2019 Budget Expected to Bring New Tax Cuts

Total Croatia News

ZAGREB, October 12, 2018 – Finance Minister Zdravko Marić said on Friday that the preparation of next year’s budget was going well and that the government was likely to discuss a proposed budget revision and a 2019 budget draft in mid-November.

“All activities concerning the preparation of the budget for next year are going well,” Marić told Hina by telephone from the Indonesian island of Bali where he was attending the annual meetings of the International Monetary Fund and the World Bank Group.

He said that the government would soon forward a set of tax bills to parliament for a second reading. “That should happen on November 8. We are yet to agree at cabinet level whether at that cabinet meeting we will prepare a budget proposal and a proposal for a technical revision of this year’s budget. In any case, I can say that we plan to discuss this in the cabinet and send it to parliament in the first half of November.”

Marić recalled that in early August the government had adopted economic and fiscal policy guidelines for 2019-2021, projecting budget revenues in 2019 at 134.2 billion kuna and expenditures at about 139 billion kuna.

GDP growth in 2019 is forecast at 2.7 percent, after a projected growth rate for this year of 2.8 percent. Following a surplus of 0.8 percent in 2017 and a forecast deficit of 0.5 percent for this year, the general government budget in 2019 is expected to be in a deficit of 0.4 percent of GDP.

Owing to further fiscal consolidation, the public debt to GDP ratio is expected to fall to 71.5 percent in 2019 from this year’s projected 74.5 percent.

Marić also said that talks were under way with investors on borrowing on foreign capital markets in 2019, given that a foreign bond of 1.5 billion dollars and a domestic bond of 1 billion euro mature next year.

The Finance Ministry issued a 750 million euro bond on the foreign market in June and two bond tranches in the total amount of 10.5 billion kuna on the domestic market in July, covering its borrowing needs in 2018.

Marić said that his ministry was already monitoring international markets for next year. “Next yearn a bond denominated in US dollars falls due in the second half of the year, so in our dialogue with investors, investment banks and others normally involved in such processes we are already focusing on the next year,” Marić told Hina.

“In any case, the finance and investor community is well aware that the needs for funding are much smaller than they were a few years ago, given that the state of public finances has improved with a balanced budget last year and even with a budget surplus in the first half of this year. Now we are mostly focused on further steps and measures to improve the structure of our public debt … and fiscal consolidation,” Marić said.

A Croatian delegation including representatives of the Finance Ministry and the Croatian National Bank is attending the annual WB and IMF meetings in Indonesia on 12-14 October, and has held talks with WB and IMF officials.

Marić said that emphasis was put on the preparation of a new cooperation strategy for the next five years. The document is likely to be hammered out in the first half of 2019. “The new strategy would be focused on the development of human resources, which is a new initiative advocated by the World Bank,” the Croatian minister said. The cooperation will also focus on providing support for the economic development of underdeveloped regions, Marić said, recalling that the World Bank is engaged in the Slavonia, Baranja and Srijem project.

Other fields of interest for further cooperation are strengthening the institutional capacity and boosting competitiveness.

Marić said that an IMF mission would visit Croatia in late November as part of the IMF’s regular consultations with countries. He said that the IMF’s forecast of Croatia’s growth of 2.8% in 2018 was in line with the government’s projections.


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