FinMin says expects 2% GDP growth, but there are negative risks

Finance Minister Zdravko Maric said on Saturday that this year the government expected the economy to grow approximately 2%, but that there were negative risks that come with those assessments, primarily due to external factors.

"Our macroeconomic guidelines do not significantly depart from recently released EU projections," Maric told the Jutarnji List daily.

The European Commission has recently increased the outlook on Croatia's economic growth in 2016 from 1.4% to to 2.1%.

Maric, however, warned that primarily due to external factors, there are risks, such as slowing down of the growth of the Chinese and the American economy, possible increase of interest rates in the United States and low prices of oil.

In this situation, the sustainability of the public debt is one of the main challenges, and one should bear in mind three pillars of the adjustment. The first is fiscal consolidation, namely the reduction of the budgetary deficit to reach a sustainable level. The second pillar is the activation of state property so as to reduce the nominal debt and the third is the strengthening of the economic activity.

Croatia is facing the so called "snowball effect", namely a situation in which the cost of financing debts is higher that the nominal increase of Gross Domestic Product (GDP).

"To cover that difference, the state must target a primary surplus ... so as to stabilise the public debt ... We need 13 billion kuna of primary surplus cumulatively in three years," Maric said.

The minister said he expected austerity measures in the form of cutting salaries in the state sector.

Last update: Sat, 20/02/2016 - 11:25

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