Croatian Government Presents 2016 Budget

By 10 March 2016

Budget for 2016 is finally here.

The Croatian Government on Thursday presented a draft of the 2016 state budget, in which revenues are planned in the amount of 114.9 billion kuna, while expenditures should reach 122.4 billion kuna. The deficit is planned in the amount of 7.5 billion kuna, or 2.2 percent of GDP. If we add six extra-budgetary funds and local government budgets, the deficit of the general government increases to 9.2 billion kuna, or 2.7 percent of GDP according to the national methodology. According to the EU methodology ESA 2010, the budget deficit will also stay below 3 percent of GDP, reports Jutarnji List on Match 10, 2016.

"We had two very successful weeks, but let's keep working", said Prime Minister Tihomir Orešković at the beginning of the government session. "This is just the beginning, we all understand that. We are starting to get to know more about our portfolios, and I think we will find additional opportunities to increase efficiency and implement other reforms during these four years", said Orešković.

Finance Minister Zdravko Marić said that the budget contained 18,245 individual budgetary items. "It is a large document, the most important we will adopt in the whole year. And we are adopting it less than two months after coming to power", Marić said, presenting the budget proposal.

The Government based the budget on estimates that GDP would increase by two percent this year, after it grew by 1.6 percent last year. "The most significant contribution to economic growth should come from domestic demand, but foreign demand should also represent a positive contribution", said the finance minister, who expects that this year the number of employed persons will grow by more than 1 percent.

The budget proposal plans tax revenues in the amount of 68.9 billion kuna, which is 1.2 percent more than in 2015. Income from EU grants should amount to 9.7 billion kuna. Revenues from the sales of non-financial assets are planned in the amount of 603 million kuna, mostly from the sale of apartments and other buildings owned by the state and from the activation of unused state property.

Total expenditures amount to 122.4 billion kuna, which is 3.8 billion kuna more than in 2015. On the expenditure side, government had to deal with an increase in the amount of 2.5 billion kuna, due to increased contribution to the EU budget, interest rates costs, participation in financing of EU projects, incentives for newborns and an increase in pension bill. Marić pointed out that, when it comes to the savings worth 2.5 billion kuna, they included almost everything except salaries and pensions.

Savings are planned in material expenditures (260 million), subsidies (550 million), grants (300 million), transfers to citizens and households (560 million), other expenses (550 million) and procurement of non-financial assets (280 million), of which a good part refers to the Defence Ministry.

As for transfers to citizens and households, social benefits will be means tested, and they will be partly financed from European funds. Budget for veterans from general revenue sources will not be reduced. As for subsidies, changes are expected in the transport sector, while agriculture should not see any major changes. The wage bill does not include funds for the six percent increase demanded by the public sector trade unions, but only for a regular annual increase of 0.5 percent per year of service.

The economic program of the government will be based on two key areas: the stabilization and reduction of public debt, and structural reforms to strengthen the foundations for economic growth. The stabilization and reduction of public debt will be based on fiscal consolidation, activation of state property and fostering economic recovery. The government will focus on intensifying the privatization of state-owned enterprises, except those which are of strategic importance.

Marić said that this year's budget deficit of 7.48 billion kuna amounted to 2.2 percent of GDP, the lowest since 2008. At the same time, according to projections, the deficit of the budget in 2017 should fall to 2 percent, and in 2018 to 1.8 percent of GDP. He pointed out that the government expected a stabilization of public debt this year, as well as its reduction in the coming years.

Prime Minister Orešković concluded by saying that the government would soon introduce reforms that will provide for long-term economic growth.