Okay. Good morning ladies and gentlemen. Welcome to the Economist Impact second annual Croatia summit. Welcome Prime Minister. My name is Joan Hoey. I'm the editor of the Economist Annual Democracy Index and I'm a Europe consultant at the Economist Intelligence Unit and I'm your moderator for the day. Before we get the proceedings underway, I'd like to thank all our sponsors and supporters without whom this event would not be possible. You can see them all on the screen behind you. We very much appreciate your support. Thank you very much indeed. The event's also been organized in collaboration with the European Commission supported by the Croatian Chamber of Economy and by Amcham. And thanks of course to the input from the government, greatly appreciated. We'd like to give a special thanks to Domagoj Yurich for his invaluable help together with MKPS and thanks also to MSS Pulse. Now before I invite the Prime Minister to join me on stage for the official opening session, I just wanted to show you a few slides to help frame the discussions that we're going to have today. I don't want to take time away from the Prime Minister, so I'm going to present these slides very quickly, so you might want to take photos of them. There's five slides and I'm only going to spend a few minutes on them. So we've got the first one now on screen. I think maybe as a framework for our discussions it's useful to think about the three major shifts that are reshaping the global order and also the outlook for our regions. First of all, of course, a theme very familiar to all of you, AI and the technology and digital revolution more broadly, which has the potential to spur growth, but is also creating quite a lot of uncertainty and may in time create significant disruption as well. Second, we've entered an era obviously of increasing great power rivalry and competition and that is reshaping alliances, generating tensions and conflict of different sorts and a new competition for spheres of influence. And third, we're seeing how those two shifts are politicizing and even weaponizing policy in many areas from trade to tech wars and so on. Now I think as a consequence for economists the job of forecasting has got a lot harder. We see tailwinds, crosswinds, headwinds all having countervailing influences on the global outlook. You can see some of them mentioned here. So on the one hand we have these tailwinds such as this huge AI investment boom that is boosting capital expenditure and equity markets and really encouraging growth especially in the US where the economy has been much more resilient than many would have thought. We have crosswinds such as the unexpected consequence maybe of the tariff wars which are forging new trade alliances, new free trade agreements and so on, rerouting supply chains. And then we have headwinds including for example a slowdown in growth and deflation in China which is slowing investment and consumption despite the official growth targets. That's just a few of these kind of countervailing trends which are shaping the global outlook. The upshot of all this is heightened uncertainty, global uncertainty which historically as we know has not been good for growth. But I think things are a lot less uncertain now at the end of the year than they were at the beginning of the year. And so far the impact of the AI tech transformation has been much more positive than negative. Tariffs have been less of a drag on growth than many had expected and that's because what we saw was a huge frontloading of trade especially in the first half of 2025. So we're not seeing the kind of negative impact on trade. Certainly we're seeing shifts in trade and we see the service economy doing very well in many places. So less uncertainty I think and some unexpected maybe upsides. This is just giving you a quick snapshot of the global economic outlook for 2026 where we see GDP growth still being quite lackluster as in 2025 with emerging markets faring better than developed markets. The color coding on this chart shows the countries that are experiencing the most anemic growth or weak growth are shown in purple and dark blue. And the fastest growing economies are shown in red, orange, not many of those, yellow, and green. And just Europe, this is what Europe is looking like in terms of the growth outlook in 2026. And what we see here, as we've done for several years, is the better performing economies are in Eastern Europe and southern Europe and that includes Croatia. And as I say, that's been the case for several years now, and we expect that to continue. So that's just a very quick, I'd like to spend more time but as I say don't want to take time away from the conversation with the Prime Minister which I know you're all very much looking forward to. So I'd like to invite now the Prime Minister of Croatia Andrej Plenković to join me on the stage to discuss his government's priorities in economic and social policy, defense, security, and regional cooperation. Welcome, Prime Minister. I thought we should start certainly with Croatia and then broaden out to the region and Europe and the world if we have time. So we're almost halfway through your third term as Prime Minister, and that started in April after the election last year. What are your priorities now for the second half of your term?
Thank you very much and congratulations for the second edition of this Economist conference in Croatia. Greetings to all the people from government, parliament, business, academia, media circles. It's great to be here with you. As you put it rightly, we are almost there. The half of this third mandate is happening sometime in May next year. But I would say that the intensity of activities is first of all the continuation of our policy that we have tried to persistently pursue over the past nine years and that is the policy of a simple and easy message that is to catch up with other countries that joined the European Union before us. So the catching up is still the main mode of operation of the Croatian government and I have to admit that now it's gaining to show results. Croatia which was at the level of 61-62% ratio GDP per capita in terms of average of the EU will end this year with 78%. Our GDP compared to 2016 to end of 2025 will actually double. It's supposed to end up around 92-93 billion euros GDP per capita basically continuously growing. It's more than double now than it was nine years ago. And the priorities are very much stemming from the national development strategy as well as the government program which is clear issue number one for the survival of Croats as a nation is demography. This time we have allocated more money than ever. More than 800 million euros will be I'm sure adopted on Friday when the parliament will adopt the new budget for 2026. Another element is of course to continue with the energy transition towards the renewables and the third priority is further efforts in the digitalization. What is important for us is to continue investment in education. Education is today where the defense and defense related expenditures and investments should be in 2035. Actually, the ministry of science and education and we spend 5% of our GDP on education for smaller nations. This is essential unless we invest into education, we won't be competitive or our people will not have the same chances at the labor markets whether they're domestic, European or global. So these are the priorities in terms of employment and that is perhaps sometimes the most important indicator. Croatia has never had more people working even now when we are off the most intense months of the tourist season. Croatia is at the level of 1,750,000 people working. The unemployment is now a natural unemployment basically between 4 and 5% around 75,000 people. So those who are not really a little bit agile or I would say active in trying to find a job are not working. But that's the usual concept now that is imminent to many other countries.
