Abstract
In this paper, we analyse the effects of the COVID-19 shock on fiscal developments in Croatia. In the first part of the paper, we analyse the effects of adverse economic developments and discretionary policy measures on different (structural) fiscal indicators. In addition, we evaluate the evolution of fiscal space in Croatia before and during the COVID-19 crisis. In the second part of the paper, we analyse the policy response to this exogenous shock by fiscal policy makers and compare the size and structure of instruments used with other EU countries. Our analysis shows that fiscal policy makers in Croatia relied primarily on the so-called direct “above-the-line” fiscal measures and that fiscal response in Croatia was powerful in local terms but relatively modest compared to other EU countries.
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Notes
- 1.
Eurostat data show that EU GDP contracted by 4.3% in 2009, 0.7% in 2012, and 5.9% in 2020.
- 2.
Central banks in significant markets expanded existing asset purchases programmes and launched new ones, while some emerging markets launched emergency asset purchases programmes for the first time (Croatia, among others).
- 3.
According to the European Commission (2021a), the global fiscal response to the COVID-19 pandemic amounted to around EUR 6 trillion of direct budgetary support in 2020 (close to 7½% of world GDP), with most support coming from the G20 countries.
- 4.
Quasi-fiscal operations are any activities undertaken by state-owned banks and enterprises, and sometimes by private sector companies at the direction of the government, where the prices charged are less than usual or less than the “market rate”. Examples include subsidised bank loans provided by the central bank or other government-owned banks and noncommercial public services provided by state-owned enterprises. A typical example would be state-owned enterprises providing fuel, electricity, or water at below-market prices, thus providing an implicit price subsidy (IBP 2011).
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Banić, F., Deskar-Škrbić, M., Šimović, H. (2022). Fiscal Response to the COVID-19 Shock in Croatia. In: Olgić Draženović, B., Buterin, V., Suljić Nikolaj, S. (eds) Real and Financial Sectors in Post-Pandemic Central and Eastern Europe. Contributions to Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-99850-9_3
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