Croatian Government Present Economic Guidelines for 2018-2020

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Positive economic trends are expected to continue.

At this morning’s session, the government presented its fiscal and economic policy guidelines for the period 2018-2020, reports Jutarnji List on 27 July 2017.

Prime Minister Andrej Plenković said that it was important that Croatia will continue with the direction of economic policy which was started last year, adding that the budget deficit in 2017 would be lower than expected. “The good thing in these guidelines is that the budget deficit this year will be 1.3 percent, although we expected 1.6 percent. For 2018, the goal is to achieve a budget deficit of 0.8 percent and GDP growth of 2.8 percent.”

The Prime Minister also pointed out that the budget for the next year would include 223.5 million kunas allocated for solving demographic problems, as well as 1.3 billion kunas for retirees, which will enable pensions to increase by 2.1 percent. The healthcare sector will get additional 500 million kunas,” said Plenković, adding that the Law on Rights of Croatian War Veterans would be adopted next week during a special session of the government in Knin.

One of the most important items in the next year’s budget is the acquisition of new fighter aircraft. “We are determined to provide that capability for the Croatian Air Force for the next 25 to 30 years. I believe that we have a firm consensus on this issue,” said the Prime Minister.

Presenting the economic and fiscal guidelines, Finance Minister Zdravko Marić stated that “indicators for 2016 and the first half of 2017 suggest that we are on a right path, which has been recognised by the international and domestic institution.” “Based on the responsible fiscal policy, we have left the excessive deficit procedure (EDP), and for the first time since 2007 we have received positive credit rating news,” said Marić.

The new guidelines, according to the Finance Minister, are largely the same as those contained in this year’s Convergence Programme, but they do take into account certain risks, including restructuring and everything related to the situation in Agrokor.

This year, the government expects economic growth of 3.2 percent and in 2018 the growth of 2.8 percent. For 2018, budget revenues are planned in the amount of 127.96 billion kunas, which is an increase of 5.3 percent compared to the 2017 plan. In 2019, budget revenues will increase by 3.6 percent and will amount to 132.6 billion kunas, while in 2020 they are expected to total 136.7 billion kunas.

The expenditure side of the budget will be defined by further strengthening of fiscal sustainability and consolidation. In addition to increases in funds for demographic measures, war veterans, pensions and the healthcare sector, the government will raise funds for salaries of public sector employees and the national component of projects financed mainly from the EU funds. Decreases in expenditures are expected in the Ministry of Economy, because payments for the shipbuilding restructuring programme will end, and in the Ministry of Finance, due to lower interest rates.

Expenditures in 2018 should increase by 4.5 billion kunas to 132.9 billion kunas, while in 2019 they should amount to 135.5 billion kunas, and in 2020 to 136.6 billion kunas. As for general government deficit, it is expected to amount to 0.8 percent of GDP in 2018, 0.3 percent in 2019, while for 2020 the Minister expects a surplus of 0.5 percent of GDP.

As a result of such developments, public debt is projected to continue to decline, falling to 81.1 percent of GDP by the end of 2017, which would be 2.6 percentage points less than at the end of 2016. The share of public debt should continue to fall in the years to come, so in 2020 it would dip to 72.1 percent of GDP.

Deputy Prime Minister and Minister of Economy Martina Dalić pointed out that the budget for 2018 will be of great importance because it will be adopted during positive economic climate. “However, we should not think that good times will last for long, and we must not forget the need for savings and rational behaviour in all ministries,” she said, adding that bad times would come sooner or later.

Translated from Jutarnji List.


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