The government is taking care that the country is functioning and that we all overcome the unprecedented crisis we are in, Prime Minister Andrej Plenkovic said on Thursday in the Croatian parliament, to which he presented the second budget revision for this year.
Croatia was prepared for the crisis, thanks to a responsible budgetary policy the government has pursued for the past few years, and which has been aimed at the stability of public finance and prudent planning of budget revenues and expenditures, he said.
He stressed that in addition to the corona crisis, his government also had to deal with the consequences of the earthquake that struck Zagreb in March, with the damage caused by it estimated at HRK 86 billion.
Government had to react strongly
The Croatian government had to reach strongly, it adopted two packages of measures for job retention and mitigating the negative consequences that reduced budget revenues but increased budget expenditures, Plenkovic recalled.
The first budget revision included HRK 5.3 billion for job-retention measures that are still in place today, and by the end of the year probably HRK 8.1 billion will have been paid out.
In addition to that, we have been continuously reducing the tax burden, Prime Minister said.
As for trends in the domestic economy, Prime Minister’s estimate is that the economic decline this year will be 8%, and he expects a 5% growth next year and a 3.4% growth in 2022.
Indicators point to recovery
Indicators for Q3 point to recovery, he said.
The Croatian government also expects an influx of European funds, and given the fact that the crisis is still ongoing, it also expects that a solution still has to be found to support the economy, to ensure all health care costs are covered and to help the most vulnerable groups in the society, Plenkovic said.
According to him, the total budget revenues have increased by HRK 9.2 billion to HRK 131.1 billion, and total expenditures have increased by HRK 8.6 billion to HRK 155.9 billion. The general government is expected to record a deficit of HRK 29.5 billion, or 8% of the GDP.
We expect the public debt-to-GDP ratio to increase by 14.5 percentage points this year, and to be at 87.3%, but next year we already expect a lower ratio, and we want it to be at 81.2% in 2023, PM said.
His government, he said, will continue with activities that will lead us to the euro area, it will manage public finances responsibly and when necessary, find the best options for future borrowing.
Situation better than May forecasts
In addition to expenditures for job-retention measures, Finance Minister Zdravko Maric mentioned the HRK 1.2 billion expenditures for different measures for fighting coronavirus, ranging from those for the culture, tourism and sport sectors to procuring equipment for the health system.
Expenditures are HRK 8.6 billion higher, and the budget revision includes increasing funds for the Health Ministry by HRK 1.76 billion, most of which is earmarked for paying the debt to drug wholesalers, he said.
When it comes to revenues, he said that tax revenues and contributions were HRK 12.2 billion lower, and the situation was slightly better, by about HRK 7 billion, than it was forecast in May.
(€1 = HRK 7.56)
