Finance Minister Zdravko Maric said on Thursday the government's new budget projections were based on what was known at the moment and that they did not include the possibility of another lockdown.

He was talking to the press after the government adopted budget guidelines for the next three years, which project a 8% GDP drop this year, a 5% growth in 2021, a 3.4% growth in 2022 and a 3.1% growth in 2023.

Maric said the government expected many indicators to return to pre-crisis levels towards the end of 2022 and the export of services, i.e. tourism, at the start of 2023.

He said global expectations of a V-shaped recovery had been abandoned and that the government expected a stronger recovery in 2022 and 2023, but that one must not allow “the right arm of the letter V to become horizontal.”

Asked if job retention measures would be extended after the end of this year, Maric said it would depend on developments, but added that the government “is leaving room for manoeuvre, just as it has so far.”

He said investments represented “positive risks” for the realisation of the government’s projections. The government expects them to grow 5% in 2021, primarily thanks to European funds. Maric expects public as well as private investment.

Asked what he would say to bar and restaurant owners who demand lower VAT on drinks, he said it was not envisaged in the new tax reform round going into force on January 1.

Asked about the Rovinj Tobacco Factory’s complaints about excises, the minister said “every job is extremely important.” He added, however, that the factory and all the circumstances surrounding it and its suppliers did not have a “significant” effect on macroeconomic projections, “either negative or positive.”

Maric said talks with the factory were ongoing but that he could not accept the argument that the conditions of doing business had deteriorated because, he said, taxes and other levies were significantly reduced over the past four years.

He said the factory exported over 80% of its product, “therefore the excise system in force in one country is totally neutral regarding production.” He added that in terms of cigarette taxation, “Croatia is second from the bottom when it comes to the amount.”

Maric said the dialogue with the factory and with distributors was ongoing but that it was necessary to respect market competition rules.

Speaking of salaries, he said the draft budget guidelines envisaged raising them but that the pace would be discussed with the unions.