Prime Minister Andrej Plenković submitted an annual report on the work of his Government to the Parliament

Zagreb - Croatia currently has macroeconomic results that were unimaginable not so long ago and, unlike before, its economic growth has a sound basis, Prime Minister Andrej Plenković said in an annual report to the Parliament on Wednesday.

Plenković said that growth was sound and was no longer based on borrowing but on reducing borrowing, reducing the tax and administrative burden, on structural reforms, boosting investment and improving the absorption of EU funding.

"Thanks to this we have macroeconomic results that were unimaginable not so long ago," the PM said, adding that the public debt to GDP ratio had been reduced by about three percentage points annually while the current account showed continued surpluses.

He recalled that until recently Croatia had been included in the EU's excessive deficit procedure because its public debt had reached 85 percent of GDP, and that the situation was reversed by the government's responsible conduct of public finance and implementation of the National Reform Programme and the Convergence Programme.

"Thorough fiscal consolidation made it possible for us to successfully reduce public debt despite the payment of HRK 4.5 billion (€608 million) in state guarantees to the Uljanik Group, mostly inherited from previous governments," Plenković said, adding that the government's aim was to keep the shipbuilding sector, but on market principles.

He went on to say that in the three rounds of tax reform, the tax burden had been cut by a total of HRK 6.5 billion (€878 million), and that Croatia was among the EU countries recording the fastest decreases in public debt, which is expected to fall to 71.7 percent of GDP by the end of this year and to 65 percent by 2021.

He said that the improved economic situation resulted in more favourable financing terms for Croatia, which led to interest on public debt dropping from HRK 12 billion (€1.6 billion) to less than 9 billion (€1.2 billion) and interest on household and corporate loans decreasing as well. He said that the government expected this trend to continue.

Plenković said that the renewed confidence in Croatia's economic stability was best illustrated by the fact that in August this year the Ministry of Finance had for the first time issued a treasury bill at a negative interest rate of -0.05 percent.

While the country's credit rating was downgraded twice between 2012 and 2015, this year two of three global ratings agencies, Fitch and S&P, have increased Croatia's credit rating to investment grade, the PM said.

Plenković said that in this way yet another goal he had announced last year had been achieved and that an important obstacle to attracting foreign investment had been removed, which was key to further development and job creation.

The PM said that the government was aware of the great potential of unused and neglected state property which could help revitalise towns and municipalities and spur growth and job creation.

He said that work would be stepped up to deal with 2,300 applications from towns and municipalities seeking state-owned property for development of their projects of high financial value, adding that the medium-term potential of this measure was estimated at HRK 5 billion (€675 million).

Author: Hina