The Croatian government on Thursday adopted economic and fiscal policy guidelines for the 2022-24 period, projecting next year's budget revenue at 158.8 billion kuna (€21.1 billion) and spending at 164.8 billion kuna (€21.9 billion).

The guidelines are in line with the convergence program, a regular document adopted in dialogue with EU institutions as part of the European Semester. They define financial plans for government departments and other budget users for the next three-year period.

After the experience with the Covid-19 crisis in 2020 and 2021, when revenues were lower and expenditures higher, “we will seek to return to a trajectory that marked responsible public finance management in 2016-19, and that is a rapid decrease in public debt, a budget surplus and a balanced budget, which is important for fulfilling the criteria for membership of the euro area,” Prime Minister Andrej Plenkovic said in his opening remarks at the cabinet meeting.

In the guidelines, just as in the convergence program adopted in April, the government projected growth of 6.6% in 2022, of 4.1% in 2023 and of 3.4% in 2024.

Marić said that the main contribution to growth in the next three-year period would come from domestic demand. The contribution from foreign demand would be negative and would be decreasing towards the end of the projected period.

Inflation is expected to reach 1.7% in 2022, before picking up to 2.0% in 2023 and 2.3% in 2024. Unemployment is forecast to rise by about 1.6% annually.

Based on macroeconomic projections and existing tax regulations, next year’s budget revenue is forecast at HRK 158.8 billion. Tax revenue is projected at HRK 86.8 billion and pension insurance contributions at 26 billion kuna.

Aid revenue, which mostly includes revenue from EU-funded projects, EU aid to help finance the consequences of the coronavirus crisis and last year’s earthquakes, and funds from the Next Generation EU instrument, is projected at 28.3 billion kuna.

Speaking of the expenditure side of the budget, Maric said that projected expenditure was limited to 164.8 billion kuna. The portion of expenditure that is financed from general sources has been reduced by 3.3 billion kuna to 122.3 billion kuna, mostly regarding health expenditure. Large health allocations have been made in this year’s budget to settle both old and new debts, he recalled.

The expenditure limits do not include funds for the purchase of multi-purpose Air Force jets from France. The limit for this purpose will be increased in a 2022 budget and budget projections for 2023 and 2024.

In accordance with the convergence program, the budget deficit was projected at 2.6% of GDP in 2022, 1.9% in 2023 and 1.5% in 2024.

Maric said that already next year Croatia would be back within the Maastricht criteria, under which the budget deficit must be below 3 percent of GDP.

He said that already this year Croatia would continue reducing the public debt to GDP ratio. The ratio is projected at 86.6 percent of GDP at the end of 2021 and is expected to decrease annually by nearly three percentage points of GDP over the next three years.

(€1 = 7.51 kuna)