Finance Minister Zdravko Maric said on Thursday the government had revised its inflation growth projection for this year up to 3.5%, adding that VAT cuts were being considered as part of a set of measures aimed at buffering energy price hikes.

Speaking to the press, Maric said the government was following developments with price hikes.

He said inflation accelerated in recent months and that its growth in December might exceed 5%, which would be visible at the start of this year.

That prompted the government to revise its projection to 3.5%, up from the 2.5% increase forecast earlier, he added.

The minister said that according to available data and expectations, higher inflation rates were expected in the first months of this year, “after which there should be a convergence to an average 3.5%.”

Besides food, the main focus is on energy prices given the price trends of raw materials at European level, he said, adding that the price of gas for households would be corrected as of 1 April.

He said the government would come up with a package or individual measures aimed at buffering the increase so that living standards were not affected in a major way.

As part of that, measures are being considered in the tax policy, too, Maric said, but would not speculate about the extent of VAT cuts. He reiterated that in the past, when VAT was cut on certain products, prices did not go down.

In these circumstances, however, I think we can come up with an adequate approach which would have the desired effect, the minister said.

Asked how much VAT could be cut and if that would be a temporary measure, Maric said he would rather not speculate, recalling that VAT on electricity is 13% and on gas 25%.

Gov’t ‘without enough information to comment on central bank case’

The minister was also asked about the Index web portal’s reports that over the past 20 years more than 40 Croatian Central Bank (HNB) employees, including governor Boris Vujcic and his deputy Sandra Svaljek, had traded in securities of banks overseen by the HNB.

Maric recalled that the HNB had stated its position and that the HANFA regulator and the parliamentary Finance and Budget Committee were looking into the matter.

The minister said he would say more when there was more information and that those bodies should be the first to comment.

He said the government did now have enough information based on which it could make “an adequate judgment or comment on anything.”

Asked how this case would impact the central bank’s reputation, Maric said the government was sticking to the plan and schedule for the introduction of the euro on 1 January 2023.

Euro introduction to be focus of attention over the next few days

He said the topic of introducing the euro would be the focus of attention over the next few days given the comprehensive legislative alignments due to occur in the first half of this year. The first step is the euro bill, which will soon be put to public consultation, Maric added.

Asked if Vujcic was now having an adverse effect on the introduction of the euro, the minister said he “wouldn’t go that far and draw such a conclusion.”