In one way or the other, we all, have certainly felt the wrath of the year 2020. The impact of this pandemic and its effects are felt individually and as society. The pandemic has not only been a health crisis, but also a socio-economic crisis. Everyday people are losing jobs and income with not knowing when things will get back to normal.
In general, the pandemic has significantly affected the Croatian economy. The explanation is explained by decreased GPD growth rate upon the onset of the pandemic. According to IMF, Croatian had been experiencing GDP growth from 2015 not until 2020 where this growth dropped to -8.9%. The IMF predicts the economy to rebound to 6% in 2021 and stabilize at 4.4% in 2022. The Croatian public debt rose to 87.7% in 2020 from 85.5% from the previous year as a result of increased government expenditure to curb the pandemic. Croatia has schemes to support businesses affected by the virus, that is, interest-free loans and low-interest rate loans.
According to a report by the Croatian National Bank, in the year 2019 December, the unemployment rate stood at 8%. However, unemployment paced up in April 2020 followed by a lower unemployment rate in May the same year. This was mainly increased government involvement to preserve jobs and easing up restrictions. The latest data by Statista shows an increased unemployment rate toping at 9.8 %. Croatian labour institute reported approximately 150,000 unemployed persons in December 2020 accounting for a 21.3% increase in the number of registered people compared to 2019.
Croatian has a huge reliance on tourism contributing 25% of the nation’s GDP. Covid-19 has proven that tourism is a vulnerable business in times of health crisis. It is as a result of tourism vulnerability that Croatia’s GDP contracted that much. In fact, Croatia has the largest contraction in the entire EU. Other than that, there are other businesses that have experienced the great Covid19 shock namely: Catering, Entertainment, Arts, Culture, Transport and Real Estate Agencies. The government injected €202 million to keep these businesses afloat. Despite this, some businesses have managed to remain strong amid the pandemic such as the telecommunication companies due to increased virtual meetings, increased entertainment streaming etc.
As a result of the economic retardation and expansive fiscal policies put in place to mitigate the effects of the pandemic, the budget deficit was estimated at 8% of the GDP in 2020. This deficit is expected to reduce to 2.9% of GDP in 2021. As per the current situation, the deficit in 2021 will be expected to increase slightly from 2.9% due to the effects of the destructive earthquake that occurred in December 2020. This led to increased subsequent government spending to support affected areas.
It is evident that this pandemic has set new trends that will reshape the transport and logistics landscape. The industry must continue to resolve the pandemic’s immediate challenges while also managing longer-term issues such as future changes in supply chain architecture, globalization trends, and consumption and purchasing habits, as well as adjust to the current operating environment, in which risk evaluation and vulnerability reduction are increasingly high on policy and business agendas. Simultaneously, the sector must mitigate the negative effects of increasingly inward-looking policies and protectionism on trade while also advancing the sustainability and low-carbon agenda.
Small open economies are unable to ‘do whatever it takes because their fiscal adjustment ability – to enable private absorption and welfare while maintaining essential public services and public expenditure – is severely restricted. In the face of foreign demand, monetary policy’s ability to counteract the domestic demand shock is limited and ineffective. However, the advanced economies, states, and central banks have used their balance sheets to fund unparalleled stimulus programs. Therefore, maintaining trade balance in smaller open economies is harder.
How can the economic fallout from the global crisis be contained? This is a natural concern for policymakers and decision-makers all over the world. The media can have a significant impact on how people perceive the underlying risks. The surrounding environment affects an individual’s actions through personal experiences, according to the social-cognitive theory approach. The seriousness of a situation is not perceived the same way by everyone. It’s crucial to consider and comprehend these differences when analysing behavioural responses, particularly in stressful situations. Due to lots of information all over the internet, people’s trust has fallen. In that regard, we do not trust the vaccine and it is the only way to open up the economy currently.
Personally, to cushion the negative effects of Covid-19 on the economy, both fiscal and monetary policy play in handy. Fiscal policy, supported by monetary policy should help to maintain cash flows. Measures include extending deadlines for tax filing, deferral of tax payments, tax exemptions such as payroll and property taxes. These policies should help protect household income and employment and keeping businesses afloat. The central bank should cut interest rates aggressively and put in place various initiatives to support liquidity in the financial sector and boost lending in banks to businesses and households.
In conclusion, we have all suffered but as always, everything regresses to the mean and things will turn around. For economic recovery, it may take time since people’s perception comes in handy in some of the measures the government is trying to put in place such as vaccination.