Thanks. Well, I think looking at the data and you know we look at the data at EIU and looking over the long view obviously the past few years have been very impressive in terms of the turnaround, the economic turnaround. So Croatia has been performing very well as you say in terms of growth of GDP, employment, wages, pensions, and so on. And I don't think anybody would dispute that it's come a long way after that period after the global financial crisis where it was at quite a low level so there's been considerable catch-up. I don't know if you saw it, there was a new Ipsos knowledge panel survey looking at nine countries in detail at attitudes towards government and more broadly democracy. And the results for Croatia were quite interesting because it was looking at satisfaction with democracy. And in Croatia, one thing that really stood out was the degree to which the population associated that supported democracy to the degree that it was delivering improvements in living standards and quality of life. I guess there's still a section of the population that feels that they could be doing better than they are despite all the progress. And I just wanted to ask why do you think that is? We see it in other countries too. Greece for example also doing well but we see this underlying dissatisfaction. Is that because it's starting from a low base? Is it because too many shocks, pandemic and then the war in Ukraine and so on? Is it because food prices are still high and driving inflation? Is it all those things?
Well, if you look at the average, I have to admit I haven't seen this survey, but I'll ask my colleagues to send it to me and then I will read it on the plane to Tin later on today. But what I can sense and everybody else who is Croatian here and on the table, you have a sort of perennial expectation of the Croats that they will eventually live better. Since we were all born, basically nobody's ever happy and we are always grumbling that things should be better and more efficient. They should have higher wages and services that the state or other institutions provide should be at a higher level. And what we are doing and everybody else before us was trying to improve things. Whether people are sufficiently happy or not, if you look at the service that the Croatian posters do, I'm always amazed with the question, are we going in the right direction? 75% believe that we are going in a completely wrong direction. So whatever this poll that you mentioned said is probably aligned with this most silliest question because I always ask the counter question. What should be the other direction? Where should we go if it's not deeper EU integration? If it's not Eurozone, Schengen, OECD growth, higher employment, better wages, better pensions, infrastructure investments, balanced regional development, equal chances, more attractive investment climate for foreign investors to come. I don't know where else we should go. So I'm taking note of all the surveys but given the context in which we operate, you barely see a neutral article or a commentary in the Croatian media, you see predominantly negative comments but that's the way it is but people now are also immune a little bit to that.
Well I guess it's good that in general people have the aspiration, you know, always to be very legitimate and I support should be doing better and I share that more is never enough. Just a bit on the politics both in Croatia and more broadly in Europe. Your governments are widely seen in Europe to have been very pro-EU. Obviously, you joined the Eurozone and Schengen two years ago, pro-EU liberal in very liberal in orientation. But in Europe and in Croatia, some see that there's been a shift since last year since the election when the Homeland Movement was included in the government as well as a minority party. Some people see maybe there has been a shift to the right including on issues of migration and minority rights and so on. So in that sense is Croatia kind of moving in line with many other countries in Europe where we see this general shift to the right, obviously rise in populist movements. Is that, has there been a shift in the political mood in Croatia? Is that something that you would agree with or not?
No, no. I will simply explain for the audience what happened because people tend to forget what happens. Basically, we had the 2024 elections where we had the sort of abrupt invasion into the parliamentary electoral process by the president which was an unconstitutional thing. Then you had the creation of a total catastrophe, crisis and everything and a huge turnout at the election. So let's say instead of winning between 63 and 66 MPs, my list got 61. Then you had a huge pressure of the left political parties and those who were thinking whether they will go into a coalition with us or not, they frightened them like wow, boo, you shouldn't go into the coalition with the government that has taken so many good things about Croatia but they ra and they should be the untouchable. So we basically had a choice of trying to talk to some of the parties of the liberal center. Some of them are with us. Others were a little bit afraid how their voters will react at the European elections which were coming literally six weeks later because they had one seat in the European Parliament and they thought if they go with us that they may lose it. So the choice which was in front of me as a leader was first of all as a convincing relative winner to continue. It would have been a bigger defeat to let the relative losers to form a government. That's what happened to Juncker in 2014. I don't like that system. So I had to talk with those who wanted to go with us and we formed the government. The five MPs from minorities are with us. The one that the Homeland Party didn't want to be in the coalition was the Serbian members of the parliament. But basically nothing changed in terms of their rights, in terms of the financing of the projects, constant political consultations that we have and I would say except the fact they're not sitting at the table of the parliamentary majority and sometimes voting against, sometimes in favor, sometimes abstaining, not much has changed. Certainly not the portrayal of the left leaning commentators who will say that something has changed. Nothing has changed. The direction of the country is exactly the same. But we had to work with those who wanted to work with us. And may I just note those who were afraid of going into the coalition with HDZ lost the seat in the European Parliament. And then I deliberately went to head the list of the HDZ and we won six out of 12 seats in the list of the Croatian MEPs. So 50%. So very even more convincing victory and basically they lost ground wherever they went. They didn't gain anything. So that was a strategic political mistake of some of the parties while let's say a little bit more left center than the center right. But nothing has changed. This is a nonsense in my view.
Thanks for that. Wanted to move on to some more regional and Europe-wide issues as well. But just first of all, just on the migration issue. I mean, is that really an issue for Croatia? Obviously Croatia is on this Western Balkan route. You have a very long border with Bosnia and Herzegovina and policing that border has obviously become more important since Croatia joined Schengen. Does this new EU migration pact put more demands on Croatia? What's the situation?
