ZAGREB, May 7, 2020 – The government on Thursday sent to parliament a draft 2020 budget revision which reduces revenues by HRK 23.2 billion to almost HRK 122 billion and keeps expenditures at HRK 147.3 billion.
Speaking at a cabinet meeting, Finance Minister Zdravko Marić said the revised budget was appropriate to the current circumstances and that it ensured the functioning of the state and all its institutions and systems.
Under the revised budget, revenues are planned at HRK 121.95 billion, down from the originally planned HRK 145.1 billion. This decline is a result of bailout measures in dealing with the COVID-19 – the partial or full exemption from income and profit tax as well as contribution payments for businesses affected by the crisis – and of the economic downturn.
Last week the government projected that this year GDP will decrease by 9.4%. The 2020 budget was drawn up with a 2.5% growth projection.
Marić said that until the end of March, the revenues side showed no or little effects of the coronavirus crisis and that the fall was felt in mid-April. In the first two weeks, VAT revenues not only decreased but were negative.
The situation improved by the end of the month and April saw a 43.2% annual drop of tax revenues, while contributions dropped by 20%, Marić said.
Under the revised budget, tax revenues are planned in the amount of HRK 66 billion, HRK 18.1 billion less than in the original 2020 budget.
Marič said the strongest message of the revised budget was keeping expenditures at HRK 147.3 billion despite an unplanned HRK 7 billion for keeping jobs and millions in additional expenses for healthcare.
The focus in this short term is solely on the state’s necessary expenses, he said, adding that the EU had helped to keep budgetary expenditures as originally planned thanks to a more flexible approach regarding contracted and allocated funds.
The original 2020 budget was almost balanced but the revision envisages a deficit of HRK 25.3 billion or 7% of GDP. The public debt-to-GDP ratio is planned to increase by 13.5 percentage points to 86.7% of GDP.
Marić recalled that in February the government issued three bond tranches totalling HRK 15 billion and, recently, a seven-year bond on the domestic market worth €1.445 billion as well as refinancing a HRK 7.8 billion treasury bill due today.
Marić said that in the weeks ahead the government planned to issue bonds worth €1.25 billion on the international market and a domestic bond in several tranches as well as utilise EU funds and borrow from international financial institutions.
The budgets of all ministries have been cut with the exception of the Labour and Pension System Ministry, whose budget was increased by HRK 4.75 billion to HRK 53.8 billion, the Health Ministry, whose budget was increased by HRK 93.7 million to HRK 12.5 billion, and the Agriculture Ministry, whose budget was increased by HRK 47.5 million to HRK 7.46 billion.
More budget news can be found in the Business section.
