Croatia: In COVID- 19 time, the Government continues to sustain the employment retention incentives for July and August 2020

published on 21 July 2020 | reading time approx. 2,5 minutes

As of 15 July, Croatia is still facing a second wave of the epidemic. Since mid-June, the country has seen a sharp increase in new cases amounting to around 100 cases per day. Previously, the situation was considered fully under control, with no new cases being reported for several weeks. It is not yet known if authorities will impose new confinement measures, considering the vital importance of tourism for the economy.

Despite the recent increase in cases, Croatian authorities have opened the country for the summer tourist season, of vital importance to the economy. Borders with several EU countries have been opened, however the authorities remain vigilant in light of the growing second wave. Croatia held early parliamentary elections on 5 July despite the uptick in COVID-19 cases because the authorities are expecting a further exacerbation of the situation in the autumn.

Economic impact

Data from the Croatian Employment Institute shows an increase in registered unemployment from 139 924 persons in January to 159 234 persons in April. However, it has been argued that the real number of unemployed due to the crisis is higher, and is obscured by jobs created in other sectors and the significance of the informal economy.

Investor panic did damage to the Croatian financial market, as the Zagreb Stock Exchange’s indicator, Crobex, lost over 32 per cent in the first month of the pandemic. As of early July, the Crobex has stabilized, at a loss of around 25 per cent of its pre-crisis value.

On 17 March, the Government announced measures of a combined worth of over HRK 30 billion (~3.9 billion Euro) to support the economy in coping with the effects of the pandemic. These include: Interventional procurement of critically important sanitary equipment (disinfection equipment, soap, masks etc.), authorized delays in tax payments, purchasing of surpluses of potentially threatened businesses (agricultural or industrial goods), measures to support the tourism industry and aid for preserving jobs in affected sectors.

From 23 March, the Employment Agency has made available special subsidies to employers, to cover salaries of full-time and part-time workers in accommodation, food and beverage, transportation and storage and other sectors in which workers are prevented from attending work due to confinement measures. With the April measures, the Government increased this support from HRK 3 250 to HRK 4 000 per worker.

In order to retain employment in industries affected by the Coronavirus epidemic (COVID-19) in Croatia, the duration of the Incentive for Employment Retention in activities affected by the Coronavirus (COVID-19) has been extended for July and August 2020, for certain business sectors/activities. Employers can apply to the Croatian Employment Bureau for incentive for July and August from July 8th, to July 31st, 2020 and for incentive for August from August 1st, to August 31st, 2020.

The tourism industry

Starting from 29 May Croatia is gradually opening its borders for inter-EU tourism. Official statistics released by the Croatian authorities accounted for 722 565 foreign tourists as of late June 2020, compared to 2 851 865 for the corresponding period last year. The main countries from which tourists visit Croatia include Slovenia (~207 000 as of end June), Germany (~204 000 as of end June) and Austria (~72 000 as of late June). Revenues from tourism are expected to amount to around 30 per cent of last year’s total tourism revenues.

Croatia’s economy strongly relies on the tourism sector, which represents around 25 per cent of the GDP. Efforts to support both firms and employees in the sector have been announced by the Government.