO as we have already drawn a tranche of 700 million euros, in addition to the initial advance of 800 million euros, requested the withdrawal of the second tranche, and are intensively working on meeting 45 indicators necessary for the withdrawal of the third tranche. So far, 10 indicators have been met, he said.

He also highlighted that the credit rating has been increased and is the highest in Croatia’s history, which is also reflected in borrowing costs.

The Minister assessed that the past two years have been extremely difficult – damage of about 40 billion kuna was caused by Covid-19, while the earthquake caused damage of about 130 billion kuna.

Fiscal policy has been able to cope with challenges, but in the fight against inflation, it has limited intervention capabilities, he said. He reminded that targeted measures have been adopted to assist in combating inflationary pressures and rising energy prices, and that part of the crisis burden is borne by HEP, through subsidized electricity prices.

Primorac emphasized the need for strong coordination between monetary and fiscal policy, stating that actions should be harmonized, and that monetary policy can and should influence the reduction of inflation much more than fiscal policy.

He pointed out that there is also a need for more intense cooperation between the scientific community and the political public, i.e., policymakers in Croatia. This has already been discussed at the Faculty of Economics in Zagreb and the Economic Institute Zagreb, and everyone seems to agree that the connection between the professional and scientific community, when it comes to economics and economic policy creators, has somewhat faded and should be stronger, said the Finance Minister.

The President of the Croatian Economic Society (HDE) Ljubo Jurčić believes that Croatia has stagnated since Croatian politics severed ties with Croatian science, which, he says, should have been a support in creating economic policies. Croatia has experienced 40 years of stagnation; the country entered stagnation as early as the 1980s, we had promises and expectations, we are progressing, but not as much compared to others, although living standards have improved, he said.

Jurčić states that Europe is creating a single market to ensure goods circulate as quickly as possible, but does not care whose goods they are. That is our concern, and it depends on the development of our own economy, he emphasized.

At the 30th HDE conference, which will be held from November 9 to 11 in Opatija, the future of the Croatian economy will be discussed in the context of turbulent geopolitical events and uncertain economic movements. Participants will also address topics such as energy future, green economy, inflationary pressures, demographic issues, labor availability, euro introduction, sustainability of the economy, and other current topics.