section_path: Prime Minister (2011–2016)/Economy
section_name: Economy
paragraph_text: Economy
  
  The Milanović administration adopted a number of reforms in taxation in order to cope with the difficult economic situation. It raised the standard Value-added tax from 23% to 25% and introduced new VAT rates for goods and services that were not previously taxed. It also cut social insurance contributions and public-sector wages. In October the Financial Operations and Pre-Bankruptcy Settlements Act was passed, which allowed firms that were unable to pay their bills to stay open during the bankruptcy proceedings and restructure their debts. Because of opposition by its coalition partner, HNS, property tax has not been expanded.
  
  The government succeeded in reducing the budget deficit to 5.3% in 2012, but GDP contracted by 2.2% and public debt reached 69.2%. Milanović's time in office has been marked by several cuts to Croatia's credit rating. On 14 December 2012 S&P cut the country's long term rating to BB+ and the short term rating to B. On 1 February 2013, Moody's cut Croatia's credit rating from Baa3 to Ba1.
  
  Several major construction projects started in 2012, including a new passenger terminal on the Zagreb International Airport and a third block of the coal-fired Plomin Power Station; however, some projects were suspended, including the Ombla hydroelectric power plant. The government said that construction of the Pelješac Bridge was to start in spring 2016. Milanović expressed his support for further oil and gas exploration and exploitation in the Adriatic Sea, which is opposed by the opposition parties and environmental organizations.
  
  In November 2012, Minister of Economy and Deputy Prime Minister Radimir Čačić resigned and was replaced by Ivan Vrdoljak. In 2013 a new fiscalization law was introduced to control gray economy and minimize tax avoidance. The government put focus on the shipbuilding industry and privatized state-owned shipyards by May 2013. In order to service public debt, the government presented a project of monetization of Croatian highways in 2013 which would bring around 2.5 billion euros. Trade unions and civic associations rejected the proposal and called for a retraction of the decision. A civic initiative called "We Are Not Giving Our Highways" gathered signatures for a highway referendum. Although the constitutional court ruled that a referendum on the subject was unconstitutional, the government announced that it was withdrawing the decision. Instead of the initial plan to lease the country's highways to foreign investors, the government will instead offer shares in them to Croatian citizens and pension funds.
  
  The Pension Insurance Act of January 2014 raised the statutory retirement age from 65 to 67 and early retirement age from 60 to 62. The unemployment rate peaked in February 2014 at 22.7%, but has since been steadily declining and reached its lowest rate in two years in August. In May 2014 Milanović sacked the Finance Minister, Slavko Linić, over a property deal that he said had hurt the state budget and appointed Boris Lalovac on his place. Changes in Personal Income Tax were introduced in 2015, the non-taxable part of income was raised, which resulted in a net salary increase for around one million people. In January 2015, the government decided to freeze exchange rates for Swiss francs for a year, after a rise in the franc that caused increasingly expensive loans for borrowers in that currency. In August 2015, Milanović announced that Swiss franc loans will be converted into euro-denominated ones.
  
  GDP decreased in 2013 (−0.9%) and 2014 (−0,4%), but in the 4th quarter of 2014 real GDP growth reached 0.3% for the first time since 2011. It was announced on 28 August 2015 that the economy had grown by 1.2% for a third consecutive quarter which marked Croatia's exit from a six-year economic recession. The budget deficit decreased in 2015 to 3.2% of GDP, down from 5.5% in 2014, and public debt was at 86.7% of GDP, the lowest debt growth rate since the introduction of the ESA 2010 methodology.