During a government meeting in Pula on Thursday, Finance Minister Zdravko Maric reported that in the first six months of the year the central government generated a budget surplus of 1.6 billion kuna (€215.6 million).

Presenting a draft report on the execution of the state budget in the first half of 2018, Maric said that the state budget recorded a 1.9 billion kuna (€256 million) deficit, which is slightly higher compared to the first half of 2017.

However, he added, when the central government’s second and third budget tiers are added – i.e. local government units, and extra-budgetary beneficiaries, which all generated surpluses – then the consolidated central government’s budget surplus for the first six months amounts to 1.6 billion kuna (€215.6 million).

“That is a good result, in line with what we managed to achieve over the entire 12 months last year which, among other things, was one of the main reasons why we got out of the Excessive Deficit Procedure, which led to our credit rating and outlook being upgraded, as well as generating significant savings on interest costs,” Maric said.

He said that this time last year was the first time a budget surplus had occurred, amounting then to 35 million kuna (€4.7 million). The total budget revenue in H1 2018 was 59.9 billion kuna (€8 billion), or 2.9 percent up year-on-year.

In terms of tax revenue, which is the largest part of the overall budget, Maric said that as of January 1, 2018, the central state budget had entirely forfeited collection of income tax, leaving it to local and regional governments, which is one of the main reasons of the central government’s tax revenues inching up slightly by merely 0.8 percent.

He said this was also the reason for a somewhat higher year-on-year budget deficit of 1.9 billion kuna (€256 million).

Around 22.5 billion kuna (€3 billion) was generated from VAT, or 4.9 up from the same period last year. On the other hand, profit tax revenues dropped by 1.0 percent to 4.9 billion kuna (€660 million).

Revenue from special taxes and excises amounted to 7.1 billion kuna (€957 million), which is 7.3 percent higher year-on-year. The highest increase in revenue was in tobacco products excises, which was up by 22.5 percent.

Revenue from vehicle tax, which was one of the biggest changes included ina set of tax cuts earlier this year, fell by 4 percent. Expenditures in the first six months of the year amounted to 61.8 billion kuna (€8.3 billion), or 3.3 percent more year-on-year. Expenditures for state employees funded from the government budget amounted to 13.6 billion kuna (€1.8 billion), or up by 750 million kuna (€101 million).

Financial expenditures, i.e. interests on taken out loans, was reduced to 4.8 billion kuna (€647 million) in H1 2018, which is a decrease of 363 million kuna (€49 million) compared to H1 2017.

Spending on various subsidies amounted to 3.5 billion kuna (€471.7 million), including 2.4 billion kuna (€323.4 million) for farming. The government also paid out 6.6 billion kuna (€889.5 million) for foreign aid, 1.6 billion kuna (€215.6 million) to the EU budget, and 1.5 billion kuna (€202 million) was transferred to the public health insurance fund.

When it comes to state-funded allowances for citizens and households, which is the largest portion of all spending, they amounted to 23.7 billion kuna (€3.2 billion), including 19.4 billion kuna (€2.6 billion) for pensions.

Welfare spending amounted to 1.1 billion kuna (€148 million), while 768 million kuna (€103 million) was spent on additional maternity leave and one-off payments for newborns, which is an increase of almost 200 million kuna (€27 million) compared to last year.

Maric noted that the GDP grew 2.7 percent in H1 2018, significantly impacted by the retail sector which increased by 3.9 percent. The construction sector jumped by 3.0 percent, while industrial production was a little weaker, increasing by 0.4 percent. Commodity exports recorded a growth of 2 percent, and imports grew by 5.5 percent year-on-year.

Prime Minister Andrej Plenkovic commented on these figures and said that the country is now just one step below investment rating.

“If we manage to make that one more step, then the interest rates being paid on the international or domestic financial markets would be significantly lower, and that would also be felt in lower interests in loans for citizens and businesses,” Plenkovic said.

(€1 = 7.42 kuna)

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