Government Presents Budgetary Guidelines for 2016

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Budget deficit to decline significantly, according to plans

Budgetary guidelines for 2016 call for revenues of 113 billion kuna and expenditures of 120.4 billion kunas, with the deficit of about 7.5 billion kunas, or 2.2 percent of GDP. The guidelines were adopted by the government on Thursday. When other non-budgetary funds and consolidated budgets of local governments are included, the deficit should amount to a total of 9.2 billion kunas or 2.7 percent of projected GDP. Even with the Eurostat ESA 2010 methodology, the deficit should not exceed 3 percent of GDP, said Finance Minister Zdravko Marić, reports on February 25, 2016.

The guidelines are based on the projection of economic growth of 2 percent. “This year we expect a slight acceleration of economic growth to 2 percent, primarily due to the increase in domestic consumption”, said Marić. He stressed that these projections are very close to the forecast of the European Commission. “The projections are realistic. Until this year, the revenues were usually planned in an unrealistic way. That was not a good strategy”, he said.

This year, the government expects inflation of 0.1 percent, after two years of deflation. The unemployment rate in 2016 is planned to fall below 16 percent. Based on these macroeconomic projections, the total revenues of the budget are planned at 113 billion kuna, which is about 3.9 billion kuna or 3.5 percent more than in 2015. The most significant increase in revenues, by as much as 78.5 percent, is expected from the EU funds.

As far as expenditure side of the budget is concerned, Marić said that “the expenditures financed from general revenues have been left at last year’s levels”. He added that it was, therefore, necessary to make savings, rationalization and consolidations in the framework of the budget. “Without these measures, spending would by itself grow by 2.5 billion kuna”, said Marić, explaining that the contribution to the EU budget has grown by 500 million kuna, interest rates payments are 230 million kuna higher than last year, the national component of the co-financing of EU projects has increased by 450 million kuna, the indexation of pensions and the natural influx of new pensioners will cost additional 400 million kuna, payments for newborn children will cost 100 million kuna…

Prime Minister Orešković noted that these guidelines were just a start, but that the government still had a lot of work to do. “This is a process where changes are essential. The easiest thing is to keep the status quo, but we need for changes to become the status quo. Changes are always accompanied by fears, but we have to demonstrate through dialogue why certain reforms are needed and where it all leads”, said Orešković.


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