Finance Minister Zdravko Maric talks about rebalances, projections and the euro area

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October 23, 2021 – Finance Minister Zdravko Maric has spoken on rebalances, projections for the future, stability and of course, the topic on most lips – Croatia’s entry into the eurozone , which is getting closer and closer.

As Poslovni Dnevnik / Ana Blaskovic writes, at the end of this year or at the very beginning of 2022, the situation in the Republic of Croatia is expected to return to pre-crisis levels. This is of course good news for the national economy in the run-up to entering the euro zone in 2023, but this generally optimistic picture is still threatened by many risks, ranging from low levels of vaccination to the so-called “Bubbles” on Croatian real estate. Marlet. These questions could be heard during the conference of the Zagreb Stock Exchange and pension funds entitled “The challenge of change / Izazov promjene”.

Finance Minister Zdravko Maric has announced that he will step down next week with a rebalancing and some new projections.

“At the end of this year, or at the beginning of next year, we should reach the figures before the pandemic”, he assured. The Croatian government will also update its budget expectations for the next three years, which will be marked by the implementation of the National Recovery and Resilience Plan, the effects of which are expected to increase GDP by 1.5 percentage points on average.

So far EUR 818 million has been injected into Croatia and further cash injections will depend on meeting 34 different criteria by the end of the year. If they are met, the government will submit a report to the European Commission (EC) in January or February, then “we can expect a new payment in May or June”.

Regarding euro area membership, said Finance Minister Zdravko Maric, everything is currently going according to plan. Interest rates and the exchange rate are not the cause, but inflation is a new fear. “Inflation is a priority for us because of society, the economy and of course people, but we should also look at it through Maastricht, even though Croatia is in the EU average. According to these projections, we should also meet them.The real date for joining the euro area is 2023, I see no reason why we will not be able to meet the criteria, ” said Maric.

The introduction of the euro as the official currency of Croatia could reduce the risk premium by two levels and thus partially cushion the possible growth of interest rates, a hot topic of recent times.

The governor of the Croatian National Bank (CNB), Boris Vujcic, on the other hand, expects a rapid recovery “in the form of the letter V”, for 2021 in the form of a GDP growth of 8.5%, then 4.1%. He noted that inflation is a consequence of supply disruptions, making it somewhat difficult for ordinary monetary tools to cope.

“The increase in benchmark interest rates over the next two years will not significantly affect the price of oil and gas, which accounts for half of inflation,” Vujcic said. He pointed out that the current figures (3.5% in September, op.a.) are historically low, but that we have grown used to a long period of low inflation, which has in fact been too low.

“This year we are forecasting an inflation rate of 2.3%, which is not worrying, it is actually very close to the monetary policy target and it will calm down a bit during the year. next “, he assured.

Risks in the macro environment …

Besides energy, the CNB sees many risks in the macro environment in the form of slower cleaning up of the market for bad companies and the creation of a real estate bubble, among others. Prices are also pushed by foreigners buying properties, especially on the coast.

“The availability of property has started to deteriorate, loan maturities relative to disposable income are slowly increasing. “If this trend continues, the purchase of real estate becomes inaccessible to a part of the population with low incomes, and this must be kept in mind because it also becomes a political problem”, warned the governor.

Evaluating the risks to financial stability, Hanfa’s Ante Zigman briefly summed it up by saying that “it’s not really great, but it’s not great either.”

“We’re not too worried about any of this, but we’re on our guard,” he said. In the second quarter, the risks were reduced somewhat, and for the third, where inflation has returned to the fore, there is no data to review yet. There is a range of risks; from the concentration of investments, from the problems of the labor market to, once again, the question of real estate.

“Currently, there are high valuation risks, the question is whether or not we have an overheated market. The risk of things falling due to high valuations is very possible,” Hanfa boss warned. Labor Minister Josip Aladrovic said there was reason to be optimistic about the end of the global coronavirus pandemic.

“We have never had closer cooperation between politics and economy. The government has acted in a timely and adequate manner, we can say that we have saved the economy. We are now entering the phase of creation of jobs, ”he said, announcing that a very important role is played by pension funds which manage 130 billion kuna.

“They need to invest in long-term sustainable investments, which will create and increase pensions in the future. It is up to us to redefine the regulations in the direction of the diversification of investments and objectives, which we will do in the short term and in cooperation with these pension funds, ” he concluded.

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