In 2016, EU Expects a Decrease in Croatia’s Deficit By 3 Billion Kuna

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EU expects lower budget deficit in Croatia next year. 

Growth of GDP and an increase in tax revenues have enabled the outgoing Croatian government to easily bring its term in office to the end. In the first eleven months of this year, tax revenues grew between 8 and 10 percent compared to last year, while the central budget deficit amounted to 7.5 billion kuna. If situation from last year’s December repeats itself, it is possible that the annual deficit in the state treasury will be 2 billion kuna lower than the planned 12.5 billion kuna, reports Vecernji List on December 3, 2015.

However, during the eleven months, the government spent 10.4 billion kuna for interest on loans, and expenses for interest have reached the amount Croatia spends on its whole education system, from primary schools to universities. In 2008, interest rates cost was just 4.7 billion kuna, while next year it will reach an unsustainable level of more than 12 billion kuna. Among hundreds of pages of text which have been written in recent weeks by experts from HDZ, SDP and MOST, nowhere does it say how and when the growth of public debt, which is now close to 290 billion kuna, will be stopped.

For the past six years, including this one, Croatia has borrowed 115 billion kuna to cover the deficit, and in order to put an end to it Croatia would have to immediately initiate the process of deleveraging which should last until the expenditures on interest are not reduced to an acceptable level. Researchers of the European Commission have recently stated that, for this goal to be reached, Croatian budget would need to have a primary surplus for the next 15 years. In the first 11 months of this year, the budged had 98.2 billion kuna in revenues and 105.8 billion kuna in expenditures. If that pace continues in December, the expenditures could be slightly lowered than planned (120.7 billion), while revenues could be near its planned levels (108 billion).

The European Commission expects Croatian Government to reduce the deficit in next year’s budget by at least three billion kuna, to match the framework set by the procedure of excessive deficit. Neither party, during the campaign or in later negotiations with MOST, did not say whether it would respect the conditions which would be the government’s most important obligation, once the government is finally formed.


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