Some good news for the Croatian economy.
Deficit of consolidated central government in 2015 stood at 9.6 billion kuna or 2.9 percent of GDP, according to preliminary data from the Finance Ministry, which is less than the former government had planned. Deficit was smaller than expected due to the fact that budget revenues grew faster than expenditures. According to the budget review adopted in September 2015, the former government expected a deficit of 12.5 billion kuna or 3.8 percent of GDP, reports Jutarnji List on February 10, 2016.
“Reduction of deficit by nearly 3.5 billion kuna is the result of a markedly higher growth of revenues than expenses”, said Raiffeisebank Austria (RBA) in its analysis. Total revenues of the consolidated central government amounted to 127.2 billion kuna, which is 7.8 percent more than in 2014. On the other hand, total spending grew by 4.3 percent and reached 136.8 billion kuna.
Data for the consolidated general government are not yet available, according to the RBA, but they will also include budgets of local government units. In 2014, local budgets had an almost neutral effect. However, due to the separation of the Croatian Institute of Health Insurance from the state treasury system in 2015, “the final assessment of whether in 2015 a fiscal consolidation has been achieved will be made only after the data on consolidated general government are published”, reported the RBA.
Analysts say that the fall in deficit was mainly a result of higher revenues due to economic growth, excellent tourist season and recovery in domestic spending. Total tax revenues of the consolidated central government, which constitute 54 percent of total revenues, reached 68.2 billion kuna, which is 7.7 percent more than in 2014. The growth in tax revenues is predominantly the result of higher VAT revenues, by 2.6 billion kuna, or 6.3 percent, and excise duties which were higher by a billion kuna, or 8.4 percent.
However, for the purpose of reporting to the European Commission and the relevant statistical comparisons with other countries, it is necessary to use a different methodology called ESA 2010. “According to the latest report by the former government, at the end of September 2015 unpaid government obligations amounted to almost 3 billion kuna. Therefore, we expect the consolidated general government deficit according to the ESA 2010 methodology to reach nearly 13.9 billion kuna or 4.2 percent of GDP, which corresponds to the latest projections of the European Commission”, explains the RBA.
“Still, the fact remains that in the last year a certain degree of fiscal consolidation in the amount of about 1.5 percentage points of GDP has been achieved”, concluded the RBA.
