Dragan Munjiza on Government Measures: It Would Be Better to Leave It to the Market

The government today presented a new package of assistance measures for citizens and entrepreneurs that will come into effect at the beginning of October and last until the end of March next year.

– This package, like all previous ones, aims to maintain low energy prices, primarily electricity prices, since we have regulated gas for one year until March next year. The price of electricity for everyone, both for citizens and for institutions and entrepreneurs, remains the same – announced Prime Minister Andrej Plenković, adding that one-time assistance will be provided to the most vulnerable to help them overcome the crisis.

Thanks to the government’s measures, in 2022, citizens had electricity bills that were three and a half times cheaper, while in 2023, the bills were half as cheap, Plenković added. The assistance measures will also apply to all state institutions and companies, but do not apply to large companies. As Plenković explained, the reason is lower energy prices, but if there are more serious disruptions in the electricity market, the government will respond again with assistance measures. Support for entrepreneurs with an average annual electricity consumption of up to 10 GWh remains the same.

The reduced VAT rate is extended until March 31, 2024, for gas, heating stations, firewood, pellets, etc. For households and entrepreneurs, the price of thermal energy remains unchanged, which is a measure worth 267 million euros annually.

An additional measure that has been adopted is the limitation of prices for basic products. Prices, as announced, will not change for sunflower oil, milk, flour, sugar, whole chickens, and minced pork.

The new products that have been included in the list of 30 basic products for which prices are limited are: yogurt, semi-hard Gouda cheese, rice, spaghetti, fresh eggs, pork neck, beef neck, sausages, hamburgers, potatoes, carrots, colored beans, tomato puree, lemons, Gala apples, milk chocolate, sugar syrup, toothpaste, shower gel, shampoo, toilet paper, sanitary pads, and diapers. Additionally, banks will increase interest rates on deposits, i.e., citizens’ savings.

The new measures were commented on for Lider by consultant Dragan Munjiza.

– The government has set a political goal to help the population with lower purchasing power and to stop inflation, even though that is not essentially its task but the task of central banks. However, due to the current situation and the assistance of journalists, there has really been a great pressure to achieve that goal, i.e., social transfer, and to direct bankers and traders to measures that would be desirable and that the government assessed would be good.

I think it would be better to leave it to the market, for traders to lower prices themselves because they simply have to protect turnover, and I also think it would be better to lower the VAT rate on certain products or to include more products in the rates of five and 13 percent, and then to have a conversation with traders as was done in Spain – said Munjiza, adding that the most important thing now is implementation because it is one thing to order something, and another to actually implement it.