Some better than expected news for the Croatian budget.
The growth of GDP, better business results and tax collection, budget spending lower than planned, and nearly double the amount of money drawn from the EU funds in comparison to last year – all this has made the budget picture somewhat better than expected. The deficit in the first seven months of the year is 8.5 billion kuna, while last year in the same period is was 8.8 billion kuna, reported Vecernji List on August 7, 2015.
“If the trends continue until the end of the year, we could have a smaller deficit than the projected five percent of GDP. The deficit could be around four percent”, said finance minister Boris Lalovac. The difference in deficit compared to last year is even larger if we add to last year’s deficit three billion kuna which were transferred from the second pension pillar (obligatory private pension accounts). Most of the deficit this year, 7.7 billion kuna, is actually an interest on debt while the primary deficit is just 750 million kuna.
According to Lalovac, the European Commission will demand that Croatia must have a primary surplus. The reason is the need to stabilize public debt, which is required from all countries which repay debt with high interest rates. In the first seven months, the collection of taxes was better than last year. Revenues from VAT amounted to 24.2 billion kuna, about two billion more than last year and 1.5 billion more than planned. Revenues from excise taxes have increased by 400 million kuna, a result mainly of this year’s increase in excise duties on fuel. Better management of companies has also contributed to the higher company tax revenues, which amounts to 3.8 billion kuna and is 400 million kuna higher than last year. Income tax revenue has increased by about 400 million to 1.1 billion kuna, primarily due to the introduction of tax on savings. In the seven months, Croatia withdrew more money from EU funds, about 2.7 billion kuna, which is 1.2 billion more than last year, and it shows that this year Croatia will get more money from the EU budget than it will pay in.
In addition, budget spending is currently below expectations. For salaries, 13.9 billion kuna was spent, which shows that by the end of the year the total savings could be between 700 and 800 million kuna. Lalovac said that he will certainly be very careful so that budget users do not start spending more by the end of the year, when spending frequently gets out of control and creates headaches for finance ministers.