Primorac: Greater liquidity in the capital market is key to retaining startups in the EU

Croatia has the lowest rate of investment product usage in the European Union, and it is necessary to encourage a change in behavior among citizens through strengthening financial literacy and educating citizens about the opportunities available to them, said Finance Minister Marko Primorac today at the ‘Challenge of Change’ conference organized by the Zagreb Stock Exchange and the Pension Fund Association.

As he stated, the direct role of the state in terms of developing the financial market is limited, but it can be significant in creating a positive atmosphere related to innovation and investment.

– Only financially literate citizens can recognize investment opportunities and make responsible decisions – said Primorac, who did not attend the conference but sent a video recording. The minister also emphasized that approximately 50 percent of global market capitalization is located in the USA, while the EU accounts for only 30 percent, adding that the share of market capitalization in the GDP of the USA is 156 percent, while in the EU it is 50 percent.

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Marko Primorac at the Challenge of Change conference

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Primorac also reflected on the trend of domestic startups turning to the USA, where they see greater opportunities for success, and pointed out that a quarter of startups are relocating to other continents. The minister stated that greater liquidity in the capital market is key to securing financing for companies and retaining them in the European Union. He also emphasized the need to digitalize the capital market as much as possible.

– We are aware that without improving the capital market, it is unrealistic to expect further growth – said Primorac, adding that the state sees great potential, which is confirmed by the high interest in government bonds and treasury bills, highlighting that more than 150,000 citizens have invested in these securities, so the share of small investors in Croatia is now at ten percent.

How the capital market can better support companies was explained by the chairman of the management board of Hanfa Ante Žigman, who confirmed that, thanks to a number of various elements, we have good economic growth, one of the stronger ones in the European Union.

However, he pointed out that there are still significant risks due to interest rates, geopolitical conflicts, market corrections, and climate change.

– Interest rates have started to fall, and those who will now take out loans will have to pay significantly higher interest – said Žigman, who also stated that the European market is significantly lagging behind the American one today, and economic uncertainty remains at high levels, although it is relatively low in Croatia compared to the rest of the EU.

EU lost momentum in IPOs after the pandemic

Žigman confirmed the minister’s statements about the transition of domestic startups to the USA, claiming that this is because most investments in the EU go through banks, while in the USA it is a different story, as they are financed through the capital market. He also touched on the issue of initial public offerings (IPOs) on stock exchanges, stating that the EU has lost momentum in IPOs after the pandemic, and that they have recently been most common in the USA.

The market, as Žigman says, is more dynamic across the Atlantic with more trading and turnover, but to not paint everything in a negative light, he noted that the European Union is still a leader in green financing, although still far from the goal it has set.

In addition to Primorac and Žigman, the conference was opened by the CEO of the Zagreb Stock Exchange Ivana Gažić, the president of the Pension Fund Association Petar Vlaić, and the state secretary of the Ministry of Labor and Pension System, Family and Social Policy Ivan Vidiš.

Gažić emphasized that increasing the base of small investors is crucial for market development. She also highlighted cooperation among market participants in listing ETFs on the Zagreb Stock Exchange.

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Ivana Gažić at the Challenge of Change conference

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– Conditions have now been created for Croatian citizens to see the possibility of investing in the stock market – said Gažić, noting that many could turn to the stock market due to the announced property tax. Vlaić pointed out that voluntary pension funds have 1.3 billion euros under management, but that they should also be encouraged with tax treatment.

– The numbers of those entering combined pension savings have started to rise, which is very encouraging – concluded Vlaić.

Vidiš dedicated himself to the work of the government, stating that they pay special attention to future and current retirees and are working to make pensions more adequate.

– We have reacted strongly in all crises, and we have kept current retirees in relatively adequate conditions, but what goes under the radar is the package for capitalizing savings – said Vidiš, adding that this year data shows that there is a larger number of people who are contracting pension savings. Vidiš also concluded that our labor market shows good performance and that it is now necessary to do everything to ensure that pensions in the coming years are more applicable.