High Price of Croatian Pre-Election Promises, Claim Economists

By 5 November 2015

There are lots of pre-election promises from the main parties - what will they cost?

Promises in pre-election manifestos would increase the annual budget deficit by 8.23 ​​billion kuna in the case of Patriotic Coalition, and by 6.8 billion kuna in the case of Croatia Is Growing coalition, reports Novi List on November 5, 2015. The calculations were done by economists Velibor Mačkić and Valentina Vučković from the Economics Faculty in Zagreb.

Croatia Is Growing would increase expenditures in the category called "investments to increase the quality of life" by 5.67 billion annually. This category includes education, research, environmental protection, energy and development of civil society. Elimination of monetary limit for maternity benefits by two months would cost additional 300 million kuna, while additional investments in the social and community infrastructure, primarily roads, would mean an increase in expenditure by half a billion kuna.

Based on the manifesto of Croatia Is Growing coalition, budget revenues would decrease by 340 million kuna. Revenues from fiscal charges would be reduced by 300 million kuna, while the elimination of health care contributions in the amount of three percent for certain categories of pensioners would mean 39.97 million kuna lower budget revenues. The sum of increased expenses and reduced revenues is 6.8 billion kuna.

Patriotic Coalition wants to give a thousand euros for each newborn child, which would cost more than 317 million kuna, while the 5 percent increase in maternity benefits would costs 45 million kuna more. The growth of pensions to the level of 60 percent of average monthly salary would mean an additional cost to the budget of 4.6 billion kuna a year. The reduction of the VAT rate from 25 to 23 percent means 3.27 billion kuna less in the budget every year.

Mačkić said at the press conference that they had tried to calculate those items which are possible to quantify, and that this was a conservative calculation. GDP growth, which both coalitions claim would increase budget revenues, was not possible to quantify, Mačkić explained. "Contrary to their prior promises, budget expenditures would rise and revenues would fall", Mačkić concluded.

Sandra Benčić, speaking on behalf of the Platform 112 initiative, said that in the future the parties should, along with their election manifestos, publish draft budgets which would show how their programs would affect the state finances. "It is commendable that both coalitions expect to increase the investments in people, but that is unsustainable as long as we do not know how they would pay for it", Benčić said and added that coalitions will either not be able to fulfil their promises or will have to finance the deficit by increasing public debt.