A LOOK AT 2017: What to Expect When You’re Expecting Political Stability and Economic Growth

image27 December 2016, VG Intelligence Weekly Issue 36

As 2016 draws to a chilly end, it is common practice to take a retrospective analysis of the year’s major moments and trends, and whether they can, in some way, be an indicator of what to expect from the year ahead. In terms of Croatia’s political and business landscape, 2016 ends with a general sense of cautious optimism. A contributing factor to this is Standard & Poor’s (S&P) recent upgrade of Croatia’s credit rating outlook. Namely, for the first time in nine years, Croatia’s outlook has been upgraded from “negative” to “stable”, with the current long-term credit rating remaining at “BB” and short-term credit rating at “B”. Three key events in 2016 boosted Croatia’s outlook – a new and currently stable Government, a record breaking tourist season and a series of early reform packages.

The defining event of 2016 was the vote of no confidence to the centre-right Oreskovic Government in June, which was followed by a snap election in September and the voting in of a new Government in early October. After an extraordinary party leadership election in July, former MEP Andrej Plenkovic was elected to lead his party, the Croatian Democratic Union (HDZ), which was elected into power with 91 MP votes (out of 151). Under the new leadership, although the HDZ and Prime Minister (PM) Plenkovic formed another Coalition Government with the Bridge of Independent Lists (MOST) party, he has enough support in the Sabor to guarantee continuous legislative flow.

The PM did not waste any time in rushing to pass reforms before the year’s end. One of these was a much awaited tax reform package intended to simplify tax administration by lowering bureaucratic and accounting costs and reducing the number of required tax forms for citizens and businesses. This package also sees a reduction in the profit tax rate from 20 to 18 percent, while businesses, whose revenues do not exceed €400,000 per annum, would pay a profit tax rate of 12 percent…

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