Did Linic underestimate crisis or did HNB underestimate Linic?

Who should we trust? Should we trust the Central bank which forecasted a new VAT downfall of 0.2 percent? Or should we trust the minister of finance Slavko Linic who is convinced that VAT could grow this year up to 1 percent. But in order to stop worrying about the numbers and digits, the Croatian National Bank’s (HNB) forecast means more unemployed people, the drop of standard and attenuation of economy while the Government speaks about an initial change of those trends.

The HNB analysis, as always, has arguments and balance; it is based on two very realistic presumptions. The first one is a drop of demands for Croatian products and services abroad, and the other one is a drop of demands on a domestic market due to the measure of savings in the state budget. We can’t affect the first presumption from here, something has to be undertaken for the second - not only to save a credit rating but simply because every new indebtedness will be more difficult. The world is still in a phase when ‘’no one trusts  no one’’ and money is being borrowed to rare ones like Germany.

Slavko Linic is very familiar with the situation so how come those two ‘’houses’’ (a ministry of finance and HNB) that often cooperate together, are now so different in opinion?

The Croatian National Bank has strong analytics for sure. It also hires good and experienced professionals. The ministry of finance couldn’t afford such thing and sometimes this function was neglected without a real explanation. A HNB machinery of analysts is in a certain advantage, but this is a matter of something else as well.

In the moment when HNB’s analysis has been formed, we knew only some partial stuff about the Government economic policy. What does the Government plan to do? It is still officially unknown and that’s why we can discuss the forecasts for 2012 only in a hypothetical manner.

Some minor alterations happened by the beginning of last week, when Slavko Linic had long and extensive speech about the budget policy for a show on the Croatian radio. The minister of finance presented one rounded plan of budgetary expenditure decrease, redistribution of tax overloads, economy stimulation and directing the state property. But there was something different about his talk that simply wasn’t set in focus of economic analysis HNB has been dealing with.

The new minister of finance seems to be very characteristic for the Milanovic’s team in which the autonomy and initiative of minister’s position are significant. In this Government, as it is completely different than Sanader’s and Kosor’s team, ministers don’t wait for the prime-minister’s approval to take some action, but every minister performs like he has been encouraged to take some own action within his department. The minister Jovanovic has already announced some changes in the filed of education, Rajko Ostojic has been dealing with health situation, Ranko Ostojic tries to ‘’clean up’’ the Ministry of Interior over a legal, but practical matter, by counting Porches and other cars in the garage of this department... Linic’s activism will be completely revealed when he presents a budget proposition for this year, but it is obvious that there will be many changes, no matter we like those changes or not.

At least two circumstances for now on are not in the reach of the newest economic forecasts. We have got the Government which seems more innovative than the last one we had. But this Government seems to use great reserves the former Government didn’t initiate. Let’s say, in investments stimulation, in directing public and state firms, in preventing waste of state money, in much bigger creativity and engagement of executive reign.

In the next six months or in a year at least, we will see whose forecasts were accurate. Did Linic underestimate the range of crisis in Europe or state of negligence in Croatian economy? Or did HNB overestimate Linic? At the beginning of this ‘’race’’, it is somehow flattering to hear the minister saying things are possible. But only if he knows what he wants.