The Croatian Minister of Finance Marko Primorac stated on Friday that there is an expected continuation of easing of inflationary pressures and it is very likely that the government will further revise its GDP growth projections. He also mentioned that property tax is a highly sensitive political issue and will not be implemented during this government's term.

"We expect the continuation of easing of inflationary pressures in the upcoming period, and the average inflation rate on an annual basis will be slightly higher than the European average, but not overly concerning," Primorac said after the government session.

The weakening of inflation is in line with expectations, and the government's measures, particularly in the context of limiting electricity prices and the impact on other energy markets, have contributed to this.

Regarding the GDP growth of 2.8% in the first quarter, Primorac stated that it even slightly exceeded expectations. The government currently projects a 2.2% growth for the Croatian economy in 2023. However, considering the first quarter and expectations of a good tourist season, the second and third quarters are also expected to be "good." Therefore, it is highly likely that the government will revise its projections upwards.

When asked if a GDP growth above 3% can be expected this year, Primorac said they are not certain at this moment and that the situation is still uncertain. However, he reiterated that the prospects are good, given the favourable announcements regarding the tourist season, expected investments, including those within the National Recovery and Resilience Plan (NRRP), and the acceleration of the post-earthquake reconstruction process, which will stimulate demand and growth.

No property tax yet

As for property tax, Primorac emphasized that it is a highly sensitive political issue, and definitively, it will not be introduced during this government's term, as it is essential to respect what is stated in the government program, which does not include it. He mentioned that most European Union countries have such a tax but added that there is still no clear consensus on how it should be calculated and what the tax base should be.

Primorac sees property tax as an instrument that would complement the range of options available to local self-government units and increase their autonomy. However, he pointed out that implementing this tax is not easy due to prerequisites such as sorting out documentation and land registers. If a decision is ever made to introduce such a tax, all necessary preparations would need to be carried out, which would require a certain amount of time. Primorac believes that introducing the tax fairly requires proper communication and explanation to citizens, and a wide consensus and public discussion are necessary.